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QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.1     THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT ("First Amendment"), dated as of April 20, 2001, is entered into by and among CROWN PACIFIC LIMITED PARTNERSHIP, a Delaware limited partnership (the "Company"), BANK OF AMERICA, N.A., as agent for the Banks (the "Agent"), and those financial institutions parties to the Credit Agreement (collectively, the "Banks") signatory hereto. RECITALS     A.  The Company, Banks, and Agent are parties to an Amended and Restated Credit Agreement dated as of December 1, 1999 (the "Credit Agreement") pursuant to which the Agent and the Banks have extended certain credit facilities to the Company.     B.  The Company, the Banks, and the Agent now hereby wish to amend the Credit Agreement in certain respects, all as set forth in greater detail below.     NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows:     1.  Defined Terms.  Unless otherwise defined herein, capitalized terms used herein shall have the meanings, if any, assigned to them in the Credit Agreement.     2.  No Obligation to Make New Loans.  The Company may request new Loans pursuant to Section 2.1 of the Credit Agreement only with the prior written consent of each of the Banks.     3.  Amendments to the Credit Agreement.       (a) The definition of "Applicable Margin" set forth in Section 1.1 of the Credit Agreement is hereby amended by deleting such definition in its entirety, and inserting in its place the following:     "Applicable Margin" means, in respect of all Loans outstanding on any date, a per annum rate equal to 3.00% for Offshore Rate Loans and 2.00% for Base Rate Loans.     (b) The definition of "Available Cash" set forth in Section 1.1 of the Credit Agreement is hereby amended and restated (until the Company exercises its Interest Coverage Replacement Option as referenced in Section 7.15(c)) to conform to the blacklined form of the definition of "Available Cash" attached as Exhibit A hereto. Upon the Company's exercise of its Interest Coverage Replacement Option as referenced in Section 7.15(c), the definition of "Available Cash" shall revert to the definition set forth in the Credit Agreement before giving effect to this Amendment.     (c) The definition of "Commitment Fee Percentage" set forth in Section 1.1 of the Credit Agreement is hereby amended by deleting such definition in its entirety, and inserting in its place the following:     "Commitment Fee Percentage" means a rate per annum equal to 0.50%.     (d) Subsection 2.7(a)(i) of the Credit Agreement is hereby amended and restated to conform to the blacklined form of subsection 2.7(a)(i) attached as Exhibit A hereto.     (e) Section 6.1 of the Credit Agreement is hereby amended and restated by adding to such Section the following new paragraph (i):      (i) as soon as available, but in any event within 30 days after the end of each calendar month, (1) internal management reports discussing the financial position and 1 -------------------------------------------------------------------------------- results of operations of the Company and its Subsidiaries and (2) a detailed report discussing updates on any sale, conveyance or disposition of any assets or any other form of acquisition, disposition or liquidation of the Company and its Subsidiaries, which report shall set forth, in reasonable detail, the assets to be sold, the nature of the proposed transaction, the approximate value of the proposed transaction, the number of bidders or potential purchasers involved, and the current status of negotiations.     (f)  Section 7.2 of the Credit Agreement is hereby amended and restated to conform to the blacklined form of Section 7.2 attached as Exhibit A hereto.     (g) Section 7.4 of the Credit Agreement is hereby amended and restated to conform to the blacklined form of Section 7.4 attached as Exhibit A hereto.     (h) The Credit Agreement is hereby amended by deleting subsections 7.5(f) and 7.5(g) thereof in their entirely and replacing such subsections with "[intentionally omitted]."     (i)  The Credit Agreement is hereby amended by deleting Section 7.15 thereof in its entirely and replacing such Section with the following:     7.15 Indebtedness Covenant.     (a) The Company shall not permit, (i) as of the last day of any fiscal quarter the ratio of Cash Flow to Debt Service to be less than 1.25 to 1.00 or (ii) as of the last day of any fiscal quarter the ratio of Cash Flow to Interest Expense to be less than the respective ratios set forth below for the respective quarters ending on the dates set forth below: Fiscal Quarter End Dates --------------------------------------------------------------------------------   Ratio -------------------------------------------------------------------------------- March 31, 2001   2.00 to 1.00 June 30, 2001   1.60 to 1.00 September 30, 2001 and thereafter   2.50 to 1.00     (b) The Company shall not permit the ratio of Cash Flow to Interest Expense as of the last day of any fiscal quarter after the Company exercises its Interest Coverage Replacement Option to be less than 2.50 to 1.00.     (c) The Company may irrevocably elect to exercise the option referenced in this Section 7.15 (the "Interest Coverage Replacement Option") on any date by delivery of written notice to the Agent, provided however, that the Company has previously delivered financial statements in compliance with Section 6.1 evidencing that the ratio of Cash Flow to Interest Expense as of the end of the most recent fiscal quarter is greater than 2.50 to 1.00.     (j)  The Credit Agreement is hereby amended by deleting Schedule 2.1 thereof in its entirely and replacing such Schedule with the following Schedule 2.1 attached hereto as Exhibit B.     4.  Representations and Warranties.  The Company hereby represents and warrants to the Agent and the Banks, as of the Effective Date (as defined below), as follows:     (a) No Default or Event of Default has occurred and is continuing.     (b) None of the representations or warranties made by the Company in the Loan Documents as of the date such representations and warranties are made or deemed made, and none of the statements contained in any exhibit, report, statement or certificate furnished by or on behalf of the Company in connection with the Loan Documents (including the offering and disclosure materials delivered by or on behalf of the Company to the Banks prior 2 -------------------------------------------------------------------------------- to the Effective Date (as defined below)), contains any untrue statement of a material fact or omits any material fact required to be stated therein or otherwise necessary to make the statements made therein, in light of the circumstances under which they are made, not misleading as of the time when made or delivered.     (c) The execution, delivery and performance by the Company of this First Amendment have been duly authorized by all necessary corporate and other action and do not and will not require any registration with, consent or approval of, notice to or action by, any person (including any Governmental Authority) in order to be effective and enforceable. The Credit Agreement as amended by this First Amendment constitutes the legal, valid and binding obligations of the Company, enforceable against it in accordance with its terms, without defense, counterclaim or offset except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability whether enforcement is sought in a proceeding at law or in equity.     (d) The Company is entering into this First Amendment on the basis of its own investigation and for its own reasons, without reliance upon the Agent and the Banks or any other person.     5.  Effective Date.  This Amendment will become effective on April 20, 2001 or the first Business Day thereafter as of which each of the following conditions precedent has been satisfied (the "Effective Date"):     (a) The Agent has received from the Company and the Required Banks a duly executed original or facsimile counterpart of this Amendment (any such facsimiles to be promptly followed by the originals thereof).     (b) The "Effective Date" as defined in the First Amended and Restated Facility B Credit Agreement has occurred or is occurring contemporaneously as of the Effective Date hereunder.     (c) The Agent has received an opinion of Ball Janik LLP, as counsel to the Company and the Partner Entities addressed to the Agent and the Banks, in form and substance reasonably satisfactory to the Required Banks.     (d) The Company shall have paid to the Agent, (i) for the account of each Bank that has executed a counterpart of this Amendment and delivered (by hard copy or facsimile) the same to the Agent or its counsel by 5:00 p.m. (San Francisco time) the Business Day before the Effective Date, a nonrefundable amendment fee in an amount equal to such Bank's Commitment multiplied by 0.350%; which amounts the Company hereby covenants to pay to the Agent for the account of such Banks on demand and (ii) for the Agent's own account, all reasonable costs and expenses incurred in connection with the Agent's recent appraisal of the timberlands of the Company.     6.  Reservation of Rights.  The Company acknowledges and agrees that the execution and delivery by the Agent and the Banks of this First Amendment shall not be deemed to create a course of dealing or otherwise obligate the Agent or the Banks to enter into similar amendments under the same or similar circumstances in the future.     7.  Miscellaneous.       (a) Except as herein expressly amended, all terms, covenants and provisions of the Credit Agreement are and shall remain in full force and effect and all references therein to such Credit Agreement shall henceforth refer to the Credit Agreement as amended by this 3 -------------------------------------------------------------------------------- First Amendment. This First Amendment shall be deemed incorporated into, and a part of, the Credit Agreement.     (b) This First Amendment shall be binding upon and inure to the benefit of the parties hereto and thereto and their respective successors and assigns. No third party beneficiaries are intended in connection with this First Amendment.     (c) This First Amendment shall be governed by and construed in accordance with the law of the State of California.     (d) This First Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument.     (e) This First Amendment, together with the Credit Agreement, contains the entire and exclusive agreement of the parties hereto with reference to the matters discussed herein and therein. This First Amendment supersedes all prior drafts and communications with respect thereto. This First Amendment may not be amended except in accordance with the provisions of Section 10.1 of the Credit Agreement.     (f)  If any term or provision of this First Amendment shall be deemed prohibited by or invalid under any applicable law, such provision shall be invalidated without affecting the remaining provisions of this First Amendment or the Credit Agreement, respectively.     (g) Company confirms its obligations under Section 10.4(a) of the Credit Agreement to reimburse the Agent for all costs and expenses including reasonable attorneys' fees and expenses incurred by the Agent in connection with this First Amendment. [Remainder of Page intentionally left blank] 4 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties hereto have executed and delivered this First Amendment as of the date first above written.     CROWN PACIFIC LIMITED PARTNERSHIP, a Delaware limited partnership     By:   CROWN PACIFIC MANAGEMENT LIMITED PARTNERSHIP, a Delaware limited partnership, its general partner     By:   --------------------------------------------------------------------------------     Title:   --------------------------------------------------------------------------------     BANK OF AMERICA, N.A., as Agent, a Bank and as a Bank     By:   --------------------------------------------------------------------------------     Title:   --------------------------------------------------------------------------------     UNION BANK OF CALIFORNIA, N.A., as Syndication Agent and as a Bank     By:   --------------------------------------------------------------------------------     Title:   --------------------------------------------------------------------------------     BANK OF MONTREAL, as Co-Agent and as a Bank     By:   --------------------------------------------------------------------------------     Title:   --------------------------------------------------------------------------------     KEYBANK NATIONAL ASSOCIATION, as Co-Agent and as a Bank     By:   --------------------------------------------------------------------------------     Title:   --------------------------------------------------------------------------------     ABN AMRO BANK, N.V.     By:   --------------------------------------------------------------------------------     Title:   --------------------------------------------------------------------------------     SUNTRUST BANK     By:   --------------------------------------------------------------------------------     Title:   --------------------------------------------------------------------------------     WELLS FARGO BANK, N.A.     By:   --------------------------------------------------------------------------------     Title:   -------------------------------------------------------------------------------- 5 --------------------------------------------------------------------------------     SUMITOMO MITSUI BANKING CORPORATION     By:   --------------------------------------------------------------------------------     Title:   --------------------------------------------------------------------------------     BNP PARIBAS (Successor in Interest to Paribas)     By:   --------------------------------------------------------------------------------     Title:   --------------------------------------------------------------------------------     FIRST UNION NATIONAL BANK     By:   --------------------------------------------------------------------------------     Title:   --------------------------------------------------------------------------------     BANK HAPOALIM, B.M.     By:   --------------------------------------------------------------------------------     Title:   -------------------------------------------------------------------------------- 6 -------------------------------------------------------------------------------- Exhibit A     "Available Cash" means, with respect to any fiscal quarter and without duplication:     (a) the sum of:      (i) all cash receipts of the Company during such fiscal quarter from all sources;     (ii) any reduction with respect to such fiscal quarter in a cash reserve previously established pursuant to clause (b)(ii) below (either by reversal or utilization) from the level of such reserve at the end of the prior fiscal quarter; and     (iii) the amount available to be borrowed on the last day of such fiscal quarter under the Working Capital Facility but only so long as the conditions relating to a "Borrowing" set forth in subsections 5.2(b) and (c) of and as defined in the Facility B Credit Agreement would be satisfied or waived on such date (or, if the Working Capital Facility is other than the Facility B Credit Agreement, the conditions to borrowing under such Working Capital Facility would be satisfied or waived on such date);     (b) less the sum of:      (i) all cash disbursements of the Company during such fiscal quarter, including, without limitation, disbursements for operating expenses (including, without limitation, the amounts described in the second sentence of Section 7.7), taxes, if any, debt service (including, without limitation, the payment of principal, premium and interest), redemption of Partnership Interests (as defined in the Company Partnership Agreement), capital expenditures and cash distributions to Partners (as defined in the Company Partnership Agreement) (but only to the extent that such cash distributions to Partners exceed Available Cash for the immediately preceding fiscal quarter); and     (ii) any cash reserves established with respect to such fiscal quarter, and any increase with respect to such fiscal quarter in a cash reserve established pursuant to this clause (b)(ii) from the level of such reserve at the end of the prior fiscal quarter, in such amounts as the Managing General Partner determines in its reasonable discretion to be necessary or appropriate (A) to provide for the proper conduct of the business of the Company (including, without limitation, reserves for future capital expenditures and those established with respect to the Obligations hereunder, the "Obligations" under and as defined in the Facility B Credit Agreement, and the Senior Notes), provided that the reserves established during such fiscal quarter pursuant to this clause (b)(ii) shall include an amount not less than (w) 100% of all capital expenditures budgeted to be incurred during the next fiscal year, (x) [200]% of the aggregate amount of all interest in respect of the Senior Notes to be paid on the interest payment date immediately following such fiscal quarter, (y) [400]% of the aggregate amount of all accrued and unpaid interest in respect of the Loans and the Facility B Loans on the date of determination, and (z) [100]% of the aggregate amount of all principal in respect of the Senior Notes scheduled to be paid during the nine calendar month period immediately following such fiscal quarter, (B) to provide funds for distributions to the Partners in respect of any one or more of the next four fiscal quarters, or (C) because the distribution of such amounts would be prohibited by applicable law or by any loan agreement, security agreement, mortgage, debt instrument or other agreement or obligation to which the Company is a party or by which it is bound or its assets are subject. Taxes paid by the Company on behalf of, or amounts withheld with respect to, all or less than all of the Partners (as defined in the Company Partnership Agreement) shall not be considered cash disbursements of the Company that reduce Available Cash, but the payment or withholding thereof shall be deemed to be a distribution of Available Cash to such Partners. Alternatively, in the discretion 1 -------------------------------------------------------------------------------- of the Managing General Partner, such taxes (if pertaining to all Partners) may be considered to be cash disbursements of the Company which reduce Available Cash, but the payment or withholding thereof shall not be deemed to be a distribution of Available Cash to such Partners.     2.7(a) Mandatory Prepayments.    (i)  If the Company or any of its Subsidiaries shall receive Net Proceeds from a sale of properties permitted by subsection 7.2(f)(ii), or harvest excess timber permitted by Section 7.4, then (A) the Net Proceeds of such sale shall be paid by the Company as a prepayment of such Senior Debt as and to the extent required by subsection 7.2(f), and (B) the net proceeds of such excess harvest shall be paid by the Company as a prepayment of such Senior Debt as required by Section 7.4; provided that, in each case, the Company may not prepay Senior Debt other than the Loans and the Facility B Loans pursuant to this subsection 2.7(a)(i) unless (1) the Company also prepays the Loans and the Facility B Loans in an aggregate amount as shall be necessary to cause the Banks together with the "Banks" as defined in the Facility B Credit Agreement to share such prepayment with the other Senior Debt at least pro rata and (2) the Senior Debt so prepaid does not exceed, in the aggregate, $37,500,000. Prepayments to be made with respect to the Loans and the Facility B Loans pursuant to this subsection 2.7(a)(i) shall be applied first to prepay any Base Rate Loans then outstanding, second, at the Company's option, to Cash Collateralize (which cash collateral shall be applied on the maturity date of their Interest Periods to prepay then outstanding Offshore Rate Loans in the order of their maturities) or to prepay any Offshore Rate Loans then outstanding (in the order of the maturity of their Interest Periods), and third to prepay or to cash collateralize Facility B Loans in accordance with Section 2.7(a)(i) of the Facility B Credit Agreement.     7.2  Asset Dispositions.     The Company will not, and will not permit any of its Subsidiaries to, sell, transfer, lease, contribute or otherwise convey, or grant options, warrants or other rights with respect to, all or any part of its assets (including accounts receivable and capital stock of Subsidiaries) to any Person, other than:     (a) sales of timber, logs, lumber and other inventory in the ordinary course of business for fair market value;     (b) sales for fair market value of equipment, which is surplus, worn-out or obsolete or no longer useful in the ordinary course of business;     (c) [intentionally omitted];     (d) [intentionally omitted];     (e) exchanges of timberland for other timberland in the ordinary course of business with Persons who are not Affiliates of the Company, if:      (i) the aggregate fair market value of all timberland so exchanged by the Company and any of its Subsidiaries, collectively, does not exceed on a cumulative basis $400,000,000 during the term of this Agreement or $25,000,000 in any fiscal year;     (ii) the timberland to be received in exchange is of at least an equivalent fair market value to the timberland to be exchanged or, if such timberland is not of at least an equivalent fair market value, the amount of any shortfall shall constitute a permitted disposition under subsection 7.2(c) or (f);     (iii) the timberland to be received in exchange is located in the United States; and 2 --------------------------------------------------------------------------------     (iv) at the time of such exchange, no Default or Event of Default exists or shall result from such exchange; provided, however, that any exchange permitted by this subsection 7.2(e) may be in the form of a tax deferred exchange so long as such tax deferred exchange is completed within 180 days; and     (f)  dispositions for fair market value thereof of assets not otherwise permitted hereunder to Persons who are not Affiliates of the Company if:      (i) at the time of such disposition no Default or Event of Default exists or shall result from such disposition; and     (ii) (A) the Net Proceeds of such disposition are applied within 180 days of such disposition to the purchase of productive assets in a Permitted Business (including purchases not consummated during such 180 days if a binding agreement for such purchase is entered into during such period and such purchase is completed within 90 days after the expiry of such 180 day period) located in the United States provided that the aggregate Net Proceeds applied to such purchases pursuant to this clause (A) shall not exceed $5,000,000 in any given fiscal year or (B) if the aggregate Net Proceeds of such dispositions (not applied as described in clause (A) above) received by the Company and its Subsidiaries in any fiscal year exceeds $5,000,000, the entirety of such Net Proceeds (not applied as described in clause (A) above) are applied within 10 Business Days after receipt thereof (or, if less than $5,000,000 of such Net Proceeds have been previously received by the Company and its Subsidiaries during any fiscal year, within 10 Business Days after receipt of Net Proceeds causing the aggregate to exceed $5,000,000) to the repayment of such Senior Debt as the Company may elect to so prepay. If, at any time the Company shall elect to repay Senior Debt other than the Loans and the Facility B Loans, (x) the Company shall also repay Loans and Facility B Loans by at least a pro rata amount (based on the then outstanding principal of amount of all Senior Debt) and (y) a Responsible Officer shall have notified the Agent promptly after its determination to so apply the Net Proceeds and shall have certified the proper application of such Net Proceeds in accordance with this subsection 7.2(f); and     (g) dispositions of assets permitted under subsection 7.3(b).     7.4 Harvesting Restrictions.     The Company shall not, and shall not suffer or permit any of its Subsidiaries to, in any calendar year, commencing with 2001, harvest timber or sell standing timber on its or any Subsidiary's timberlands in excess of Planned Volume for that year unless the net proceeds from such excess harvest (which shall be determined based upon the average prices received on the sale of all timber harvested during such period and a reasonable allocation of direct cash expenses incurred in connection with the harvesting and sale of timber during such period), are, within ten Business Days after the end of such period, applied to the repayment of Senior Debt as required by subsection 2.7(a)(i). "Planned Volume" shall mean for each calendar year 340,000,000 board feet of timber, as decreased for any year in which there is an Annual Timber Decrease effective upon the Effective Date for such Annual Timber Decrease by the same percentage that such Annual Timber Decrease represents as a percentage of the inventory of standing timber owned by the Company and its Subsidiaries at the end of the prior calendar year. For purposes of the foregoing:     "Annual Timber Decrease" shall mean, for any calendar year, the amount, in board feet, by which the number of board feet of timber sold by the Company and its Subsidiaries during such calendar year shall exceed the number of board feet of timber acquired by the Company and its Subsidiaries during such calendar year.     "Effective Date" for any Annual Timber Decrease shall be July 1 of the calendar year for which such Annual Timber Decrease occurs. 3 -------------------------------------------------------------------------------- QuickLinks RECITALS Exhibit A

EXHIBIT 10.2 Ball Corporation Directors Deposit Share Program Table of Contents 1. Purpose.........................................................................................1 2. Definitions.....................................................................................1 2.1 Committee............................................................................1 2.2 Deferral.............................................................................1 2.3 Change of Control....................................................................1 2.4 Effective Date.......................................................................1 2.5 Grant Date...........................................................................1 2.6 Holding Period.......................................................................1 2.7 Newly Acquired Shares................................................................1 2.8 Participant..........................................................................1 2.9 Program..............................................................................1 2.10 Restricted Shares....................................................................1 2.11 Shareholder of Record................................................................1 2.12 Voluntary Resignation................................................................1 3. Restricted Stock Grant..........................................................................2 3.1 Form of Grant........................................................................2 3.2 Minimum Number of Newly Acquired Shares..............................................2 3.3 Grant Date...........................................................................2 4. Holding Period for the Newly Acquired Shares....................................................2 5. Lapse of Restrictions/Forfeiture of Restricted Shares...........................................2 5.1 End of Holding Period................................................................2 5.2 Cease Serving as a Director..........................................................2 5.3 Completion of Term...................................................................2 5.4 Forfeiture...........................................................................3 6. Dividends.......................................................................................3 7. Deferral of Award...............................................................................3 7.1 Exchange of Restricted Shares........................................................3 7.2 Election to Defer....................................................................3 7.3 Exchange of Restricted Shares from Restricted Units..................................3 7.4 Date of Deferral.....................................................................3 8. Miscellaneous...................................................................................3 8.1 Administration of the Program........................................................3 8.2 Amendment and Termination of Program.................................................3 8.3 Successors and Mergers, Consolidations, or Change in Control.........................4 8.4 Gender, Singular and Plural..........................................................4 8.5 Captions.............................................................................4 8.6 Applicable Law.......................................................................4 8.7 Validity.............................................................................4 Directors Deposit Share Program ("Program") 1. Purpose To encourage Directors to acquire a larger equity ownership interest in the Corporation to further align their personal interests with the interests of the shareholders of the Corporation, in order to promote share price growth and enhancement of shareholder value. 2. Definitions 2.1 "Committee" means the Nominating Committee of the Board of Directors of Ball Corporation. 2.2 "Deferral" means the amount of elective deferred Restricted Units deferred by a Participant into the Ball Corporation 2000 Deferred Compensation Company Stock Plan. 2.3 "Change in Control" means "Change in Control" as defined in Section 2.D. of the Ball Corporation 1997 Stock Incentive Plan. 2.4 "Effective Date" means April 25, 2001, which is the effective date of the Directors Deposit Share Program. 2.5 "Grant Date" means the actual date of issuance of the Restricted Shares pursuant to this Program. 2.6 "Holding Period" means the four-year period beginning at the grant date of the Restricted Shares during which a Participant is required to retain Newly Acquired Shares. 2.7 "Newly Acquired Shares" means Ball Corporation Common Stock purchased by a Participant within two years after the Effective Date of the Directors Deposit Share Program. 2.8 "Participant" means any Director, except the CEO, who are in office following the annual meeting on April 25, 2001. 2.9 "Program" means the Directors Deposit Share Program as set forth in this document as amended from time-to-time. 2.10 "Restricted Shares" means shares of stock that are issued or transferred to a Participant under this Program pursuant to the Ball Corporation 1997 Stock Incentive Plan. 2.11 "Shareholder of Record" means the person who holds Ball Corporation Common Stock that is held in an account by the transfer agent and for which dividends are paid by the transfer agent. 2.12 "Voluntary Resignation" means resignation by a Director during a three-year term. 3. Restricted Stock Grant 3.1 Form of Grant - The grant under this Program shall be a Restricted Stock Grant ("Restricted Share") pursuant to the Ball Corporation 1997 Stock Incentive Plan. If, at any time or from time-to-time, within two years of the effective date of the Program, the Participant provides documentation to the Corporate Secretary's Department of the Corporation, reasonably satisfactory to the Corporation, of Participant's acquisition of Newly Acquired Shares during the two-year period commencing April 25, 2001, together with a written promise by the Participant to hold the shares for the Holding Period, then the Corporation will grant the Participant one Restricted Share for each Newly Acquired Share so acquired, up to a maximum of 3,000 Restricted Shares. 3.2 Minimum Number of Newly Acquired Shares - The minimum number of Newly Acquired Shares that will be matched by Restricted Shares at one time is 200 shares. The Participant may accumulate purchases of fewer than 200 shares, and when the total number of accumulated shares is equal to or exceeds 200 shares, the Participant may then request that matching Restricted Shares be issued. 3.3 Grant Date - The Restricted Shares will be granted on the 15th of each month provided the documentation required in this Section 3 is received on or before the 5th of that month, otherwise it will granted the following month. If the 15th occurs on a holiday or weekend, the Restricted Shares will be issued on the workday immediately prior to that holiday or weekend. 4. Holding Period for the Newly Acquired Shares The Participant must agree that the Newly Acquired Shares will not be sold or transferred during the Holding Period. Except as provided in Sections 5.2 and 5.3, if the Newly Acquired Shares are not retained during the entire Holding Period, Restricted Shares are forfeited. A pledge of Newly Acquired Shares as collateral for any loan during the Holding Period is not considered to be a sale or transfer of the shares for purposes of this Program; however, in the event of default on the loan during the Holding Period, the Newly Acquired Shares will be considered to be sold and the matching Restricted Shares will be forfeited. 5. Lapse of Restrictions/Forfeiture of Restricted Shares 5.1 End of Holding Period - Restrictions lapse at the end of the Holding Period provided the Participant has not sold or transferred, during the Holding Period, the Newly Acquired Shares for which the Restricted Shares were granted. 5.2 Cease Serving as a Director - Restrictions on Restricted Shares may lapse early when a Participant ceases to serve as a Director of Ball Corporation during the Holding Period for any reason other than Voluntary Resignation. 5.3 Completion of Term - A Director who decides not to stand for re-election or is not re-elected for a three-year term will not be determined to have voluntarily resigned; therefore restrictions lapse pursuant to Section 5.2. 5.4 Forfeiture - Restricted Share granted pursuant to this Program shall be forfeited if the Newly Acquired Shares to which the Restricted Shares relate are not retained by the Participant during the Holding Period. In the event of Voluntary Resignation, the Restricted Shares will be forfeited. 6. Dividends The Participant also will receive a dividend, if any, payable with respect to the Restricted Shares from the date of grant. 7. Deferral of Award 7.1 Exchange of Restricted Shares - Participants in the Program will have an opportunity to exchange Restricted Shares granted under this Program for Restricted Units issued under the Ball Corporation 2000 Deferred Compensation Company Stock Plan (the "Deferred Compensation Stock Plan"). 7.2 Election to Defer - In order to exchange shares and utilize the Deferred Stock Plan, the Participant must elect to exchange any Restricted Shares granted under this Program at least one year prior to the lapse of restrictions on such Restricted Shares. The Restricted Units, upon transfer to the Deferred Compensation Stock Plan, will be eligible for a Corporation Matching Contribution. 7.3 Exchange of Restricted Shares for Restricted Units - In the event a Participant elects to undertake such an exchange, the Restricted Shares granted under this Program will be cancelled and an equivalent number of Restricted Units will be issued to the Participant. Lapse of restrictions and the Participant's rights with respect to such Restricted Units during the Holding Period will be determined under the terms of this Program. 7.4 Date of Deferral - The actual deferral of the Restricted Units will occur when restrictions lapse on the Restricted Units. 8. Miscellaneous 8.1 Administration of the Program - The Nominating Committee of the Board of Directors shall be the sole administrator of the Program. The Committee shall have full power to formulate additional details and regulations for carrying out this Program. The Committee shall also be empowered to make any and all of the determinations not herein specifically authorized which may be necessary or desirable for the effective administration of the Program. Any decision or interpretation of any provision of this Program adopted by the Committee shall be final and conclusive. 8.2 Amendment and Termination of Program - The Committee may at any time amend the Program in whole or in part; provided, however, that no amendment shall be effective to affect the Participant's vested right therein, and, except as provided below, no amendment shall be effective to decrease the future benefits under the Program payable to any Participant or beneficiary with respect to any amount granted or vested prior to the date of the amendment. Written notice of any amendments shall be given promptly to each Participant. No notice shall be required with respect to amendments that are non-material or administrative in nature. 8.3 Successors and Mergers, Consolidations, or Change in Control - The terms and conditions of this Program and Election Form shall enure to the benefit of and bind the Corporation, the Participants, their successors, assignees, and personal representatives. If a Change in Control shall occur then the rights and obligations created hereunder shall be the rights and obligations of the acquirer or successor corporation or entity; provided, however, in the event of a Change in Control, all restrictions on Restricted Shares granted pursuant to Section 3 of this Program shall lapse. 8.4 Gender, Singular and Plural - All pronouns and any variations thereof shall be deemed to refer to the masculine and feminine gender as the identity of the person or persons may require. As the context may require, the singular may be read as the plural and the plural as the singular. 8.5 Captions - The captions to the articles, sections, and paragraphs of this Program are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 8.6 Applicable Law - This Program shall be governed and construed in accordance with the laws of the State of Indiana. 8.7 Validity - In the event any provision of this Program is held invalid, void, or unenforceable, the same shall not affect, in any respect whatsoever, the validity of any other provision of this Program.

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.39 EMPLOYMENT AGREEMENT     This EMPLOYMENT AGREEMENT ("Agreement"), which is dated as of October 1, 1999, is made by and between STAAR Surgical Company, a Delaware corporation, located at 1911 Walker Avenue, Monrovia, California 91016 and hereinafter referred to as "Company", and William C. Huddelston, whose address is 363 Timkin Road, Anaheim, California 92808, hereinafter referred to as "Executive", based upon the following: RECITALS     WHEREAS, Company wishes to retain the services of Executive, and Executive wishes to render services to Company, as its Executive Vice President and Chief Operating Officer;     WHEREAS, Company and Executive wish to set forth in this Agreement the duties and responsibilities that Executive has agreed to undertake on behalf of Company;     WHEREAS, Company and Executive intend that this Agreement will supersede and replace any and all other employment agreements or arrangements for employment entered into by and between Company and Executive and that, upon execution of this Agreement, any such employment agreements or arrangements shall have no further force or effect.     THEREFORE, in consideration of the foregoing and of the mutual promises contained in this Agreement, Company and Executive (who are sometimes individually referred to as a "party" and collectively referred to as the "parties") agree as follows: AGREEMENT     1.  SPECIFIED PERIOD.       Company hereby employs Executive pursuant to the terms of this Agreement and Executive hereby accepts employment with Company pursuant to the terms of this Agreement for the period beginning on October 1, 1999 and ending on September 30, 2005.     Subject to paragraphs 10 and 11, this Agreement will be automatically be renewed for successive periods of one year after September 30, 2005 unless either party gives notice to the other, at least sixty (60) days prior to the expiration of the specified period, that the party desires to renegotiate this Agreement. Thereafter, the terms and conditions of this Agreement shall apply until the parties reach an agreement modifying them. If an agreement is not reduced to writing and executed by the parties within sixty (60) sixty days of the end of the specified period, then this Agreement shall continue on a month to month basis until terminated by written notice given by either party at least one hundred eighty (180) days prior to the end of any monthly period.     2.  GENERAL DUTIES.       Executive shall report to Company's Chief Executive Officer. Executive shall devote his entire productive time, ability, and attention to Company's business during the term of this Agreement. In his capacity as Executive Vice President and Chief Operating Officer, Executive shall be responsible for the day-to-day supervision and control of the business and the employees of Company in the absence of the Chief Executive Officer, and shall supervise Company's daily business operations. Executive shall do and perform all services, acts, or things necessary or advisable to discharge his duties under this Agreement, and such other duties as are commonly performed by an employee of his rank in a publicly traded corporation or which may, from time to time, be prescribed by the Company through its Chief Executive Officer or Board of Directors. Furthermore, Executive agrees to cooperate with and work to 1 -------------------------------------------------------------------------------- the best of his ability with Company's management team, which includes the Board of Directors and the officers and other employees, to continually improve Company's reputation in its industry for quality products and performance.     3.  NONSOLICITATION AND NONINTERFERENCE AND PROPRIETARY PROPERTY AND CONFIDENTIAL INFORMATION PROVISIONS.       (a)  Applicable Definitions.       For purposes of this paragraph 3, the following capitalized terms shall have the definitions set forth below:       i. "Business Segments"—The term "Business Segments" is defined as each of Company's (or Company's affiliates') products or product lines.      ii. "Competitive Business"—The term "Competitive Business" is defined as any business that is or may be competitive with or similar to or adverse to any of Company's (or Company's affiliates') Business Segments, whether such business is conducted by a proprietorship, partnership, corporation or other entity or venture.     (b)  Nonsolicitation and Noninterference.       (1)  Covenants.  Executive hereby covenants and agrees that Executive shall not, either for Executive's own account or directly or indirectly in conjunction with or on behalf of any person, partnership, corporation or other entity or venture:       i. During the term of this Agreement and for a period of one (1) year from the date this Agreement terminates or expires, solicit or employ or attempt to solicit or employ any person who is then or has, within twelve (12) months prior thereto, been an officer, partner, manager, agent or employee of Company or any affiliate of Company whether or not such a person would commit a breach of that person's contract of employment with Company or any affiliate of Company, if any, by reason of leaving the service of Company or any affiliate of Company (the "Nonsolicitation Covenant"); or      ii. During the term of this Agreement and for a period of one (1) year from the date of the Agreement, on behalf of, directly or indirectly, any Competitive Business, or for the purpose of or with the reasonably foreseeable effect of harming the business of Company, solicit the business of any person, firm or company which is then, or has been at any time during the preceding twelve (12) months prior to such solicitation, a customer, client, contractor, supplier or vendor of Company or any affiliate of Company (the "Noninterference Covenant").     (2)  Acknowledgements.  Each of the parties acknowledges that: (i) the covenants and the restrictions contained in the Nonsolicitation and Noninterference Covenants are necessary, fundamental, and required for the protection of the business of Company; (ii) such Covenants relate to matters which are of a special, unique and extraordinary value; and (iii) a breach of either of such Covenants will result in irreparable harm and damages which cannot be adequately compensated by a monetary award.     (3)  Judicial Limitation.  Notwithstanding the foregoing, if at any time, despite the express agreement of Company and Executive, a court of competent jurisdiction holds that any portion of this Nonsolicitation and/or Noninterference Covenant is unenforceable by reason of its extending for too great a period of time or by reason of its being too extensive in any other respect, such Covenant shall be interpreted to extend only over the maximum period of time or to the maximum extent in all other respects, as the case may be, as to which it may be enforceable, all as determined by such court in such action. 2 --------------------------------------------------------------------------------     (4)  Termination of Agreement.  The covenants and agreements contained in the Nonsolicitation and Noninterference Covenant shall terminate and be of no effect if this Agreement is terminated by Company without Cause or by Executive for Cause.     (c)  Proprietary Property; Confidential Information.       (1)  "Applicable Definitions"  For purposes of this paragraph 3(c), the following capitalized terms shall have the definitions set forth below:       i. "Confidential Information"—The term "Confidential Information" is collectively and severally defined as any information, matter or thing of a secret, confidential or private nature, whether or not so labeled, which is connected with Company's business or methods of operation or concerning any of Company's suppliers, customers, licensors, licensees or others with whom Company has a business relationship, and which has current or potential value to Company or the unauthorized disclosure of which could be detrimental to Company. Confidential Information shall be broadly defined and shall include, by way of example and not limitation: (i) matters of a business nature available only to management and owners of Company of which Executive may become aware (such as information concerning customers, vendors and suppliers, including their names, addresses, credit or financial status, buying or selling habits, practices, requirements, and any arrangements or contracts that Company may have with such parties, Company's marketing methods, plans and strategies, the costs of materials, the prices Company obtains or has obtained or at which Company sells or has sold its products or services, Company's manufacturing and sales costs, the amount of compensation paid to employees of Company and other terms of their employment, financial information such as financial statements, budgets and projections, and the terms of any contracts or agreements Company has entered into) and (ii) matters of a technical nature (such as product information, trade secrets, know-how, formulae, innovations, inventions, devices, discoveries, techniques, formats, processes, methods, specifications, designs, patterns, schematics, data, compilation of information, test results, and research and development projects). For purposes of the foregoing, the term "trade secrets" shall mean the broadest and most inclusive interpretation of trade secrets as defined by Section 3426.1(d) of the California Civil Code (the Uniform Trade Secrets Act) and cases interpreting the scope of said Section.      ii. "Proprietary Property"—The term "Proprietary Property" is collectively and severally defined as any written or tangible property owned or used by Company in connection with Company's business, whether or not such property also qualifies as Confidential Information. Proprietary Property shall be broadly defined and shall include, by way of example and not limitation, products, samples, equipment, files, lists, books, notebooks, records, documents, memoranda, reports, patterns, schematics, compilations, designs, drawings, data, test results, contracts, agreements, literature, correspondence, spread sheets, computer programs and software, computer print outs, other written and graphic records, and the like, whether originals, copies, duplicates or summaries thereof, affecting or relating to the business of Company, financial statements, budgets, projections, invoices.     (2)  Ownership of Proprietary Property.  Executive acknowledges that all Proprietary Property which Executive may prepare, use, observe, come into possession of and/or control shall, at all times, remain the sole and exclusive property of Company. Executive shall, upon demand by Company at any time, or upon the cessation of Executive's employment, irrespective of the time, manner, cause or lack of cause of such cessation, immediately deliver to Company or its designated agent, in good condition, ordinary wear and tear and damage by any cause beyond the reasonable control of Executive excepted, all items of the Proprietary Property which are or have been in Executive's possession or under his control, as well as a statement describing the disposition of all items of the Proprietary Property beyond Executive's possession or control in the event Executive has not previously returned such items of the Proprietary Property to Company. 3 --------------------------------------------------------------------------------     (3)  Agreement not to Use or Divulge Confidential Information.  Executive agrees that he will not, in any fashion, form or manner, unless specifically consented to in writing by Company, either directly or indirectly use, divulge, transmit or otherwise disclose or cause to be used, divulged, transmitted or otherwise disclosed to any person, firm or corporation, in any manner whatsoever (other than in Executive's performance of duties for Company or except as required by law) any Confidential Information of any kind, nature or description. The foregoing provisions shall not be construed to prevent Executive from making use of or disclosing information which is in the public domain through no fault of Executive, provided, however, specific information shall not be deemed to be in the public domain merely because it is encompassed by some general information that is published or in the public domain or in Executive's possession prior to Executive's employment with Company.     (4)  Acknowledgement of Secrecy.  Executive acknowledges that the Confidential Information is not generally known to the public or to other persons who can obtain economic value from its disclosure or use and that the Confidential Information derives independent economic value thereby, and Executive agrees that he shall take all efforts reasonably necessary to maintain the secrecy and confidentiality of the Confidential Information and to otherwise comply with the terms of this Agreement.     (5)  Inventions, Discoveries.  Executive acknowledges that any inventions, discoveries or trade secrets, whether patentable or not, made or found by Executive in the scope of his employment with Company constitute property of Company and that any rights therein now held or hereafter acquired by Executive individually or in any capacity are hereby transferred and assigned to Company, and agrees to execute and deliver any confirmatory assignments, documents or instruments of any nature necessary to carry out the intent of this paragraph when requested by Company without further compensation therefor, whether or not Executive is at the time employed by Company. Provided, however, notwithstanding the foregoing, Executive shall not be required to assign his rights in any invention which qualifies fully under the provisions of Section 2870(a) of the California Labor Code, which provides, in pertinent part, that the requirement to assign "shall not apply to any invention that the employee developed entirely on his or her own time without using employer's equipment, supplies, facilities or trade secret information except for those inventions that either:      (i) Relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer; or     (ii) Result from any work performed by the employee for the employer."     Executive understands that he bears the full burden of proving to Company that an invention qualifies fully under Section 2870(a). By signing this Agreement, Executive acknowledges receipt of a copy of this Agreement and of written notification of the provisions of Section 2870.     4.  COMPLIANCE WITH SECURITIES LAWS.  Executive acknowledges that Executive will be subject to the provisions of Sections 10(b) and 16 of the Securities Exchange Act of 1934. Executive acknowledges that Section 10(b) can prohibit Executive from selling or transferring his stock or securities in Company. Executive agrees that he will comply with Company's policies, as stated from time to time, relating to selling or transferring his stock or securities in Company.     5.  COMPENSATION.       (a)  Annual Salary.  During the term of this Agreement, Company shall pay to Executive an annual base salary in the amount of two hundred thousand dollars ($200,000) (the "Annual Salary"). The Annual Salary shall be subject to any tax withholdings and/or employee deductions that are applicable. The Annual Salary shall be paid to Executive in equal installments in accordance with the periodic payroll practices of the Company for executive employees. 4 --------------------------------------------------------------------------------     (b)  Annual Bonus.  Executive and the Compensation Committee of the Board of Directors shall meet to establish performance standards and goals to be met by Executive, which standards and goals shall be based upon earnings, cash flows, EBITDA and other objectives that are mutually agreed to by Executive and the Compensation Committee. Company shall pay to Executive, not later than thirty (30) days after the completion of the fiscal year, a cash bonus (the "Annual Bonus") in an amount to be recommended by the Compensation Committee to the Board, for each year in which the performance standards and goals are met or exceeded by Executive. Nothing in this paragraph shall prevent Executive and the Compensation Committee from mutually agreeing to an alternative computation of the Annual Bonus, which may be implemented and paid to Executive in place of the Annual Bonus described herein. The Annual Bonus shall be subject to any applicable tax withholdings and/or employee deductions.     (c)  Cost of Living Adjustment.  Commencing as of January 1, 2000, and on each January 1st thereafter, the then effective Annual Salary shall be increased (but not decreased) by an amount: (i) which shall reflect the increase, if any, in the cost of living during the previous 12 months by adding to the Annual Salary an amount computed by multiplying the Annual Salary by the percentage by which the level of the Consumer Price Index for the Los Angeles, California Metropolitan Area, as reported on January 1st of the new year by the Bureau of Labor Statistics of the United States Department of Labor has increased over its level as of January 1st of the prior year; and (ii) which will maintain Executive's compensation at a level consistent with the compensation paid to executive officers holding similar positions in the medical technology industries. Additionally, the Board shall periodically review Executive's Annual Salary to determine whether to otherwise increase Executive's compensation, without any obligation by the Board to authorize such increase.     (d)  Participation in Employee Benefit Plans.  Executive shall have the same rights, privileges, benefits and opportunities to participate in any of Company's employee benefit plans, including payment of medical and dental insurance premiums for family, which may now or hereafter be in effect on a general basis for executive officers or employees, including its qualified retirement plans and its non-qualified deferred compensation plans. Company may delete benefits and otherwise amend and change the type and quantity of benefits it provides in its sole discretion. In the event Executive receives payments from a disability plan maintained by Company, Company shall have the right to offset such payments against the Annual Salary otherwise payable to Executive during the period for which payments are made by such disability plan. During the term of this Agreement, Company shall pay the premium for a term life insurance policy for the benefit of Executive's survivors which shall insure the life of Executive in the amount of $1,000,000.     (e)  Forgiveness of Loans.  Company shall forgive the payment of any and all loans made to Executive by Company in the event of: (i) a termination of Executive as a result of a Change in Control, (ii) a termination by Executive for good reason, (iii) a termination by Company without cause; or (iv) Executive's death or disability. Company shall pay, or shall pay to Executive, an amount equal to any and all taxes, of any kind or nature, that are incurred by Executive as a result of the forgiveness of the loans. For purposes of this Agreement, a "Change in Control" shall be defined as any of the following transactions: (i) the sale or disposition by Company of substantially all of its business or assets, or (ii) the acquisition of Company's capital stock by a third party in connection with the transfer of a controlling interest of Company's capital stock to such party, or (iii) the merger or consolidation of Company with another corporation as part of a transfer of a controlling interest of Company's capital stock to a third party. A "controlling interest of Company's capital stock" shall be defined as a transfer or acquisition by a third party of at least thirty percent (30%) of Company's capital stock in one or a series of transactions. A "third party" shall not include any employee benefit plan maintained by Company or any corporation or entity in which Company holds fifty percent (50%) of more of the voting securities. 5 --------------------------------------------------------------------------------     (f)  Automobile Allowance.  Company shall provide a late model luxury automobile to Executive for his use during the term of this Agreement, and shall pay all purchase-installment and/or lease payments to acquire such automobile, as well as the cost to insure the automobile. If Company fails to provide the automobile during any portion of the term of this Agreement, Company shall pay to Executive the sum of seven hundred fifty dollars ($750) for each month an automobile is not provided, to reimburse Executive for the cost of an automobile and for the payment of insurance in connection therewith. Payment and/or provision of the aforesaid allowance shall be subject to any applicable tax withholdings and/or employee deductions. Executive shall be responsible for all income taxes imposed on Executive by reason of the automobile allowance.     (g)  Additional Compensation.  Nothing included herein shall prevent the Compensation Committee from increasing or adding to Executive's compensation.     6.  REIMBURSEMENT OF BUSINESS EXPENSES.       Company shall promptly reimburse Executive for all reasonable business expenses incurred by Executive in connection with the business of Company. However, each such expenditure shall be reimbursable only if Executive furnishes to Company adequate records and other documentary evidence required by federal and state statutes and regulations issued by the appropriate taxing authorities for the substantiation of each such expenditure as an income tax deduction.     7.  ANNUAL VACATION/SICK LEAVE.       Executive shall be entitled to at least five (5) weeks vacation time each year without loss of compensation. Executive shall be entitled to sick leave in accordance with Company's general policy for its employees.     8.  INDEMNIFICATION OF LOSSES.       So long as Executive's actions were taken in good faith and in furtherance of Company's business and within the scope of Executive's duties and authority, Company shall indemnify and hold Executive harmless to the full extent of the law from any and all claims, losses and expenses sustained by Executive as a result of any action taken by him to discharge his duties under this Agreement, and Company shall defend Executive, at Company's expense, in connection with any and all claims by stockholders or third parties which are based upon actions taken by Executive to discharge his duties under this Agreement.     9.  PERSONAL CONDUCT.       Executive agrees promptly and faithfully to comply with all present and future policies, requirements, directions, requests and rules and regulations of Company in connection with Company's business. Executive further agrees that he will not intentionally at any time commit any act or become involved in any situation or occurrence tending to bring Company into public scandal, ridicule or which will reflect unfavorably on the reputation of Company.     10.  TERMINATION BY COMPANY FOR CAUSE.       Company reserves the right to declare Executive in default of this Agreement if Executive willfully breaches or habitually neglects the duties which he is required to perform under the terms of this Agreement, or if Executive commits such acts of dishonesty, fraud, gross negligence or willful misconduct, which acts were not taken in good faith and were not in furtherance of Company's business, and which acts result in material harm to Company or its business. Company may terminate this Agreement for cause by giving written notice of termination to Executive. With the exception of the covenants included in paragraph 3 above and as otherwise set forth in this paragraph 10, upon such termination the obligations of Executive and Company under this Agreement shall immediately cease. Such termination shall be without prejudice to any other remedy to which Company may be entitled 6 -------------------------------------------------------------------------------- either at law, in equity, or under this Agreement for (i) the recovery of property, such as embezzled funds, or (ii) for the enforcement of the covenants included in paragraph 3 above. If Executive's employment is terminated pursuant to this paragraph, Company shall pay to Executive (i) Executive's accrued but unpaid Annual Salary and vacation pay through the effective date of the termination; (ii) Executive's accrued but unpaid Annual Bonus, if any; and (iii) business expenses incurred prior to the effective date of termination. Executive shall not be entitled to continue to participate in any employee benefit plans except to the extent provided in such plans for terminated participants, or as may be required by applicable law.     11.  TERMINATION BY COMPANY OR EXECUTIVE WITHOUT CAUSE.       (a)  Death.  Executive's employment shall terminate upon the death of Executive. With the exception of the covenants included in paragraph 12 below, upon such termination, the obligations of Executive and Company under this Agreement shall immediately cease.     (b)  Disability.  Company reserves the right to terminate Executive's employment upon ninety (90) days written notice if, for a period of sixty (60) days, Executive is prevented from discharging his duties under this Agreement due to any physical or mental disability. With the exception of the covenants included in paragraph 3 above and paragraph 12 below, upon such termination the obligations of Executive and Company under this Agreement shall immediately cease.     (c)  Election By Executive.  Executive's employment may be terminated at any time by Executive upon not less than ninety (90) days written notice by Executive to the Board. With the exception of the covenants included in paragraph 3 above and as otherwise set forth in this sub-paragraph (c), upon such termination the obligations of Executive and Company under this Agreement shall immediately cease. In the event of a termination pursuant to this paragraph, Company shall pay to Executive (i) Executive's accrued but unpaid Annual Salary and vacation pay through the effective date of the termination; (ii) Executive's accrued but unpaid Annual Bonus, if any; and (iii) business expenses incurred prior to the effective date of termination. Executive shall not be entitled to continue to participate in any employee benefit plans except to the extent provided in such plans for terminated participants, or as may be required by applicable law.     (d)  Election By Company.  Company may terminate Executive's employment upon not less than ninety (90) days written notice by Company to Executive. With the exception of the covenants included in paragraph 13 below, upon such termination the obligations of Executive and Company under this Agreement shall immediately cease.     (e)  Termination By Executive For Good Reason.  Executive may terminate this Agreement immediately based on his reasonable determination that one of the following events has occurred:     (i)  Company intentionally and continually breaches or wrongfully fails to fulfill or perform (A) its obligations, promises or covenants under this Agreement; or (B) any warranties, obligations, promises or covenants in any agreement (other than this Agreement) entered into between Company and Executive, without cure, if any, as provided in such agreement;     (ii) Without the consent of Executive, Company: (A) substantially alters or materially diminishes the position, nature, status, prestige or responsibilities of Executive from those in effect by mutual agreement of the parties from time-to-time; (B) assigns additional duties or responsibilities to Executive which are wholly and clearly inconsistent with the position, nature, status, prestige or responsibilities of Executive then in effect; (C) removes or fails to reappoint or re-elect Executive to Executive's offices under this Agreement (as they may be changed or augmented from time-to-time with the consent of Executive), unless Executive is deceased or disabled, or such removal or failure is attributable to an event which would 7 -------------------------------------------------------------------------------- constitute termination for cause; or (D) Company moves its place of business to a location which is more than thirty (30) miles from Executive's home;     (iii) Without the ratification of Executive, Executive is removed from the Board without his consent; or Company fails to nominate or reappoint Executive to the Board (unless Executive is deceased or disabled, or such removal or failure is attributable to an event which would constitute termination for cause), or if Executive is so nominated, the stockholders of the Company fail to re-elect Executive to the Board;     (iv) Company intentionally requires Executive to commit or participate in any felony or other serious crime; and/or     (v) Company engages in other conduct constituting legal cause for termination. With the exception of the covenants included in paragraph 13 below, upon such termination the obligations of Executive and Company under this Agreement shall immediately cease.     12.  EFFECT OF TERMINATION ATTRIBUTABLE TO DEATH OR DISABILITY.       In the event Executive's employment is terminated due to Executive's death or disability, then:     (a) Company shall pay Executive's accrued but unpaid Annual Salary and vacation time through the effective date of the termination, provided, however, that Company shall also pay to Executive or his estate one (1) years Salary at the Executive's then effective Annual Salary as set forth in paragraph 5(a);     (b) Company shall pay to the Executive an Annual Bonus which shall be computed as the greater of the accrued but unpaid Annual Bonus, if any, or an amount which equals the average of Executive's Annual Bonus during the three (3) calendar years prior to the termination date;     (c) Company shall reimburse Executive for any business expenses incurred prior to the effective date of the termination;     (d) Executive (including Executive's heirs) shall be entitled to continue to participate in any employee benefit plans except to the extent provided in such plans for terminated participants, or as may be required by applicable law.     (e) Pursuant to paragraph 5(e), Company shall forgive the payment of any and all loans made by Company to Executive. Company shall pay, or shall pay to Executive, an amount equal to any and all taxes, of any kind or nature, that are incurred by Executive as a result of the forgiveness of the loans.     (f)  Unless otherwise provided in the agreement memorializing them, the vesting conditions imposed on any stock options, warrants or other rights subject to vesting shall be accelerated and shall vest on the date of Executive's termination.     13.  EFFECT OF TERMINATION ATTRIBUTABLE TO A CHANGE IN CONTROL, A TERMINATION BY EXECUTIVE FOR GOOD REASON, OR A TERMINATION BY COMPANY WITHOUT CAUSE.       If Executive's employment is terminated before the expiration of the term, and such termination is attributable to (i) a Change in Control; (ii) a termination by Executive for good reason; or (iii) Company's election to terminate, then:     (a) Company shall pay to Executive, in a lump sum and without discount to present value, an amount equal to the Annual Salary, as set forth in paragraph 5(a), due to Executive for the 8 -------------------------------------------------------------------------------- balance of the term, but in no event shall such payment total less than five hundred thousand dollars ($500,000);     (b) Company shall pay to Executive, in a lump sum and without discount to present value, Executive's declared but unpaid Annual Bonus, if such Annual Bonus has been declared, but if not declared then Company shall pay to Executive an amount which equals the average of Executive's Annual Bonus during the three (3) calendar years prior to the termination date;     (c) At the election of Executive, Company shall (i) provide to Executive and his spouse and dependents, for a period of twelve (12) months, medical benefits which shall be comparable to the benefits received by Executive at the time of termination of his employment; or (ii) provide to Executive additional compensation, payable on a monthly basis, which would approximate the cost to Executive to obtain such comparable benefits;     (d) Company shall reimburse Executive for Executive's business expenses incurred through the effective date of the termination;     (e) Pursuant to paragraph 5(e), Company shall forgive the payment of any and all loans made by Company to Executive. Company shall pay, or shall pay to Executive, an amount equal to any and all taxes, of any kind or nature, that are incurred by Executive as a result of the forgiveness of the loans; and     (f)  Unless otherwise provided in the agreement memorializing them, the vesting conditions imposed on any stock options, warrants or other rights subject to vesting shall be accelerated and shall vest on the date of Executive's termination. Executive shall not be required to mitigate the amount of any payment made pursuant to this paragraph 13 by seeking other employment or otherwise, and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to Executive in any subsequent employment.     14.  MISCELLANEOUS       (a)  Preparation of Agreement.  It is acknowledged by each party that such party either had separate and independent advice of counsel or the opportunity to avail itself or himself of same. In light of these facts it is acknowledged that no party shall be construed to be solely responsible for the drafting hereof, and therefore any ambiguity shall not be construed against any party as the alleged draftsman of this Agreement.     (b)  Cooperation.  Each party agrees, without further consideration, to cooperate and diligently perform any further acts, deeds and things and to execute and deliver any documents that may from time to time be reasonable necessary or otherwise reasonably required to consummate, evidence, confirm and/or carry out the intent and provisions of this Agreement, all without undue delay or expense.     (c)  Interpretation.       (i)  Entire Agreement/No Collateral Representations.  Each party expressly acknowledges and agrees that this Agreement, including all exhibits attached hereto: (1) is the final, complete and exclusive statement of the agreement of the parties with respect to the subject matter hereof; (2) supersedes any prior or contemporaneous agreements, promises, assurances, guarantees, representations, understandings, conduct, proposals, conditions, commitments, acts, course of dealing, warranties, interpretations or terms of any kind, oral or written (collectively and severally, the "Prior Agreements"), and that any such prior agreements are of no force or effect except as expressly set forth herein; and (3) may not be varied, supplemented or contradicted by evidence of Prior Agreements, or by evidence of subsequent oral agreements. 9 -------------------------------------------------------------------------------- Any agreement hereafter made shall be ineffective to modify, supplement or discharge the terms of this Agreement, in whole or in part, unless such agreement is in writing and signed by the party against whom enforcement of the modification or supplement is sought.     (ii)  Waiver.  No breach of any agreement or provision herein contained, or of any obligation under this Agreement, may be waived, nor shall any extension of time for performance of any obligations or acts be deemed an extension of time for performance of any other obligations or acts contained herein, except by written instrument signed by the party to be charged or as otherwise expressly authorized herein. No waiver of any breach of any agreement or provision herein contained shall be deemed a waiver of any preceding or succeeding breach thereof, or a waiver or relinquishment of any other agreement or provision or right or power herein contained.     (iii)  Remedies Cumulative.  The remedies of each party under this Agreement are cumulative and shall not exclude any other remedies to which such party may be lawfully entitled.     (iv)  Severability.  If any term or provision of this Agreement or the application thereof to any person or circumstance shall, to any extent, be determined to be invalid, illegal or unenforceable under present or future laws effective during the term of this Agreement, then and, in that event: (A) the performance of the offending term or provision (but only to the extent its application is invalid, illegal or unenforceable) shall be excused as if it had never been incorporated into this Agreement, and, in lieu of such excused provision, there shall be added a provision as similar in terms and amount to such excused provision as may be possible and be legal, valid and enforceable, and (B) the remaining part of this Agreement (including the application of the offending term or provision to persons or circumstances other than those as to which it is held invalid, illegal or unenforceable) shall not be affected thereby and shall continue in full force and effect to the fullest extent provided by law.     (v)  No Third Party Beneficiary.  Notwithstanding anything else herein to the contrary, the parties specifically disavow any desire or intention to create any third party beneficiary obligations, and specifically declare that no person or entity, other than as set forth in this Agreement, shall have any rights hereunder or any right of enforcement hereof.     (vi)  Headings; References; Incorporation; Gender.  The headings used in this Agreement are for convenience and reference purposes only, and shall not be used in construing or interpreting the scope or intent of this Agreement or any provision hereof. References to this Agreement shall include all amendments or renewals thereof. Any exhibit referenced in this Agreement shall be construed to be incorporated in this Agreement. As used in this Agreement, each gender shall be deemed to include the other gender, including neutral genders or genders appropriate for entities, if applicable, and the singular shall be deemed to include the plural, and vice versa, as the context requires.     (d)  Enforcement.       (i)  Applicable Law.  This Agreement and the rights and remedies of each party arising out of or relating to this Agreement (including, without limitation, equitable remedies) shall be solely governed by, interpreted under, and construed and enforced in accordance with the laws (without regard to the conflicts of law principles thereof) of the State of California, as if this agreement were made, and as if its obligations are to be performed, wholly within the State of California.     (ii)  Consent to Jurisdiction; Service of Process.  Any action or proceeding arising out of or relating to this Agreement shall be filed in and heard and litigated solely before the state courts of California located within the County of Los Angeles. 10 --------------------------------------------------------------------------------     (iii)  Consent to Specific Performance and Injunctive Relief and Waiver of Bond or Security.  Each party acknowledges that Company may, as a result of Executive's breach of the covenants and obligations included in paragraph 3 of this Agreement, sustain immediate and long-term substantial and irreparable injury and damage which cannot be reasonably or adequately compensated by damages at law. Each party agrees that in the event of Executive's breach or threatened breach of the covenants and obligations included in paragraph 3, Company shall be entitled to obtain equitable relief from a court of competent jurisdiction or arbitration without proof of any actual damages that have been or may be caused to Company by such breach or threatened breach and without the posting of bond or other security in connection therewith.     (e)  No Assignment of Rights or Delegation of Duties by Executive.  Executive's rights and benefits under this Agreement are personal to him and therefore (i) no such right or benefit shall be subject to voluntary or involuntary alienation, assignment or transfer; and (ii) Executive may not delegate his duties or obligations hereunder.     (f)  Notices.  Unless otherwise specifically provided in this Agreement, all notices, demands, requests, consents, approvals or other communications (collectively and severally called "Notices") required or permitted to be given hereunder, or which are given with respect to this Agreement, shall be in writing, and shall be given by: (A) personal delivery (which form of Notice shall be deemed to have been given upon delivery), (B) by telegraph or by private airborne/overnight delivery service (which forms of Notice shall be deemed to have been given upon confirmed delivery by the delivery agency), (C) by electronic or facsimile or telephonic transmission, provided the receiving party has a compatible device or confirms receipt thereof (which forms of Notice shall be deemed delivered upon confirmed transmission or confirmation of receipt), or (D) by mailing in the United States mail by registered or certified mail, return receipt requested, postage prepaid (which forms of Notice shall be deemed to have been given upon the fifth (5th) business day following the date mailed). Each party, and their respective counsel, hereby agree that if Notice is to be given hereunder by such party's counsel, such counsel may communicate directly with all principals, as required to comply with the foregoing notice provisions. Notices shall be addressed to the address hereinabove set forth in the introductory paragraph of this Agreement, or to such other address as the receiving party shall have specified most recently by like Notice, with a copy to the other parties hereto. Any Notice given to the estate of a party shall be sufficient if addressed to the party as provided in this subparagraph.     (g)  Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument, binding on all parties hereto. Any signature page of this Agreement may be detached from any counterpart of this Agreement and reattached to any other counterpart of this Agreement identical in form hereto by having attached to it one or more additional signature pages.     (h)  Execution by All Parties Required to be Binding; Electronically Transmitted Documents.  This Agreement shall not be construed to be an offer and shall have no force and effect until this Agreement is fully executed by all parties hereto. If a copy or counterpart of this Agreement is originally executed and such copy or counterpart is thereafter transmitted electronically by facsimile or similar device, such facsimile document shall for all purposes be treated as if manually signed by the party whose facsimile signature appears. 11 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties have executed this Agreement.     Company:     STAAR Surgical Company     a Delaware corporation     By:    /s/ ANDREW F. POLLET    --------------------------------------------------------------------------------     Executive:     /s/ WILLIAM C. HUDDLESTON    -------------------------------------------------------------------------------- William C. Huddleston 12 -------------------------------------------------------------------------------- QuickLinks Exhibit 10.39 EMPLOYMENT AGREEMENT RECITALS AGREEMENT

QuickLinks -- Click here to rapidly navigate through this document RSTAR CORPORATION RESTRICTED STOCK PURCHASE AGREEMENT (Amended as of April 20, 2001)     THIS RESTRICTED STOCK PURCHASE AGREEMENT (this "Agreement") is made by and between Lance Mortensen ("Purchaser") and rStar Corporation, a Delaware corporation (the "Company") and as amended herein supercedes the Restricted Stock Purchase Agreement originally dated September 13, 1999.     In consideration of the mutual covenants and representations herein set forth, the Company and Purchaser hereby agree as follows:     1.  Purchase and Sale of Shares. Purchaser hereby purchases from the Company, and the Company hereby issues and sells to Purchaser, an aggregate of 300,000 shares of Common Stock (as hereinafter defined) (the "Shares"), at a price of $5.00 per share or an aggregate purchase price of $1,500,000. The Company shall, promptly after execution of this Agreement, issue a certificate representing the Shares registered in the name of Purchaser, which certificate shall be held in escrow pursuant to the provisions of Section 6 hereof. In return, the Purchaser shall deliver to the Company (a) an executed counterpart of this Agreement, and (b) the purchase price of the Shares in the form of (i) a check payable to the Company, (ii) a wire transfer of immediately available funds to an account designated by the Company, (iii) a limited-recourse promissory note, or (iv) any combination of the foregoing.     2.  Adjustments. All references to the number of Shares and the purchase price of the Shares in this Agreement shall be appropriately adjusted to reflect any further stock split, stock dividend or other change in the Shares which may be made by the Company after the date of this Agreement.     3.  Definitions. As used herein, the following definitions shall apply:     (a) "Board" means the Board of Directors of the Company.     (b) "Change of Control" shall mean the occurrence of any of the following events:     (i)  the approval by stockholders of the Company of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation;     (ii) any approval by the stockholders of the Company of a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets; or     (iii) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becoming the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company's then outstanding voting securities.     (c) "Code" means the Internal Revenue Code of 1986, as amended.     (d) "Common Stock" means the Common Stock of the Company.     (e) "Consultant" means any person, including an advisor, who is engaged by the Company or any Parent or Subsidiary to render services and is compensated for such services, and any director of the Company whether compensated for such services or not. --------------------------------------------------------------------------------     (f)  "Continuous Status as an Employee or Consultant" means the absence of any interruption or termination of service as an Employee or Consultant. Continuous Status as an Employee shall not be considered interrupted in the case of: (i) sick leave; (ii) military leave; (iii) any other leave of absence approved by the Company, provided that such leave is for a period of not more than ninety (90) days, unless reemployment upon the expiration of such leave is guaranteed by contract or statute, or unless provided otherwise pursuant to Company policy adopted from time to time; or (iv) in the case of transfers between locations of the Company or between the Company, its Subsidiaries or its successor. Continuous Status as an Employee or Consultant shall not be considered interrupted in the case of a change in status from Employee to Consultant, or vice versa.     (g) "Employee" means any person, including officers and directors, employed by the Company or any Parent or Subsidiary of the Company, provided that the payment of a director's fee by the Company shall not, in and of itself, be sufficient to constitute "employment" by the Company.     (h) "Fair Market Value" means, as of any date, the value of Common Stock determined as follows:     (i)  if the Common Stock is listed on any established stock exchange or a national market system, including, without limitation, the Nasdaq National Market of the National Association of Securities Dealers, Inc. Automated Quotation ("Nasdaq") Stock Market, its Fair Market Value shall be the closing sale price for such stock (or the closing bid, if no sales were reported, as quoted on such system or exchange, for the last market trading day prior to the time of determination) as reported in the Wall Street Journal or such other source as the Board deems reliable;     (ii) if the Common Stock is quoted on the Nasdaq Stock Market (but not on the Nasdaq National Market thereof) or regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high and low asked prices for the Common Stock; or     (iii) in the absence of an established market for the Common Stock, Fair Market Value thereof shall be determined in good faith by the Board.     (i)  "Involuntary Termination" means (i) without the Purchaser's express written consent, a significant reduction of the Purchaser's duties, position or responsibilities relative to the Purchaser's duties, position or responsibilities in effect immediately prior to such reduction, or the removal of the Purchaser from such position, duties and responsibilities, unless the Purchaser is provided with comparable duties, position and responsibilities; provided, however, that a reduction in duties, position or responsibilities solely by virtue of the Company being acquired and made part of a larger entity (as, for example, when the Chief Executive Officer of the Company remains as such following a Change of Control but is not made Chief Executive Officer of the acquiring corporation) shall not constitute an "Involuntary Termination"); (ii) without the Purchaser's express written consent, a substantial reduction, without good business reasons, of the facilities and perquisites (including office space and location) available to the Purchaser immediately prior to such reduction; (iii) a reduction by the Company of the Purchaser's base salary as in effect immediately prior to such reduction; (iv) a material reduction by the Company in the kind or level of employee benefits to which the Purchaser is entitled immediately prior to such reduction with the result that the Purchaser's overall benefits package is significantly reduced; or (v) without the Purchaser's express written consent, the relocation of the Purchaser to a facility or a location more than fifty (50) miles from his current location; (vi) any purported termination of the Purchaser by the Company which is not effected for Cause or for which the grounds relied upon are not valid. 2 --------------------------------------------------------------------------------     (j)  "Parent" means a "parent corporation", whether now or hereafter existing, as defined in Section 424(e) of the Code.     (k) "Subsidiary" means a "subsidiary corporation", whether now or hereafter existing, as defined in Section 424(f) of the Code.     (l)  "Unvested Shares" means those Shares that, as of any particular date, have not vested in accordance with the vesting schedule set forth in Section 4 below.     (m) "Vested Shares" means those Shares that, as of any particular date, have vested in accordance with the vesting schedule set forth in Section 4 below.     4.  Vesting.     The Shares shall vest and be released from the Company's Repurchase Option (as hereinafter defined) in accordance with the following provisions:     (a) One-third (1/3) of the Shares shall vest twelve (12) months after the date hereof, and one-third (1/3) of the Shares shall vest at the end of each year thereafter, so that all the Shares shall be Vested Shares on September 13, 2002.     (b) Vesting under this subsection shall cease in the event that Purchaser's Continuous Status as an Employee or Consultant terminates. At such times, the repurchase provisions of Section 5 hereof shall apply to all Shares that are Unvested Shares as of the date of such termination.     (c) Notwithstanding anything contained in this Agreement to the contrary, if the Purchaser's employment with the Company terminates as a result of an Involuntary Termination at any time within twelve (12) months after a Change of Control, then 100% of the Shares shall become Vested Shares and the repurchase provisions of Section 5 shall immediately lapse.     5.  Repurchase Option.     (a) If Purchaser's Continuous Status as an Employee or Consultant terminates for any or no reason, including for cause, death, or disability, the Company shall have the right and option to purchase from Purchaser all of Purchaser's Shares which are Unvested Shares as of the date of such termination, at the price paid by Purchaser for such Shares (the "Repurchase Option").     (b) Upon the occurrence of such termination, the Company may exercise its Repurchase Option by delivering personally, by registered or certified mail, or by overnight courier, to Purchaser (or Purchaser's transferee or legal representative, as the case may be) and to the Escrow Agent (as hereinafter defined), within sixty (60) days of such termination, a notice in writing indicating the Company's intention to exercise the Repurchase Option and setting forth a date for closing not later than fifteen (15) days from the date of such notice. The closing shall take place at the Company's office. At the closing, the holder of the certificates for the Unvested Shares being transferred shall deliver the stock certificate or certificates evidencing the Unvested Shares, and the Company shall deliver the purchase price (the "Repurchase Price") therefor.     (c) Payment of the Repurchase Price may be made, at the option of the Company, in cash (by check), by cancellation of all or a portion of any outstanding indebtedness of Purchaser to the Company or by any combination thereof. If the Company elects to pay the entire Repurchase Price by check, it may make such payment to a bank selected by the Company. The Company shall avail itself of this option by a notice in writing to Purchaser which states the name and address of the bank, the date of closing, and waives the closing at the Company's office.     (d) If the Company does not elect to exercise the Repurchase Option conferred above by giving the requisite notice within sixty (60) days following the termination, the Repurchase Option shall terminate. 3 --------------------------------------------------------------------------------     6.  Transfer of Shares; Escrow.     (a) Purchaser hereby authorizes and directs the Secretary of the Company, or such other person designated by the Company, to transfer any Unvested Shares as to which the Repurchase Option has been exercised from Purchaser to the Company.     (b) To ensure the availability for delivery of Purchaser's Unvested Shares upon repurchase by the Company pursuant to the Repurchase Option under Section 5 above, Purchaser hereby appoints the Corporate Secretary of the Company, or any other person designated by the Company, as escrow agent (the "Escrow Agent") and as Purchaser's attorney-in-fact to sell, assign and transfer unto the Company such Unvested Shares, if any, as may be repurchased by the Company pursuant to the Repurchase Option and shall, upon execution of this Agreement, deliver and deposit with the Escrow Agent the share certificates representing the Unvested Shares, together with two stock assignments duly endorsed in blank and in the form attached hereto as Exhibit A-1. The Unvested Shares and stock assignment shall be held by the Escrow Agent in escrow pursuant to Joint Escrow Instructions in the form attached hereto as Exhibit A-2, until (i) the Company exercises its Repurchase Option as provided in Section 5 above, (ii) such Unvested Shares become Vested Shares, or (iii) such time as this Agreement no longer is in effect. Upon vesting of the Unvested Shares, the Escrow Agent shall promptly deliver to Purchaser the certificate or certificates representing such Shares in the Escrow Agent's possession belonging to Purchaser, and the Escrow Agent shall be discharged of all further obligations hereunder. Notwithstanding any of the foregoing, however, the Escrow Agent shall nevertheless retain such certificate or certificates as Escrow Agent if so required pursuant to other restrictions imposed pursuant to this Agreement.     (c) The Escrow Agent shall not be liable for any act it may do or omit to do with respect to holding the Shares in escrow and while acting in good faith and in the exercise of its judgment.     (d) Transfer or sale of the Shares is subject to restrictions on transfer imposed by any applicable state and federal securities laws. Any transferee shall hold such Shares subject to all the provisions hereof and shall acknowledge the same by signing a copy of this Agreement.     (e) No Shares may be sold, pledged, hypothecated or otherwise transferred by Purchaser until such Shares have become Vested Shares and are no longer subject to any security agreement for the benefit of the Company.     7.  Ownership, Voting Rights, Duties. This Agreement shall not affect in any way the ownership, voting rights or other rights or duties of Purchaser, except as specifically provided herein. Purchaser shall enjoy rights as a stockholder until such time as Purchaser disposes of the Shares or the Company and/or its assignee(s) exercises either the Repurchase Option or the Right of First Refusal hereunder. Upon any such exercise, Purchaser shall have no further rights as a holder of the Shares so purchased except the right to receive payment for the Shares so purchased in accordance with the provisions of this Agreement, and Purchaser or the Escrow Agent, as the case may be, shall forthwith cause the certificate(s) evidencing the Shares so purchased to be surrendered to the Company for transfer or cancellation.     8.  Company's Right of First Refusal. Before any Shares held by Purchaser or any transferee (either being sometimes referred to herein as the "Holder") may be sold or otherwise transferred (including transfer by gift or operation of law), the Company or its assignee(s) shall have a right of first refusal to purchase the Shares on the terms and conditions set forth in this Section (the "Right of First Refusal").     (a) Notice of Proposed Transfer. The Holder of the Shares shall deliver to the Company a written notice (the "Notice") stating: (i) the Holder's bona fide intention to sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee ("Proposed 4 -------------------------------------------------------------------------------- Transferee"); (iii) the number of Shares to be transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the Shares (the "Offered Price"), and the Holder shall offer the Shares at the Offered Price to the Company or its assignee(s).     (b) Exercise of Right of First Refusal. At any time within thirty (30) days after receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase all, but not less than all, of the Shares proposed to be transferred to any one or more of the Proposed Transferees, at the purchase price determined in accordance with subsection (c) below.     (c) Purchase Price. The purchase price for the Shares purchased by the Company or its assignee(s) under this Section shall be the Offered Price. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Board in good faith.     (d) Payment. Payment of the purchase price shall be made, at the option of the Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an assignee, to the assignee), or by any combination thereof within 30 days after receipt of the Notice or in the manner and at the times set forth in the Notice.     (e) Holder's Right to Transfer. If all of the Shares proposed in the Notice to be transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s) as provided in this Section, then the Holder may sell or otherwise transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other transfer is consummated within ninety (90) days after the date of the Notice and provided further that any such sale or other transfer is effected in accordance with any applicable securities laws and the Proposed Transferee agrees in writing that the provisions of this Section shall continue to apply to the Shares held by such Proposed Transferee. If the Shares described in the Notice are not transferred to the Proposed Transferee within such period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred.     (f)  Exception for Certain Family Transfers. Anything to the contrary contained in this Section notwithstanding, the transfer of any or all of the Shares during Purchaser's lifetime or on Purchaser's death by will or intestacy to Purchaser's Immediate Family or a trust for the benefit of Purchaser's immediate family shall be exempt from the provisions of this Section. "Immediate Family" as used herein shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister. In such case, the transferee or other recipient shall receive and hold the Shares so transferred subject to the provisions of this Section, and there shall be no further transfer of such Shares except in accordance with the terms of this Section.     (g) Termination of Right of First Refusal. The Right of First Refusal shall terminate as to any Shares upon (i) the first sale of Common Stock of the Company to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Securities Act"), or (ii) a merger of the Company with a corporation whose stock is publicly traded on a national exchange.     9.  Restrictive Legends; Stop-Transfer Orders; Market Standoff.     (a) Legends. Purchaser understands and agrees that the Company shall cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) 5 -------------------------------------------------------------------------------- evidencing ownership of the Shares together with any other legends that may be required by state or federal securities laws: THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER, RIGHTS OF REPURCHASE, RIGHTS OF FIRST REFUSAL AND OTHER RESTRICTIONS FOR THE BENEFIT OF THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN A RESTRICTED STOCK PURCHASE AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, COPIES OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS, RIGHTS OF REPURCHASE, RIGHTS OF FIRST REFUSAL AND OTHER RESTRICTIONS ARE BINDING ON TRANSFEREES OF THESE SHARES.     (b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate "stop transfer" instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.     (c) Market Standoff. Purchaser hereby agrees that, if so requested by the Company or any representative of the underwriters in connection with any registration of the offering of any securities of the Company under the Securities Act, Purchaser shall not sell or otherwise transfer any Shares or other securities of the Company during the 180-day period (or such other period as may be requested in writing by the representative of the underwriters and agreed to in writing by the Company) following the effective date of a registration statement of the Company filed under the Securities Act. Such restriction shall apply only to the first registration statement of the Company to become effective under the Securities Act that includes securities to be sold on behalf of the Company to the public in an underwritten public offering under the Securities Act. The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such market standoff period.     (d) Refusal to Transfer. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.     10. Representations.     (a) Investment Representation. Purchaser represents to the Company the following:     (i)  Purchaser either (1) has a preexisting personal or business relationship with the Company or any of its officers, directors or controlling persons, or (2) by reason of Purchaser's business or financial experience or the business or financial experience of Purchaser's professional advisors who are unaffiliated with and who are not compensated by the Company or any affiliate or selling agent of the Company, directly or indirectly, could be reasonably assumed to have the capacity to protect Purchaser's own interests in connection with the purchase of the Shares. 6 --------------------------------------------------------------------------------     (ii) Purchaser is aware of the Company's business affairs and financial condition and has acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Shares. Purchaser is acquiring these Shares for investment for Purchaser's own account only and not with a view to, or for resale in connection with, any "distribution" thereof within the meaning of the Securities Act.     (iii) Purchaser acknowledges and understands that the Shares constitute "restricted securities" under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Purchaser's investment intent as expressed herein. In this connection, Purchaser understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if Purchaser's representation was predicated solely upon a present intention to hold these Shares for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Shares, or for a period of one year or any other fixed period in the future. Purchaser further understands that the Shares must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Purchaser further acknowledges and understands that the Company is under no obligation to register the Shares. Purchaser understands that the certificate evidencing the Shares shall be imprinted with a legend which prohibits the transfer of the Shares unless they are registered or such registration is not required in the opinion of counsel satisfactory to the Company, a legend enumerating the restrictions on transfer of the Shares, and any other legend required under applicable state securities laws.     (iv) Purchaser is familiar with the provisions of Rule 144, promulgated under the Securities Act, which, in substance, permits limited public resale of "restricted securities" acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions.     (v) Purchaser further understands that in the event all of the applicable requirements of Rule 144 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required, and that, notwithstanding the fact that Rule 144 is not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. Purchaser understands that no assurances can be given that any such other registration exemption will be available in such event.     (b) Tax Representations. Purchaser has reviewed with its own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. Purchaser is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Purchaser understands that it (and not the Company) shall be responsible for its own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.     11. Section 83(b) Elections. Purchaser understands that Section 83 of the Code, taxes as ordinary income the difference between the amount paid for the Shares and the fair market value of the Shares as of the date any restrictions on the Shares lapse. In this context, "restriction" means the right of the Company to buy back the Shares pursuant to the Repurchase Option. In the event the Company has registered equity securities under the Securities Exchange Act of 1934 (the "Exchange Act"), 7 -------------------------------------------------------------------------------- "restriction" with respect to officers, directors, and 10% stockholders also includes the six-month period after the purchase of the Shares during which sales of certain securities by such officers, directors, and 10% stockholders would give rise to liability under Section 16(b) of the Exchange Act. Purchaser understands that he or she may elect to be taxed at the time the Shares are purchased rather than when any restrictions applicable to the Shares lapse, by filing an election under Section 83(b) of the Code with the Internal Revenue Service within 30 days from the date of purchase. Even if the fair market value of the Shares equals the amount paid for the Shares, the election may be made to avoid adverse tax consequences in the future. Purchaser understands that failure to make this filing in a timely manner shall result in the recognition of ordinary income by Purchaser, as any restrictions applicable to the Shares lapse, on any difference between the purchase price and the fair market value of the Shares at the time such restrictions lapse. A form of Election under Section 83(b) is attached to the Agreement as Exhibit A-3 for reference.     PURCHASER ACKNOWLEDGES THAT IT IS PURCHASER'S SOLE RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b) OF THE CODE, EVEN IF PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON PURCHASER'S BEHALF.     12. Additional Actions. The parties shall execute such further instruments and take such further action as may reasonably be necessary to carry out the intent of this Agreement.     13. Notices. All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given (a) five (5) days after deposit with the U.S. Postal Service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, or (c) one business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid, and shall be addressed (i) if to Purchaser, at Purchaser's address as set forth beneath Purchaser's signature to this Agreement, or at such other address as Purchaser shall have furnished to the Company in writing, (ii) if to the Company, to RStar Corporation with a copy to Wilson Sonsini Goodrich and Rosati, 650 Page Mill Road, Palo Alto, California 94304-1050, Attention:, or at such other address as the Company shall have furnished to Purchaser, or (iii) if to the Escrow Agent, to the Corporate Secretary, at RStar Corporation, or at such other address as the Escrow Agent shall have furnished to the parties.     14. Assignment. The Company may assign its rights and delegate its duties under this Agreement. If any such assignment or delegation requires consent of the California Department of Corporations, the parties agree to cooperate in requesting such consent. This Agreement shall inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer herein set forth, be binding upon Purchaser, Purchaser's heirs, executors, administrators, successors and assigns.     15. Entire Agreement; Amendment. This Agreement and the Joint Escrow Instructions executed in connection herewith constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof, and no party shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth herein. Except as expressly provided herein, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the party against whom enforcement of any such amendment, waiver, discharge or termination is sought.     16. Arbitration. At the option of either party, any and all disputes or controversies, whether of law or fact, and of any nature whatsoever arising from or respecting this Agreement, unless otherwise expressly provided herein, shall be decided by arbitration by the American Arbitration Association in accordance with the rules and regulations of that Association.     (a) The arbitrators shall be selected as follows: In the event the Company and Purchaser agree on one arbitrator, the arbitration shall be conducted by such arbitrator. In the event the 8 -------------------------------------------------------------------------------- Company and Purchaser do not so agree, the Company and Purchaser shall each select one independent, qualified arbitrator and these two arbitrators shall select a third arbitrator. The Company reserves the right to reject any individual arbitrator who shall be employed by or affiliated with a competing organization.     (b) Arbitration shall take place in San Ramon County, California, or any other location mutually agreeable to the parties. At the request of either party, arbitration proceedings shall be conducted in secrecy. In such case all documents, testimony, and records shall be received, heard, and maintained by the arbitrators in secrecy under seal, available for inspection only by the Company and Purchaser and their respective attorneys and their respective experts who shall agree in advance and in writing to receive all such information confidentially and to maintain such information in secrecy until such information shall become generally known. The arbitrator, who shall act by majority vote, shall be able to decree any and all relief of an equitable nature, including but not limited to such relief as a temporary restraining order, a temporary or a permanent injunction, or both, and shall also be able to award damages, with or without an accounting, costs, and reasonable attorneys' fees. The decree or judgment of an award rendered by the arbitrators may be entered in any court having jurisdiction thereof.     (c) Reasonable notice of the time and place of arbitration shall be given to all persons, other than the parties, as shall be required by law, in which case such persons or their authorized representatives shall have the right to attend and participate in all the arbitration hearings to the extent and in such manner as the law shall require.     17. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of California as they apply to contracts entered into and wholly to be performed within such state.     Purchaser represents that Purchaser has read this Agreement and is familiar with its terms and provisions. Purchaser hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board upon any questions arising under this Agreement.     18. No Effect on Employment/Consulting Relationship. PURCHASER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREUNDER DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE OR CONSULTANT OF THE COMPANY FOR ANY PERIOD OR AT ALL. NOTHING IN THIS AGREEMENT SHALL AFFECT IN ANY MANNER WHATSOEVER OR INTERFERE WITH THE RIGHT OR POWER OF THE COMPANY, OR A PARENT OR SUBSIDIARY OF THE COMPANY, TO TERMINATE PURCHASER'S EMPLOYMENT OR CONSULTING RELATIONSHIP WITH THE COMPANY AT ANY TIME, FOR ANY OR NO REASON, WITH OR WITHOUT CAUSE.     19. Advice of Counsel. Purchaser has reviewed this Agreement in its entirety, has had an opportunity to obtain the advice of independent counsel prior to executing this Agreement and fully understands all provisions hereof.     20. Authorization of Transfer. Purchaser hereby authorizes and directs the Secretary or transfer agent of the Company to transfer the Stock as to which the Repurchase Option has been exercised from Purchaser to the Company or the Company's assignees.     21. Waiver. Either party's failure to enforce any provision or provisions of this Agreement shall not in any way be construed as a waiver of any such provision or provisions, nor prevent that party thereafter from enforcing each and every other provision of this Agreement. The rights granted both parties herein are cumulative and shall not constitute a waiver of either party's right to assert all other legal remedies available to it under the circumstances. 9 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, this Agreement is deemed made as of the date first set forth above.     RSTAR CORPORATION     /s/ ROBERT EDWARDS    -------------------------------------------------------------------------------- Robert Edwards Senior Vice President, Administration and Chief Financial Officer     PURCHASER     /s/ LANCE MORTENSEN    -------------------------------------------------------------------------------- Lance Mortensen     ADDRESS:     --------------------------------------------------------------------------------     --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- [Signature Page for Restricted Stock Purchase Agreement] 10 -------------------------------------------------------------------------------- CONSENT OF SPOUSE     I,             , spouse of Lance Mortensen, have read and approve the foregoing Agreement. In consideration of the granting to my spouse of the right to purchase shares of RStar Corporation, as set forth in the Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to the exercise of any rights under the Agreement and agree to be bound by the provisions of the Agreement insofar as I may have any rights in the Agreement or in any shares issued pursuant thereto under the community property laws of the State of California or similar laws relating to marital property in effect in the state of our residence as of the date of the signing of the Agreement. Dated:      --------------------------------------------------------------------------------      -------------------------------------------------------------------------------- (Signature of Spouse) -------------------------------------------------------------------------------- PROMISSORY NOTE $1,500,000.00   September 13, 1999 (Amended: April 20, 2001) For value received, the undersigned promises to pay to RStar Corporation a Delaware corporation (the "Company"), or order, at its principal office the principal sum of $1,500,000.00 with interest thereof at the rate of 5.98% per annum, compounded annually, on the unpaid balance of the principal sum. Said principal shall be due on the earlier to occur of the fourth anniversary of the date of this Note, thirty (30) days after termination other than for death or disability, or one year after termination for death or disability. Said interest shall be accrued and is payable on the due date of the Note. Should the undersigned fail to make full payment of principal or interest for a period of ten (10) days or more after the due date thereof, the whole unpaid balance on this Note of principal and interest shall become immediately due at the option of the holder of this Note. This Note is subject to the terms of a Stock Purchase Agreement, dated as of September 13, 1999, as subsequently amended on April 20, 2001, ("Stock Purchase Agreement"). This Note is secured by a pledge of 300,000 shares of the Company's Common Stock (the "Shares") under the terms of a Security Agreement of even date herewith and is subject to all the provisions thereof. The sole recourse for the holder of this Note against the undersigned (including, but not limited to, the payment of principal and interest) shall be the right to sell the Shares at a private or public sale or repurchase the Shares as provided in the Stock Purchase Agreement. The proceeds of any sale shall be applied in the following order: (i) to pay all reasonable expenses of the Company in enforcing this Note, including without limitation reasonable attorneys' fees and legal expenses incurred by the Company; (i) in satisfaction of the remaining indebtedness under this Note; and (ii) to the undersigned, any remaining proceeds. The principal is payable in lawful money of the United States of America. The privilege is reserved to prepay any portion of the Note at any time. If the undersigned shall default in the payment of amounts hereunder when due, the sole recourse for the holder of this Note shall be the right to sell the Shares to sell the at a private or public sale or repurchase the Shares as provided in the Stock Purchase Agreement.  The maker waives presentment for payment, protest, notice of protest and notice of non-payment of this Note. This Note shall be governed by the laws of the State of California as they apply to contracts entered into and wholly to be performed within such state. /s/ LANCE MORTENSEN    -------------------------------------------------------------------------------- SECURITY AGREEMENT     This Security Agreement is made as of September 13, 1999 between RStar Corporation, a Delaware corporation ("Pledgee"), Lance Mortensen ("Pledgor"), and Bruce D. Bower, Secretary of Pledgee, as the agent of Pledgee and holder of the Securities pledged hereunder ("Pledgeholder"). Recitals     Pursuant to the Restricted Stock Purchase Agreement dated September 13, 1999 (the "Agreement"), between Pledgor and Pledgee and Pledgor's election under the terms of the Agreement to pay for such shares with Pledgor's promissory note (the "Note"), Pledgor has purchased 300,000 shares of Pledgee's Common Stock (the "Shares") at a price of five dollars ($5.00) per share, for a total purchase price of five million dollars ($1,500,000.00).     NOW, THEREFORE, it is agreed as follows:     1.  Creation and Description of Security Interest.  In consideration of the transfer of the Shares to Pledgor under the Agreement, Pledgor, pursuant to the California Uniform Commercial Code, hereby pledges all of such Shares (herein sometimes referred to as the "Collateral") represented by certificate number      , and herewith delivers said certificate to Pledgeholder, who shall hold said certificate on behalf of Pledgee subject to the terms and conditions of this Security Agreement.     The Shares (together with an executed blank stock assignment or assignments) shall be held by Pledgeholder on behalf of Pledgee as security for the repayment of the Note, and any extensions or renewals thereof, to be executed by Pledgor pursuant to the terms of the Agreement, and Pledgeholder shall not encumber or dispose of such Shares except in accordance with the provisions of this Security Agreement.     2.  Pledgor's Representations and Covenants.  To induce Pledgee to enter into this Security Agreement, Pledgor represents and covenants to Pledgee, its successors and assigns, as follows:     (a) Payment of Indebtedness. Pledgor will pay the principal sum of the Note secured hereby, and interest thereon, at the time and in the manner provided in the Note.     (b) Encumbrances. The Shares are free of all other adverse claims, encumbrances, defenses and liens (other than restrictions on transfer imposed by applicable securities laws), except for (i) Pledgee's rights to repurchase Shares pursuant to Section 5 of the Agreement and (ii) the pledge of the Shares hereunder as security for payment of the Note, and Pledgor will not further encumber the Shares without the prior written consent of Pledgee.     (c) Margin Regulations. In the event that Pledgee's Common Stock is now or later becomes margin-listed by the Federal Reserve Board and Pledgee is classified as a "lender" within the meaning of the regulations under Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G"), Pledgor agrees to cooperate with Pledgee in making any amendments to the Note or providing any additional collateral as may be necessary to comply with such regulations.     3.  Voting Rights.  During the term of this pledge and so long as all payments of principal and interest are made as they become due under the terms of the Note, Pledgor shall have the right to vote all of the Shares pledged hereunder.     4.  Stock Adjustments.  In the event that during the term of the pledge any stock dividend, reclassification, readjustment or other changes are declared or made in the capital structure of Pledgee, all new, substituted and additional shares or other securities issued by reason of any such change shall be delivered to and held by the Pledgee under the terms of this Security Agreement in the same manner as the Shares originally pledged hereunder. In the event of substitution of such securities, Pledgor, Pledgee and Pledgeholder shall cooperate and execute such documents as are reasonable so as to provide for the substitution of such Collateral and, upon such substitution, references to "Shares" in this Security Agreement shall include the substituted shares of capital stock of Pledgor as a result thereof. --------------------------------------------------------------------------------     5.  Options and Rights.  In the event that, during the term of this pledge, subscription Options or other rights or options shall be issued in connection with the pledged Shares, such rights, Options and options shall be the property of Pledgor and, if exercised by Pledgor, all new stock or other securities so acquired by Pledgor as it relates to the pledged Shares then held by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under the terms of this Security Agreement in the same manner as the Shares pledged.     6.  Default.  Pledgor shall be deemed to be in default of the Note and of this Security Agreement in the event:     (a) Payment of principal or interest on the Note shall be delinquent for a period of ten (10) days or more; or     (b) Pledgor fails to perform any of the covenants set forth in the Agreement or contained in this Security Agreement for a period of ten (10) days after written notice thereof from Pledgee; or     (c) A bankruptcy or insolvency proceeding is instituted by or against Pledgor, or if a receiver is appointed for the property of Pledgor; or     (d) Pledgor makes an assignment for the benefit of creditors.     In the case of a default, as set forth above, Pledgee shall have the right to accelerate payment of the entire amount on the Note, and Pledgee shall thereafter be entitled to pursue its remedies under the California Uniform Commercial Code.     7.  Release of Collateral.  Subject to any applicable contrary rules under Regulation G, there shall be released from this pledge a portion of the pledged Shares held by Pledgeholder hereunder upon payments of the principal of the Note. The number of the pledged Shares which shall be released shall be that number of full Shares which bears the same proportion to the initial number of Shares pledged hereunder as the payment of principal bears to the initial full principal amount of the Note. Notwithstanding the foregoing, upon any release of pledged Shares hereunder any such Shares which shall continue to constitute Unreleased Shares as defined in the Agreement shall continue to be held in escrow pursuant to Sections 5 and 6 of the Agreement.     8.  Withdrawal or Substitution of Collateral.  Pledgor shall not sell, withdraw, pledge, substitute or otherwise dispose of all or any part of the Collateral without the prior written consent of Pledgee.     9.  Term.  The within pledge of Shares shall continue until the payment of all indebtedness secured hereby, subject to the provisions for prior release of a portion of the Collateral as provided in paragraph 7 above.     10.  Pledgeholder Liability.       (a) Pledgeholder shall not be liable to any party for any of his acts, or omissions to act, as Pledgeholder unless Pledgeholder is proved to have acted in bad faith. Any act done or omitted pursuant to the advice of legal counsel, other than an act or omission involving gross or willful negligence, shall be deemed to be done or omitted in good faith.     (b) Pledgeholder shall be entitled to employ such legal counsel and other experts as Pledgeholder may deem necessary properly to advise Pledgeholder in connection with its obligations hereunder, and Pledgeholder may rely upon the advice of such counsel. Such counsel's reasonable fees and costs shall be borne 50% by Pledgor and 50% by Pledgee.     (c) It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities held by Pledgeholder hereunder, Pledgeholder is authorized and directed to retain in Pledgeholder's possession as agent of Pledgee without liability to anyone all or any part of said securities until such disputes shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree or judgment of the arbitrator provided for in Section 16 of the Agreement or of a court of competent -------------------------------------------------------------------------------- jurisdiction after the time for appeal has expired and no appeal has been perfected, but Pledgeholder shall be under no duty whatsoever to institute or defend any such proceedings.     In addition, upon any dispute Pledgeholder should be entitled to engage legal counsel, one-half of whose fees and expenses shall be borne by Pledgor and one-half by Pledgee.     11.  Invalidity of Particular Provisions.  Pledgor and Pledgee agree that the enforceability or invalidity of any provision or provisions of this Security Agreement shall not render any other provision or provisions herein contained unenforceable or invalid.     12.  Successors or Assigns.  Pledgor and Pledgee agree that all of the terms of this Security Agreement shall be binding on their respective successors and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein shall be deemed to include, for all purposes, the respective designees, successors, assigns, heirs, executors and administrators.     13.  Governing Law.  This Security Agreement shall be interpreted and governed under the laws of the State of California.     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. "PLEDGOR"   By: Lance Mortensen        -------------------------------------------------------------------------------- (Signature)        --------------------------------------------------------------------------------    -------------------------------------------------------------------------------- (Address) "PLEDGEE"   RStar Corporation a Delaware corporation     By:      -------------------------------------------------------------------------------- Rick Inatome, President and Chief Executive Officer -------------------------------------------------------------------------------- EXHIBIT A-1 ASSIGNMENT SEPARATE FROM CERTIFICATE     FOR VALUE RECEIVED, Lance Mortensen hereby sells, assigns and transfers unto RStar Corporation, an aggregate of Three Hundred Thousand (300,000) shares of the Common Stock of RStar Corporation standing in the undersigned's name on the books of said corporation represented by Certificate No.      , and does hereby irrevocably constitute and appoint Wilson Sonsini Goodrich & Rosati to transfer the said stock on the books of the within named corporation with full power of substitution in the premises.     This Stock Assignment may be used only in accordance with the Restricted Stock Purchase Agreement between RStar Corporation and the undersigned dated          , 1999. Dated:      --------------------------------------------------------------------------------             -------------------------------------------------------------------------------- (to be signed exactly as name is to appear on stock certificate) INSTRUCTIONS: Please do not fill in the blanks other than the signature line. The purpose of this assignment is to enable the Company to exercise its "repurchase option," as set forth in the Agreement, without requiring additional signatures on the part of the Purchaser. -------------------------------------------------------------------------------- EXHIBIT A-2 JOINT ESCROW INSTRUCTIONS               , 1999 RStar Corporation Attn: Corporate Secretary 3000 Executive Parkway San Ramon, CA 94583 Dear Corporate Secretary:     As Escrow Agent for both RStar Corporation, a Delaware corporation (the "Company"), and the undersigned purchaser of stock of the Company ("Purchaser"), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms of that certain Restricted Stock Purchase Agreement ("Agreement"), dated as of September 13, 1999, between the Company and the undersigned, in accordance with the following instructions:     1.  In the event that the Company and/or any assignee of the Company (referred to collectively for convenience herein as the "Company") exercises the Company's repurchase option set forth in the Agreement, the Company shall give to Purchaser and you a written notice specifying the number of shares of stock to be purchased, the purchase price, and the time for a closing hereunder at the principal office of the Company. Purchaser and the Company hereby irrevocably authorize and direct you to close the transaction contemplated by such notice in accordance with the terms of said notice.     2.  At the closing, you are directed (a) to date the stock assignments necessary for the transfer in question, (b) to fill in the number of shares being transferred, and (c) to deliver same, together with the certificate evidencing the shares of stock to be transferred, to the Company or its assignee, against the simultaneous delivery to you of the purchase price (by cash, a check, or some combination thereof) for the number of shares of stock being purchased pursuant to the exercise of the Company's repurchase option.     3.  Purchaser irrevocably authorizes the Company to deposit with you any certificates evidencing shares of stock to be held by you hereunder and any additions and substitutions to said shares as defined in the Agreement. Purchaser does hereby irrevocably constitute and appoint you as Purchaser's attorney-in-fact and agent for the term of this escrow to execute with respect to such securities all documents necessary or appropriate to make such securities negotiable and to complete any transaction herein contemplated, including but not limited to the filing with any applicable state blue sky authority of any required applications for consent to, or notice of transfer of, the securities. Subject to the provisions of this paragraph 3, Purchaser shall exercise all rights and privileges of a shareholder of the Company while the stock is held by you.     4.  Upon written request of Purchaser, but no more than once per calendar year, unless the Company's repurchase option has been exercised, you shall deliver to Purchaser a certificate or certificates representing so many shares of stock as are not then subject to the Company's repurchase option. Within sixty (60) days after cessation of Purchaser's continuous employment by or services to the Company, or any parent or subsidiary of the Company, you shall deliver to Purchaser a certificate or certificates representing the aggregate number of shares held or issued pursuant to the Agreement and not purchased by the Company or its assignees pursuant to exercise of the Company's repurchase option.     5.  If at the time of termination of this escrow you should have in your possession any documents, securities, or other property belonging to Purchaser, you shall deliver all of the same to Purchaser and shall be discharged of all further obligations hereunder.     6.  Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto. --------------------------------------------------------------------------------     7.  You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties. You shall not be personally liable for any act you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith.     8.  You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders or process of courts of law and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. In case you obey or comply with any such order, judgment or decree, you shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction.     9.  You shall not be liable in any respect on account of the identity, authorities or rights of the parties executing or delivering or purporting to execute or deliver the Agreement or any documents or papers deposited or called for hereunder.     10. You shall not be liable for the outlawing of any rights under the Statute of Limitations with respect to these Joint Escrow Instructions or any documents deposited with you.     11. You shall be entitled to employ such legal counsel and other experts as you may deem necessary properly to advise you in connection with your obligations hereunder, may rely upon the advice of such counsel, and may pay such counsel reasonable compensation therefor.     12. Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be an officer or agent of the Company or if you shall resign by written notice to each party. In the event of any such termination, the Company shall appoint a successor Escrow Agent.     13. If you reasonably require other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in furnishing such instruments.     14. It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities held by you hereunder, you are authorized and directed to retain in your possession without liability to anyone all or any part of said securities until such disputes shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no duty whatsoever to institute or defend any such proceedings.     15. All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given (a) five (5) days after deposit with the U.S. Postal Service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, or (c) one business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid, and shall be addressed to each of the other parties thereunto -------------------------------------------------------------------------------- entitled at the following addresses or at such other addresses as a party may designate by ten days' advance written notice to each of the other parties hereto. COMPANY:   RStar Corporation 3000 Executive Parkway San Ramon, CA 94583 Attn: President PURCHASER:   Lance Mortensen 117 Warwick Court Alamo, CA 94507 ESCROW AGENT:   RStar Corporation 3000 Executive Parkway San Ramon, CA 94583 Attn: Corporate Secretary     16. By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions; you do not become a party to the Agreement.     17. This instrument shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns.     18. These Joint Escrow Instructions shall be governed by, and construed and enforced in accordance with, the laws of the State of California as they apply to contracts entered into and wholly to be performed within such state.     Very truly yours,     RSTAR CORPORATION    --------------------------------------------------------------------------------     PURCHASER:     -------------------------------------------------------------------------------- Lance Mortensen     ESCROW AGENT:     -------------------------------------------------------------------------------- Corporate Secretary -------------------------------------------------------------------------------- EXHIBIT A-3 ELECTION UNDER SECTION 83(b) OF THE INTERNAL REVENUE CODE OF 1986     The undersigned taxpayer hereby elects, pursuant to the above-referenced Federal Tax Code, to include in taxpayer's gross income for the current taxable year, the amount of any compensation taxable to taxpayer in connection with his receipt of the property described below: 1.The name, address, taxpayer identification number and taxable year of the undersigned are as follows: NAME: TAXPAYER: Lance Mortensen   SPOUSE: ADDRESS:     IDENTIFICATION NO.: TAXPAYER:   SPOUSE: TAXABLE YEAR: Calendar Year 1999     2.The property with respect to which the election is made is described as follows: 300,000 shares (the "Shares") of the Common Stock of RStar Corporation, a Delaware corporation (the "Company"). 3.The date on which the property was transferred is:                         , 1999. 4.The property is subject to the following restrictions: The Shares may be repurchased by the Company, or its assignee, on certain events. This right lapses with regard to a portion of the Shares based on the continued performance of services by the taxpayer over time. 5.The fair market value at the time of transfer, determined without regard to any restriction other than a restriction which by its terms will never lapse, of such property is: $1,500,000. 6.The amount (if any) paid for such property is: $1,500,000. The undersigned has submitted a copy of this statement to the person for whom the services were performed in connection with the undersigned's receipt of the above-described property. The transferee of such property is the person performing the services in connection with the transfer of said property. The undersigned understands that the foregoing election may not be revoked except with the consent of the Commissioner. Dated:                                       , 1999      -------------------------------------------------------------------------------- Taxpayer The undersigned spouse of taxpayer joins in this election. Dated:                                       , 1999      -------------------------------------------------------------------------------- Spouse of Taxpayer -------------------------------------------------------------------------------- QuickLinks RSTAR CORPORATION RESTRICTED STOCK PURCHASE AGREEMENT (Amended as of April 20, 2001)

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.11 CENTERPOINT PROPERTIES TRUST DIRECTOR'S STOCK GRANT AGREEMENT     THIS STOCK GRANT AGREEMENT (the "Agreement") is dated as of May 16, 2001 between CenterPoint Properties Trust, a Maryland real estate investment trust (the "Company"), and Martin Barber (the "Grantee").     This Agreement is made pursuant to, and is governed by, the CenterPoint Properties Trust 1995 Restricted Stock Incentive Plan (the "Plan"). Capitalized terms not otherwise defined herein shall have the meanings set forth in the Plan. The purpose of this Agreement is to establish a written agreement evidencing a grant of stock made in accordance with the terms of the Plan. In this Agreement, "Shares" means the Company's Common Stock granted pursuant to this Agreement or other securities resulting from an adjustment under Section 4.3 of the Plan.     The parties agree as follows: 1.Grant of Stock.  The Company hereby grants to the Grantee 215 shares of Common Stock under the terms and conditions hereof. 2.Share Price.  The Share Price of the Shares is $46.51. 3.Assignability.  The Shares shall not be transferable other than by will or the laws of descent and distribution until the later of (a) six months from the date of this Agreement. 4.Vesting.  The Shares shall be fully vested at the time of the award. 5.Rights of Shareholder.  Except as otherwise provided in the Plan or in this Agreement, the Grantee shall have rights of a shareholder with respect to Shares as provided in Article 8 of the Plan. 6.Rights of the Company.  This Agreement does not affect the Company's right to take any corporate action, including other changes in its right to recapitalize, reorganize or consolidate, issue bonds, notes or stock, including preferred stock or options therefor, to dissolve or liquidate, or to sell or transfer any part of its assets or business. 7.Changes in Capitalization.  Upon the occurrence of an event described in Section 4.3(a) of the Plan, the Committee shall make the adjustments specified in Section 4.3(b) of the Plan. 8.Compliance with Laws.  Shares can be delivered under this Agreement only in compliance with all applicable federal and state laws and regulations, including without limitation state and federal securities laws, and the rules of all stock exchanges on which the Common Stock is listed at any time. Shares may not be issued under this Agreement until the Company has obtained the consent or approval of every regulatory body, federal or state, having jurisdiction over such matters as the Committee deems advisable. Each person or estate that acquired the right to receive shares by bequest or inheritance may be required by the Committee to furnish reasonable evidence of ownership of the shares as a condition to their issuance. In addition, the Committee may require such consents and releases of taxing authorities as the Committee deems advisable. 9.Stock Legends.  Any certificate issued to evidence Shares issued pursuant to this Agreement shall bear such legends and statements as the Committee deems advisable to assure compliance with all federal and state laws and regulations. 10.Amendment of Agreement.  The Company may alter, amend, or terminate the Agreement only with the Grantee's consent, except for adjustments expressly provided by this Agreement. 11.Choice of Law.  The provisions of Section 9.7 of the Plan, concerning choice of law, shall govern this Agreement. 12.Miscellaneous.  This Agreement is subject to and controlled by the Plan. Any inconsistency between this Agreement and said Plan shall be controlled by the Plan. This Agreement is the final, -------------------------------------------------------------------------------- complete, and exclusive expression of the understanding between the parties and supersedes any prior or contemporaneous agreement or representation, oral or written, between them. Modification of this Agreement or waiver of a condition herein must be written and signed by the party to be bound. In the event that any paragraph or provision of this Agreement shall be held to be illegal or unenforceable, such paragraph or provision shall be severed from the Agreement and the entire Agreement shall not fail on account thereof, but shall otherwise remain in full force and effect. 13.Notices.  All notices and other communications required or permitted under this Agreement shall be written, and shall be either delivered personally or sent by registered or certified first-class mail, postage prepaid and return receipt requested, or by telex or telecopier, addressed as follows: if to the Company, to the Company's principal office, and if to the Grantee or his successor, to the address last furnished by such person to the Company. Each such notice and communication delivered personally shall be deemed to have been given when delivered. Each such notice and communication given by mail shall be deemed to have been given when it is deposited in the United States mail in the manner specified herein, and each such notice and communication given by telex or telecopier shall be deemed to have been given when it is so transmitted and the appropriate answer back is received. A party may change its address for the purpose hereof by giving notice in accordance with the provisions of this Section 17.     IN WITNESS WHEREOF, the Company has executed this Agreement as of the date first written above.     CENTERPOINT PROPERTIES TRUST     By:   -------------------------------------------------------------------------------- Rockford O. Kottka Its: Executive Vice President and Treasurer         GRANTEE         -------------------------------------------------------------------------------- Printed Name: Martin Barber -------------------------------------------------------------------------------- QuickLinks EXHIBIT 10.11 CENTERPOINT PROPERTIES TRUST DIRECTOR'S STOCK GRANT AGREEMENT

QuickLinks -- Click here to rapidly navigate through this document AMENDMENT NO. 1 TO ANCHOR GAMING 2000 STOCK INCENTIVE PLAN     This Amendment No. 1 to Anchor Gaming 2000 Stock Incentive Plan (this "Amendment") is dated as of December 15, 2000, and it serves as an amendment to the Anchor Gaming 2000 Stock Incentive Plan (the "Plan"). Capitalized terms not defined herein shall have the meaning given to them in the Plan.     WHEREAS, the Board of Directors of Anchor Gaming resolved that the Plan be amended to eliminate therefrom the ability to exercise options granted thereunder by payment of a promissory note.     NOW, THEREFORE, the Plan is amended as follows:     Section 6.3(a) of the Plan is deleted and replaced in its entirety as follows: (a)  FORMS OF CONSIDERATION AUTHORIZED. Except as otherwise provided below, payment of the exercise price for the number of shares of Stock being purchased pursuant to any Option may be made (i) in cash, by check or cash equivalent, (ii) by tender to the Company, or attestation to the ownership, of shares of Stock owned by the Participant having a Fair Market Value (as determined by the Company without regard to any restrictions on transferability applicable to such stock by reason of federal or state securities laws or agreements with an underwriter for the Company) not less than the exercise price, (iii) by the assignment of the proceeds of a sale or loan with respect to some or all of the shares being acquired upon the exercise of the Option (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System) (a "Cashless Exercise"), (iv) by such other consideration as may be approved by the Board from time to time to the extent permitted by applicable law, or (v) by any combination thereof. The Board may at any time or from time to time, by adoption of or by amendment to the standard forms of Option Agreement described in Section 7, or by other means, grant Options that do not permit all of the foregoing forms of consideration to be used in payment of the exercise price or that otherwise restrict one or more forms of consideration. Reference to and Effect on the Plan     (a) Upon execution of this Amendment, each reference in the Plan to "this Plan," "hereunder," "hereof," "herein" or words of like import, and each reference in any document related thereto, or executed in connection therewith, shall mean and be a reference to the Plan as amended by this Amendment, and the Plan and this Amendment shall be read together and construed as one single instrument.     (b) Except as specifically amended by this Amendment, the Plan is not modified and shall remain in full force and effect.     IN WITNESS WHEREOF, Anchor Gaming has caused this Amendment to be signed by an officer thereunto duly authorized all as of the date first above written.     ANCHOR GAMING     By:   /s/ GEOFFREY A. SAGE    --------------------------------------------------------------------------------     Name:   Geoffrey A. Sage --------------------------------------------------------------------------------     Title:   CFO -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- QuickLinks AMENDMENT NO. 1 TO ANCHOR GAMING 2000 STOCK INCENTIVE PLAN

-------------------------------------------------------------------------------- EXHIBIT 10.1 -------------------------------------------------------------------------------- SEITEL, INC. NOTE PURCHASE AGREEMENT Dated as of October 15, 2001 $20,000,000 7.04% Series G Senior Notes due October 15, 2006 $50,000,000 7.19% Series H Senior Notes due October 15, 2008 $37,000,000 7.34% Series I Senior Notes due October 15, 2011 -------------------------------------------------------------------------------- TABLE OF CONTENTS 1 AUTHORIZATION OF NOTES. 1 2 SALE AND PURCHASE OF NOTES. 2 3 CLOSINGS. 2   3.1. First Closing. 2   3.2. Notice of Second Closing; Second Closing 3   3.3. Failure of the Company to Deliver. 3   3.4. Failure by You to Deliver. 3 4 YOUR CONDITIONS TO CLOSINGS. 4   4.1. Representations and Warranties. 4   4.2. Performance; No Default. 4   4.3. Compliance Certificates. 4   4.4. Opinions of Counsel. 5   4.5. Purchases Permitted By Applicable Law, etc. 5   4.6. Sale of Other Notes. 5   4.7. Payment of Special Counsel Fees. 5   4.8. Private Placement Numbers. 6   4.9. Changes in Corporate Structure. 6   4.10. Subsidiary Guaranty. 6   4.11. Proceedings and Documents. 6 5 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. 6   5.1. Organization; Power and Authority. 7   5.2. Authorization, etc. 7   5.3. Disclosure. 8   5.4. Organization and Ownership of Shares of Subsidiaries; 8     Affiliates.     5.5. Financial Statements. 9   5.6. Compliance with Laws, Other Instruments, etc. 9   5.7. Governmental Authorizations, etc. 10   5.8. Litigation; Observance of Agreements, Statutes and Orders. 10   5.9. Taxes. 10   5.10. Title to Property; Leases. 10   5.11. Licenses, Permits, etc. 11   5.12. Compliance with ERISA. 11   5.13. Private Offering by the Company. 12   5.14. Use of Proceeds; Margin Regulations. 13   5.15. Existing Debt; Future Liens. 13   5.16. Foreign Assets Control Regulations, etc. 13   5.17. Status under Certain Statutes. 14   5.18. Environmental Matters. 14 6 REPRESENTATIONS OF THE PURCHASER. 14   6.1. Purchase for Investment. 14   6.2. Legend. 15   6.3. ERISA. 15   6.4. Organization; Power and Authority; Compliance with Laws. 17   6.5. Authorization, etc. 17 7 INFORMATION AS TO COMPANY. 17   7.1. Financial and Business Information. 17   7.2. Officer's Certificate. 21   7.3. Inspection. 22 8 PREPAYMENT OF THE NOTES 22   8.1. Required Prepayments. 22   8.2. Optional Prepayments with Make-Whole Amount; 23     Rescission.     8.3. Allocation of Partial Prepayments. 24   8.4. Maturity; Surrender, etc. 24   8.5. Purchase of Notes. 24   8.6. Make-Whole Amount. 25 9 AFFIRMATIVE COVENANTS. 26   9.1. Compliance with Law. 26   9.2. Insurance. 26   9.3. Maintenance of Properties. 26   9.4. Payment of Taxes and Claims. 27   9.5. Corporate Existence, etc. 27   9.6. Pari Passu. 28   9.7. Subsidiary Guaranty. 28 10 NEGATIVE COVENANTS. 28   10.1. Net Worth. 28   10.2. Interest Coverage. 28   10.3. Debt Incurrence. 29   10.4. Liens. 29   10.5. Mergers and Consolidations. 32   10.6. Sale of Assets. 33   10.7. Restricted Payments and Restricted Investments. 35   10.8. Limitations on Certain Restricted Subsidiary Actions. 36   10.9. Affiliate Transactions. 37   10.10. Line of Business. 37 11 EVENTS OF DEFAULT. 38 12 REMEDIES ON DEFAULT, ETC. 39   12.1. Acceleration. 39   12.2. Other Remedies. 40   12.3. Rescission. 40   12.4. No Waivers or Election of Remedies, Expenses, etc. 41 13 REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES. 41   13.1. Registration of Notes. 41   13.2. Transfer and Exchange of Notes. 41   13.3. Replacement of Notes. 42 14 PAYMENTS ON NOTES. 42   14.1. Place of Payment. 42   14.2. Home Office Payment. 42 15 EXPENSES, ETC. 43   15.1. Transaction Expenses. 43   15.2. Survival. 43 16 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE 43   AGREEMENT.   17 AMENDMENT AND WAIVER. 44   17.1. Requirements. 44   17.2. Solicitation of Holders. 44   17.3. Binding Effect, etc. 45   17.4. Notes held by Company, etc. 45 18 NOTICES. 45 19 REPRODUCTION OF DOCUMENTS. 46 20 CONFIDENTIAL INFORMATION. 46 21 SUBSTITUTION OF PURCHASER. 47 22 MISCELLANEOUS. 48   22.1. Successors and Assigns. 48   22.2. Payments Due on Non-Business Days. 48   22.3. Severability. 48   22.4. Construction. 48   22.5. Counterparts. 48   22.6. Governing Law. 49   22.7. Consent to Jurisdiction; Appointment of Agent. 49   22.8. Defeasance. 50   22.9. GAAP. 52   22.10. Usury. 53 --------------------------------------------------------------------------------     SCHEDULES & EXHIBITS SCHEDULE A -- Information Relating To Purchasers SCHEDULE B -- Defined Terms       SCHEDULE 4.9 -- Changes in Corporate Structure SCHEDULE 5.4 -- Subsidiaries of the Company and Ownership of Subsidiary Stock SCHEDULE 5.5 -- Financial Statements SCHEDULE 5.8 -- Certain Litigation SCHEDULE 5.11 -- Patents, etc. SCHEDULE 5.12 -- ERISA SCHEDULE 5.15 -- Existing Debt SCHEDULE 10.8 -- Certain Agreements by Restricted Subsidiaries       EXHIBIT A -- Subordination Terms       EXHIBIT 1G -- Form of 7.04% Series G Senior Note due October 15, 2006 EXHIBIT 1H -- Form of 7.19% Series H Senior Note due October 15, 2008 EXHIBIT 1I -- Form of 7.34% Series I Senior Note due October 15, 2011       EXHIBIT 4.4(a) -- Form of Opinion of Special Counsel for the Company EXHIBIT 4.4(b) -- Form of Opinion of Special Counsel for the Purchasers       EXHIBIT 4.10 -- Form of Subsidiary Guaranty --------------------------------------------------------------------------------   SEITEL, INC. West Building, 7th Floor 50 Briar Hollow Lane Houston, Texas 77027 $20,000,000 7.04% Series G Senior Notes Due October 15, 2006 $50,000,000 7.19% Series H Senior Notes Due October 15, 2008 $37,000,000 7.34 % Series I Senior Notes Due October 15, 2011   As of October 15, 2001 Separately Addressed to each of the Purchasers Listed on Schedule A hereto Ladies and Gentlemen:      SEITEL, INC., a Delaware corporation (together with any Person who succeeds to all, or substantially all, of the assets and business of Seitel, Inc., the "Company"), agrees with you as follows: 1.      AUTHORIZATION OF NOTES.       The Company will authorize the issue and sale of         (a) Twenty Million Dollars ($20,000,000) aggregate principal amount of its seven and four hundredths percent (7.04%) series g senior notes due october 15, 2006 (the "series g notes," such term to include any such notes issued in substitution therefor pursuant to section 13 of this agreement or the other agreements (as hereinafter defined)),         (b) Fifty Million Dollars ($50,000,000) aggregate principal amount of its seven and nineteen hundredths percent (7.19%) Series H Senior Notes due October 15, 2008 (the "Series H Notes," such term to include any such notes issued in substitution therefor pursuant to Section 13 of this Agreement or the Other Agreements), and         (c) Thirty-Seven Million Dollars ($37,000,000) aggregate principal amount of its seven and thirty-four hundredths percent (7.34%) Series I Senior Notes due October 15, 2011 (the "Series I Notes," such term to include any such notes issued in substitution therefor pursuant to Section 13 of this Agreement or the Other Agreements).   The Series G Notes shall be substantially in the form set out in Exhibit 1G, the Series H Notes shall be substantially in the form set out in Exhibit 1H, and the Series I Notes shall be substantially in the form set out in Exhibit 1I, in each case, with such changes therefrom, if any, as may be approved by you and the Company (the Series G Notes, the Series H Notes and the Series I Notes are herein referred to collectively as the "Notes," and each individually as a "Note"). Certain capitalized terms used in this Agreement are defined in Schedule B; references to a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement.       2. SALE AND PURCHASE OF NOTES.       Subject to the terms and conditions of this Agreement, the Company will issue and sell to you and you will purchase from the Company, in accordance with the provisions hereof, at the Closings provided for in Section 3, Notes of the Series and in the principal amounts specified opposite your name in Schedule A at the purchase price of one hundred percent (100%) of the principal amount thereof; provided, however, that you may change such information on Schedule A (other than the aggregate principal amount of your commitment) by written notice delivered to the Company prior to the applicable Closing (except that one or more (but not more than three) of your Affiliates shall be the purchaser or purchasers of the principal amount of the Notes specified opposite your name on Schedule A). Contemporaneously with entering into this Agreement, the Company is entering into separate Note Purchase Agreements (the "Other Agreements") identical with this Agreement with each of the other purchasers named in Schedule A (the "Other Purchasers"), providing for the sale at the Closings to each of the Other Purchasers of Notes of the Series and in the principal amounts specified opposite its name in Schedule A. Your obligation hereunder and the obligations of the Other Purchasers under the Other Agreements are several and not joint obligations and you shall have no obligation under any Other Agreement and no liability to any Person for the performance or non-performance by any Other Purchaser thereunder.     3. CLOSINGS.       3.1 First Closing.           The sale and purchase of the Notes to be purchased by the purchasers listed on Schedule A hereto (the "Purchasers") shall occur at the offices of Bingham Dana LLP, One State Street, Hartford, Connecticut 06103, at 10:00 a.m., eastern standard time, at a closing (the "First Closing") on October 15, 2001 (the "First Closing Date"). At the First Closing the Company will deliver to each Purchaser the Notes to be purchased by it in the form of, respectively, a single Series G Note, Series H Note, or Series I Note, as the case may be (or such greater number of Series G Notes, Series H Notes, or Series I Notes, in denominations of at least Twenty-Five Thousand Dollars ($25,000) as such Purchaser may request), dated the First Closing Date and registered in its name (or in the name of its nominee) as indicated on Schedule A, against delivery by such Purchaser to the Company or its order of immediately available funds in the amount of the purchase price therefor by wire transfer of immediately available funds for the account of the Company to account number 314102 at Southwest Bank of Texas, 5 Post Oak Park, 4400 Post Oak Parkway, Houston, Texas 77027, ABA# 113011258.       3.2 Notice of Second Closing; Second Closing             (a) Notice of Second Closing . Subsequent to the date hereof, the Company shall deliver to the Purchasers an irrevocable written notice specifying a date no later than December 27, 2001 as the date of purchase of $25,000,000 in aggregate amount of the Notes (the "Second Closing Date," the First Closing Date and the Second Closing Date being sometimes referred to herein, individually, as a "Closing Date"). Such notice shall be given not less than 15 nor more than 45 days prior to the Second Closing Date.           (b) Second Closing . The sale and purchase of the Notes to be purchased by the Purchasers listed on Schedule A hereto on the Second Closing Date shall occur at the offices of Bingham Dana LLP, One State Street, Hartford, Connecticut 06103, at 10:00 a.m., eastern standard time, at a closing (the "Second Closing," the First Closing and the Second Closing being sometimes referred to herein collectively as the "Closings" and individually as a "Closing") on the Second Closing Date. At the Second Closing the Company will deliver to each Purchaser the Notes to be purchased by it in the form of, respectively, a Series G Note, Series H Note or Series I Note, as the case may be (or such greater number of Series G Notes, Series H Notes or Series I Notes in denominations of at least $25,000 as Purchaser may request), dated the Second Closing Date, and registered in its name (or in the name of its nominee), as indicated in Schedule A, against delivery by such Purchaser to the Company or its order of immediately available funds in the amount of the purchase price therefor by wire transfer of immediately available funds for the account of the Company to account number 314102 at Southwest Bank of Texas, 5 Post Oak Park, 4400 Post Oak Parkway, Houston, Texas 77027, ABA# 113011258.         3.3 Failure of the Company to Deliver.         If on either Closing Date the Company fails to tender to you the Notes to be acquired by you on such date or if the conditions specified in Section 4 have not been fulfilled to your satisfaction on either such Closing Date, you may thereupon elect to be relieved of all further obligations under this Agreement with respect to the Notes to be purchased by you on such date. In addition, if such tender shall not be made to you on the Second Closing Date, or if the conditions specified in Section 4 have not been fulfilled on such date, the Company shall pay to you a Make-Whole Amount with respect to the Notes to be purchased by you on such date, determined as if such Notes had been purchased and declared to be due and payable on such date. Nothing in this Section shall operate to relieve the Company from any of its obligations under this Agreement or to waive any of your rights against the Company.       3.4 Failure by You to Deliver.         If on either Closing Date you fail to deliver the full amount of funds to be delivered by you on such date or if the conditions specified in Section 4A have not been fulfilled on such date, the Company may thereupon elect to return immediately any funds delivered by you on such date and to be relieved of all further obligations under this Agreement with respect to the Notes to be purchased by you on such date. Except as described herein and in accordance with applicable law, nothing in this Section shall operate to relieve you from any of your obligations to the Company under this Agreement or to waive any of the Company's rights against you.     4. YOUR CONDITIONS TO CLOSINGS.       Your obligation to purchase and pay for the Notes to be sold to you on each Closing Date is subject to the fulfillment to your satisfaction, prior to or on such Closing Date (except as otherwise specified), of the following conditions:         4.1. Representations and Warranties.           The representations and warranties of the Company in this Agreement shall be true and correct when made and on such Closing Date.         4.2 Performance; No Default.           The Company shall have performed and complied with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or on such Closing Date and after giving effect to the issue and sale of the Notes (and the application of the proceeds thereof as contemplated by Schedule 5.14), no Default or Event of Default shall have occurred and be continuing.         4.3 Compliance Certificates.           (a) Officer's Certificate               The Company shall have delivered to you an Officer's Certificate, dated such Closing Date, certifying that the conditions specified in Sections 4.1 and 4.2 have been fulfilled.             (b) Company Secretary's Certificate               The Company shall have delivered to you a certificate, dated such Closing Date, signed by the Secretary or an Assistant Secretary of the Company, and certifying as to the resolutions, the bylaws and the certificate of incorporation attached thereto and as to other corporate proceedings relating to the authorization, execution and delivery of the Notes, this Agreement and any other agreement or instrument related thereto.               Secretary's Certificates of Restricted Subsidiaries.               Each Restricted Subsidiary shall have delivered to you a certificate dated such Closing Date (separately executed or executed jointly by one or more Restricted Subsidiaries), signed by the Secretary or an Assistant Secretary of such Restricted Subsidiary, and certifying as to the resolutions, the bylaws and the certificate or articles of incorporation of such Restricted Subsidiary attached thereto and as to other corporate proceedings relating to the authorization, execution and delivery by such Restricted Subsidiary of the Subsidiary Guaranty.           4.4. Opinions of Counsel.             You shall have received from             (a) Andrews & Kurth Mayor Day Caldwell & Keeton, L.L.P., counsel for the Company and the Restricted Subsidiaries, and             (b) Bingham Dana LLP, your special counsel,         closing opinions satisfactory to you in form, scope and substance, each dated as of such Closing Date, substantially in the respective forms set forth in Exhibits 4.4(a) and 4.4(b), and opining as to such other matters as you may reasonably request. This Section 4.4 shall constitute direction by the Company to such counsel named in the immediately preceding subsection (a) to deliver such closing opinion to you.           4.5. Purchases Permitted By Applicable Law, etc.             On such Closing Date your purchase of Notes shall (a) be permitted by the laws and regulations of each jurisdiction to which you are subject, without recourse to provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment, (b) not violate any applicable law or regulation (including, without limitation, Regulation T, U or X of the Board of Governors of the Federal Reserve System) and (c) not subject you to any tax, penalty or liability under or pursuant to any applicable law or regulation, which law or regulation was not in effect on the date hereof. If requested by you, you shall have received an Officer's Certificate certifying as to such matters of fact as you may reasonably specify to enable you to determine whether such purchase is so permitted.           4.6 Sale of Other Notes.             Contemporaneously with such Closing, the Company shall sell to the Other Purchasers and the Other Purchasers shall purchase the Notes to be purchased by them at such Closing as specified in Schedule A.           4.7. Payment of Special Counsel Fees.             Without limiting the provisions of Section 15.1, the Company shall have paid on or before such Closing the fees, charges and disbursements of your special counsel referred to in Section 4.4(b) to the extent reflected in a statement of such counsel rendered to the Company at least one (1) Business Day prior to such Closing.                   4.8. Private Placement Numbers.           Private Placement numbers issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities Valuation Office of the National Association of Insurance Commissioners) shall have been obtained for each Series.           4.9 Changes in Corporate Structure.             Except as specified in Schedule 4.9, the Company shall not have changed its jurisdiction of incorporation or been a party to any merger or consolidation and shall not have succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the most recent financial statements referred to in Schedule 5.5.           4.10 Subsidiary Guaranty.             You shall have received the Guaranty, duly executed and delivered by each Restricted Subsidiary, substantially in the form of Exhibit 4.10 (the "Subsidiary Guaranty"), satisfactory to you in form and substance, which Guaranty shall be in full force and effect.           4.11. Proceedings and Documents.             All corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident to such transactions shall be reasonably satisfactory to you and your special counsel, and you and your special counsel shall have received all such counterpart originals or certified or other copies of such documents as you or they may reasonably request.         4.A. COMPANY'S CLOSING CONDITIONS.         The Company's obligation to sell the Notes to be purchased by you on each Closing Date is subject to the fulfillment to the Company's satisfaction, prior to or on such Closing Date (except as otherwise specified), of the following conditions:           4A.1. Representations and Warranties.             The representations and warranties made by you in Section 6 shall be correct when made and on such Closing Date.           4A.2. Sales Permitted by Applicable Law, etc.     On such Closing Date the Company's sale of the Notes and the granting of the Subsidiary Guaranty by the Restricted Subsidiaries shall (a) be permitted by the laws and regulations of each jurisdiction to which the Company and the Restricted Subsidiaries are subject, and (b) not violate any applicable law or regulation.         5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.         The Company represents and warrants to you that:           5.1 Organization; Power and Authority.             (a) The Company               (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware;                 (ii) is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and                 (iii) has the corporate power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver this Agreement and the Other Agreements and the Notes and to perform the provisions hereof and thereof.               (b) Each Subsidiary                 (i) is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization;                 (ii) is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and                 (iii) has the corporate or other power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, and, in the case of the Restricted Subsidiaries, to execute and deliver the Subsidiary Guaranty and to perform the provisions hereof and thereof.             5.2 Authorization, etc.               (a) This Agreement and the Other Agreements and the Notes have been duly authorized by all necessary corporate action on the part of the Company, and this Agreement constitutes, and upon execution and delivery thereof each Note will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).               (b) The Subsidiary Guaranty has been duly authorized by all necessary corporate, partnership or limited liability company action on the part of each Restricted Subsidiary and constitutes a legal, valid and binding obligation of each Restricted Subsidiary enforceable against such Restricted Subsidiary in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).             5.3 Disclosure.             The Company, through its agent, Banc One Capital Markets, Inc., has delivered to you and each Other Purchaser a copy of a Confidential Private Placement Memorandum, dated August 2001 (the "Memorandum"), relating to the transactions contemplated hereby. The Memorandum fairly describes, in all material respects, the general nature of the business and principal properties of the Company and the Subsidiaries. This Agreement, the Memorandum, the documents, certificates or other writings delivered to you by or on behalf of the Company in connection with the transactions contemplated hereby and the financial statements listed in Schedule 5.5, taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made. All projections and forward-looking statements contained in the Memorandum are based upon assumptions that the Company believes to be reasonable and were made in good faith, although no assurances can be given that the results set forth in such projections or forward-looking statements will be achieved. Except as disclosed in the Memorandum or in the financial statements listed in Schedule 5.5, since December 31, 2000, there has been no change in the financial condition, operations, business, properties or prospects of the Company or any Subsidiary except changes that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. There is no fact known to the Company that could reasonably be expected to have a Material Adverse Effect that has not been set forth herein or in the Memorandum or in the other documents, certificates and other writings delivered to you by or on behalf of the Company specifically for use in connection with the transactions contemplated hereby.             5.4 Organization and Ownership of Shares of Subsidiaries; Affiliates.               (a) Schedule 5.4 contains (except as noted therein) complete and correct lists of (i) the Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization and the percentage of shares of each class of its outstanding capital stock or similar equity interests owned by the Company and each other Subsidiary, and whether such Subsidiary is a Restricted Subsidiary, and (ii) the Company's Affiliates (other than Subsidiaries).               (b) All of the outstanding shares of capital stock or similar equity interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company and the Subsidiaries have been duly authorized and validly issued, are fully paid and nonassessable and are owned by the Company or another Subsidiary free and clear of any Lien (except as otherwise disclosed in Schedule 5.4).               (c) Each Subsidiary identified in Schedule 5.4 is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each such Subsidiary has the corporate or other power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact.               (d) No Restricted Subsidiary is a party to, or otherwise subject to any legal restriction or any agreement (other than this Agreement, the agreements listed on Schedule 5.4 and customary limitations imposed by corporate law statutes) restricting the ability of such Restricted Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Company or any of the Restricted Subsidiaries that owns outstanding shares of capital stock or similar equity interests of such Restricted Subsidiary.             5.5. Financial Statements.             The Company has delivered to each Purchaser copies of the financial statements of the Company and the Subsidiaries listed on Schedule 5.5. All of said financial statements (including in each case the related schedules and notes) present fairly, in all material respects, the consolidated financial position of the Company and the Subsidiaries as of the respective dates specified in such Schedule and the consolidated results of their operations and cash flows for the respective periods so specified and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the notes thereto (subject, in the case of any interim financial statements, to normal year-end adjustments).             5.6 Compliance with Laws, Other Instruments, etc.               Neither the execution, delivery and performance by the Company of this Agreement and the Notes, nor the execution, delivery and performance by any Restricted Subsidiary of the Subsidiary Guaranty, will (a) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of the Company or any Restricted Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or by-laws, or any other agreement or instrument to which the Company or any Restricted Subsidiary is bound or by which the Company or any Restricted Subsidiary or any of their respective properties may be bound or affected, (b) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to the Company or any Restricted Subsidiary or (c) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Company or any Restricted Subsidiary.             5.7 Governmental Authorizations, etc.               No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance (a) by the Company of this Agreement or the Notes or (b) by any Restricted Subsidiary of the Subsidiary Guaranty.             5.8 Litigation; Observance of Agreements, Statutes and Orders.               (a) Except as disclosed in Schedule 5.8, there are no actions, suits or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary or any property of the Company or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.               (b) Neither the Company nor any Subsidiary is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including without limitation Environmental Laws) of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.             5.9 Taxes.               The Company and the Subsidiaries have filed all tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments levied upon them or their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (a) the amount of which is not individually or in the aggregate Material or (b) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which the Company or a Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP. The Company knows of no basis for any other tax or assessment that could reasonably be expected to have a Material Adverse Effect. The charges, accruals and reserves on the books of the Company and the Subsidiaries in respect of Federal, state or other taxes for all fiscal periods are adequate. The Federal income tax liabilities of the Company and the Subsidiaries have been determined by the Internal Revenue Service and paid for all fiscal years up to and including the fiscal year ended December 31, 1996.             5.10. Title to Property; Leases.               The Company and the Subsidiaries have good and sufficient title to their respective properties that individually or in the aggregate are Material, including all such properties reflected in the most recent audited balance sheet referred to in Section 5.5 or purported to have been acquired by the Company or any Subsidiary after said date (except as sold or otherwise disposed of in the ordinary course of business), in each case free and clear of Liens prohibited by this Agreement. All leases that individually or in the aggregate are Material are valid and subsisting and are in full force and effect in all material respects.             5.11. Licenses, Permits, etc.             Except as disclosed in Schedule 5.11,               (a) the Company and the Subsidiaries own or possess all licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks and trade names, or rights thereto, with respect to the business of the Company and/or any Subsidiary as currently conducted, that individually or in the aggregate are Material, without known conflict with the rights of others;               (b) to the best knowledge of the Company, no product of the Company or any Subsidiary infringes in any material respect upon any license, permit, franchise, authorization, patent, copyright, service mark, trademark, trade name or other right owned by any other Person; and               (c) to the best knowledge of the Company, there is no violation by any Person of any right of the Company or any Subsidiary with respect to any patent, copyright, service mark, trademark, trade name or other right owned or used by the Company or any Subsidiary which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.             5.12. Compliance with ERISA.               (a) The Company and each ERISA Affiliate have operated and administered each Plan in compliance with all applicable laws except for such instances of noncompliance as have not resulted in and could not reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in Section 3 of ERISA), and no event, transaction or condition has occurred or exists that could reasonably be expected to result in the incurrence of any such liability by the Company or any ERISA Affiliate, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or 412 of the Code, other than such liabilities or Liens as would not be individually or in the aggregate Material.                         (b) The present value of the aggregate benefit liabilities under each of the Plans (other than Multiemployer Plans), determined as of the end of such Plan's most recently ended plan year on the basis of the actuarial assumptions specified for funding purposes in such Plan's most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such Plan allocable to such benefit liabilities. The term "benefit liabilities" has the meaning specified in section 4001 of ERISA and the terms "current value" and "present value" have the meaning specified in section 3 of ERISA.               (c) The Company and its ERISA Affiliates have not incurred withdrawal liabilities (and are not subject to contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that individually or in the aggregate are Material.               (d) The expected postretirement benefit obligation (determined as of the last day of the Company's most recently ended fiscal year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by section 4980B of the Code) of the Company and the Restricted Subsidiaries is not Material.               (e) The execution and delivery of this Agreement and the issuance and sale of the Notes hereunder will not involve any transaction that is subject to the prohibitions of section 406 of ERISA or in connection with which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation by the Company in the first sentence of this Section 5.12(e) is made in reliance upon and subject to the accuracy of your representation in Section 6.3 as to the sources of the funds used to pay the purchase price of the Notes to be purchased by you.               (f) Schedule 5.12 lists all ERISA Affiliates that are Subsidiaries and that maintain one or more Plans and any employee organizations in respect of any Multiemployer Plan or Plan. Schedule 5.12 sets forth all ERISA Affiliates and all "employee benefit plans" with respect to which the Company or any "affiliate" of the Company is a "party-in-interest" or in respect of which the Notes could constitute an "employer security" ("employee benefit plan," "party-in-interest" and "employee organization" have the meanings specified in section 3 of ERISA, "affiliate" has the meaning specified in section 407(d) of ERISA and Section V of the Department of Labor Prohibited Transaction Exemption 95-60 (60 FR 35925, July 12, 1995) and "employer security" has the meaning specified in section 407(d) of ERISA)             5.13. Private Offering by the Company             Neither the Company nor anyone acting on its behalf has offered the Notes or any similar Securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any Person other than you, the Other Purchasers and not more than 47 other Institutional Investors, each of which has been offered the Notes at a private sale for investment pursuant to a valid exemption from the registration requirements of Section 5 of the Securities Act. In reliance upon the accuracy of your representations and warranties and the representations and warranties of the Other Purchasers, neither the Company nor anyone acting on its behalf has taken, or will take, any action that would subject the issuance or sale of the Notes to the registration requirements of Section 5 of the Securities Act.             5.14. Use of Proceeds; Margin Regulations.               The Company will apply the proceeds of the sale of the Notes to refinance existing Debt and to fund capital expenditures primarily associated with the acquisition of seismic data and investment in working interests of exploration and production projects. No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or trading in any Securities under such circumstances as to involve the Company in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin stock does not constitute more than one percent (1%) of the value of the consolidated assets of the Company and the Subsidiaries and the Company does not have any present intention that margin stock will constitute more than five percent (5%) of the value of such assets. As used in this Section, the terms "margin stock" and "purpose of buying or carrying" shall have the meanings assigned to them in said Regulation U.             5.15. Existing Debt; Future Liens.               (a) Except as described therein, Schedule 5.15 sets forth a complete and correct list of all outstanding Debt (in excess of $100,000 outstanding) of the Company and the Subsidiaries as of September 30, 2001, since which date there has been no material change in the amounts, interest rates, sinking funds, installment payments or maturities of the Debt of the Company or the Subsidiaries. Neither the Company nor Subsidiary is in default, and no waiver of default is currently in effect, in the payment of any principal of or interest on any Debt of the Company or such Subsidiary and no event or condition exists with respect to any Debt of the Company or any Subsidiary that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Debt to become due and payable before its stated maturity or before its regularly scheduled dates of payment.               (b) Except as disclosed in Schedule 5.15, neither the Company nor any Restricted Subsidiary has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien not permitted by Section 10.4.             5.16. Foreign Assets Control Regulations, etc.               Neither the sale of the Notes by the Company hereunder nor its use of the proceeds thereof will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto.             5.17. Status under Certain Statutes.               Neither the Company nor any Subsidiary is subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as amended, the Transportation Acts (49 U.S.C.), as amended, or the Federal Power Act, as amended.             5.18. Environmental Matters.               Neither the Company nor any Subsidiary has knowledge of any claim or has received any notice of any claim, and no action or proceeding of any kind has been instituted raising any claim against the Company or any of the Subsidiaries or any of their respective real properties now or formerly owned, leased or operated by any of them or other assets, alleging any damage to the environment or violation of any Environmental Laws, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect. Except as otherwise disclosed to you in writing,               (a) neither the Company nor any of the Subsidiaries has knowledge of any facts which would give rise to any claim, public or private, of violation of Environmental Laws or damage to the environment emanating from, occurring on or in any way related to real properties now or formerly owned, leased or operated by any of them or to other assets or their use, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect;               (b) neither the Company nor any of the Subsidiaries has stored any Hazardous Materials on real properties now or formerly owned, leased or operated by any of them or has disposed of any Hazardous Materials in a manner contrary to any Environmental Laws in each case in any manner that could reasonably be expected to result in a Material Adverse Effect; and               (c) all buildings on all real properties now owned, leased or operated by the Company or any of the Subsidiaries are in compliance with applicable Environmental Laws, except where failure to comply could not reasonably be expected to result in a Material Adverse Effect.           6. REPRESENTATIONS OF THE PURCHASER.             6.1. Purchase for Investment.               You represent that you are purchasing the Notes for your own account or for one or more separate accounts maintained by you or for the account of one or more pension or trust funds and not with a view to the distribution thereof or with any present intention of offering or selling any of the Notes in a transaction that would violate the Securities Act or the securities laws of any State of the United States or any other applicable jurisdiction, provided that the disposition of your or their property shall at all times be within your or their control. You represent and warrant that you and any Person for whose account you are purchasing the Notes are either a Qualified Institutional Buyer or an Accredited Institution, in either case with such knowledge and experience in financial and business matters as are necessary in order to evaluate the merits and risks of an investment in the Notes. You also understand that the Company and, for purposes of the opinions to be delivered to you pursuant to Section 4.4, counsel to the Company and your special counsel, will rely upon the accuracy and truth of the foregoing representations and you hereby consent to such reliance. You understand that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Company is not required to register the Notes.             6.2. Legend.             You agree that the Notes shall contain the following legend:             "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY ONLY BE REOFFERED AND SOLD IN COMPLIANCE WITH THE REGISTRATION PROVISIONS OF SUCH ACT OR PURSUANT TO AN EXEMPTION THEREFROM."           The legend requirements imposed by this Section 6.2 shall cease and terminate as to any particular Note if the Notes represented thereby have been:               (a) effectively registered under the Securities Act (the Company having no obligation to effect the registration of such Notes) and disposed of in accordance with the registration statement covering such Notes,                 (b) distributed to the public pursuant to Rule 144 (or any successor provision) under the Securities Act, or               (c) otherwise transferred in accordance herewith and the subsequent disposition of such Notes shall not require the registration or qualification of such Notes under the Securities Act or any similar state law then in force.           Whenever such restrictions shall terminate as to any Notes, the holder thereof shall be entitled to receive from the Company, without expense to such holder (except for stamp taxes or governmental charges, if any, payable in connection with a transfer of such Notes, as required by Section 13.2), a new Note of like tenor not bearing the legend set forth in this Section 6.2.           6.3. ERISA.         You represent:             (a) if you are acquiring the Notes for your own account with funds from or attributable to your general account, and in reliance upon the Company's representations set forth in Section 5.12 and the related disclosures set forth in Schedule 5.12, that the amount of the reserves and liabilities for the general account contracts (as defined by the annual statement for life insurance companies approved by the National Association of Insurance Commissioners (the "NAIC Annual Statement")) held by or on behalf of any Plan together with the amount of the reserves and liabilities for the general account contracts held by or on behalf of any other Plans maintained by the same employer (or affiliate thereof, as such term is defined in section V of DOL Prohibited Transaction Exemption 95-60 (60 FR 35925, July 12, 1995)) or by the same employee organization (as defined in ERISA) in the general account do not exceed 10% of the total reserves and liabilities of the general account (exclusive of separate account liabilities) plus surplus as set forth in the NAIC Annual Statement filed with the state of domicile of the insurance company; for purposes of the percentage limitation in this clause (a), the amount of reserves and liabilities for the general account contracts held by or on behalf of a Plan shall be determined before reduction for credits on account of any reinsurance ceded on a coinsurance basis; or             (b) if any part of the funds being used by you to purchase the Notes shall come from assets of an employee benefit plan (as defined in section 3 of ERISA) or a plan (as defined in section 4975(e)(1) of the Code), that:               (i) if such funds are attributable to a "separate account" (as defined in section 3 of ERISA), then                   (A) all requirements for an exemption under DOL Prohibited Transaction Exemption 90-1 (issued January 29, 1990) are met with respect to the use of such funds to purchase the Notes, or                     (B) the employee benefit plans with an interest in such separate account have been identified in a writing delivered by you to the Company;                   (ii) if such funds are attributable to a "separate account" (as defined in section 3 of ERISA) that is maintained solely in connection with fixed contracted obligations of an insurance company, any amounts payable, or credited, to any employee benefit plan having an interest in such account and to any participant or beneficiary of such plan (including an annuitant) are not affected in any manner by the investment performance of the separate account;                   (iii) if such funds are attributable to an "investment fund" managed by a "qualified plan asset manager" (as such terms are defined in Part V of DOL Prohibited Transaction Exemption 84-14, issued March 13, 1984), all requirements for an exemption under such Exemption are met with respect to the use of such funds to purchase the Notes; or                   (iv) such employee benefit plan is excluded from the provisions of section 406 of ERISA by virtue of section 4(b) of ERISA.               6.4. Organization; Power and Authority; Compliance with Laws.               You represent and warrant that:                 (a) you are a corporation duly organized, validly existing, and in good standing under the laws of the state of your incorporation,                 (b) you have the corporate power and authority to execute and deliver this Agreement and to perform the provisions hereof, and                 (c) the execution, delivery and performance of this Agreement by you will not violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to you.               6.5. Authorization, etc.               You represent and warrant that this Agreement has been duly authorized by all necessary corporate action on your part, and this Agreement constitutes your legal, valid and binding obligation enforceable against you in accordance with its terms, except as such enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).             7. INFORMATION AS TO COMPANY.               7.1. Financial and Business Information.               The Company shall deliver to each holder that is an Institutional Investor:                 (a) Quarterly Statements -- within forty-five (45) days after the end of each quarterly fiscal period in each fiscal year of the Company (other than the last quarterly fiscal period of each such fiscal year), duplicate copies of,                   (i) consolidated balance sheets of the Company and its consolidated Subsidiaries, and of the Company and its Restricted Subsidiaries, as at the end of such quarter, and                   (ii) consolidated statements of operations, stockholders' equity and cash flows of the Company and its consolidated Subsidiaries, and of the Company and its Restricted Subsidiaries, for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter,             setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a Senior Financial Officer as fairly presenting, in all material respects, the financial position of the companies being reported on and their results of operations and cash flows, subject to changes resulting from year-end adjustments, provided that, so long as the Company shall not have any Unrestricted Subsidiaries, delivery within the time period specified above of copies of the Company's Quarterly Report on Form 10-Q prepared in compliance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 7.1(a);                 (b) Annual Statements -- within ninety (90) days after the end of each fiscal year of the Company, duplicate copies of,                   (i) a consolidated balance sheet of the Company and its consolidated Subsidiaries as at the end of such year,                   (ii) consolidated statements of operations, stockholders' equity and cash flows of the Company and its consolidated Subsidiaries for such year, and                   (iii) a condensed consolidating balance sheet, and condensed consolidating statements of operations and cash flows of the Company and its Subsidiaries setting forth, in each case, consolidating information sufficient to show the financial position and results of operations and cash flows of the Company and the Restricted Subsidiaries,             setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied by                     (A) in the case of the financial statements identified in the foregoing clauses (i) and (ii), an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that such financial statements present fairly, in all material respects, the financial position of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances, and                     (B) a certificate of such accountants stating that they have reviewed this Agreement and stating further whether, in making their audit, they have become aware of any condition or event that then constitutes a Default or an Event of Default, and, if they are aware that any such condition or event then exists, specifying the nature and period of the existence thereof (it being understood that such accountants shall not be liable, directly or indirectly, for any failure to obtain knowledge of any Default or Event of Default unless such accountants should have obtained knowledge thereof in making an audit in accordance with generally accepted auditing standards or did not make such an audit),             provided that, so long as the Company shall not have any Unrestricted Subsidiaries, the delivery within the time period specified above of the Company's Annual Report on Form 10-K for such fiscal year (together with the Company's annual report to shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance with the requirements therefor and filed with the Securities and Exchange Commission, together with the accountants' certificates described in clauses (A) and (B) above, shall be deemed to satisfy the requirements of this Section 7.1(b);                 (c) SEC and Other Reports -- promptly upon their becoming available, one copy of                   (i) each financial statement, report, notice or proxy statement sent by the Company or any Restricted Subsidiary to public securities holders generally, and                   (ii) (A) each regular or periodic report, each registration statement (without exhibits except as expressly requested by such holder), and each prospectus and all amendments thereto filed by the Company or any Restricted Subsidiary with the Securities and Exchange Commission; and                     (B) by facsimile or e-mail, all press releases and other statements made available generally by the Company or any Restricted Subsidiary to the public concerning developments that are Material;                 (d) Audit Reports - as soon as practicable after receipt thereof by the Company or any Subsidiary, a copy of each other report submitted to the Company or any Subsidiary by its independent accountants in connection with any interim or special audit made by them of the books of the Company or any Subsidiary;                 (e) Litigation -- within five (5) days after the Company obtains knowledge thereof, written notice of any pending or threatened (in writing) (i) litigation not fully covered by insurance or as to which an insurance company has not accepted liability or (ii) governmental proceeding, in each case against the Company or any Restricted Subsidiary, in which the damages sought exceed One Million Dollars ($1,000,000), individually or in the aggregate, or which otherwise could reasonably be expected to have a Material Adverse Effect;                 (f) Notice of Default or Event of Default -- promptly, and in any event within five (5) days after a Responsible Officer shall become aware of the existence of any Default or Event of Default or that any Person has given any notice or taken any action with respect to a claimed default hereunder or that any Person has given any notice or taken any action with respect to a claimed default of the type referred to in Section 11(f), a written notice specifying the nature and period of existence thereof and what action the Company is taking or proposes to take with respect thereto;                 (g) Oil and Gas Reserve Reports -- promptly, and in any event no later than April 1 in each year, engineering reports in form and substance reasonably satisfactory to the Required Holders, certified by Garb Grubb Harris & Associates, Inc. (or any other nationally or regionally recognized independent consulting petroleum engineers) as fairly and accurately setting forth                   (i) the proven and producing, shut-in, behind-pipe, and undeveloped oil and gas reserves (separately classified as such) of the Company and its Restricted Subsidiaries as of January 1 of the year for which such reserve reports are furnished,                   (ii) the aggregate present value of the future net income with respect to such reserves discounted at a stated per annum annual discount rate,                   (iii) projections of the annual rate of production, gross income, and net income with respect to such proven and producing reserves, and                   (iv) information with respect to the "take-or-pay," "prepayment," and gas-balancing liabilities of the Company and its Restricted Subsidiaries;                 (h) ERISA Matters -- promptly, and in any event within five (5) days after a Responsible Officer shall become aware of any of the following, a written notice setting forth the nature thereof and the action, if any, that the Company or an ERISA Affiliate proposes to take with respect thereto:                   (i) with respect to any Plan, any reportable event, as defined in section 4043(b) of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to such regulations as in effect on the date hereof; or                   (ii) the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC with respect to such Multiemployer Plan; or                   (iii) any event, transaction or condition that could result in the incurrence of any liability by the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, could reasonably be expected to have a Material Adverse Effect;                 (i) Notices from Governmental Authority -- promptly, and in any event within thirty (30) days of receipt thereof, copies of any notice to the Company or any Subsidiary from any Federal or state Governmental Authority relating to any order, ruling, statute or other law or regulation that could reasonably be expected to have a Material Adverse Effect; and             (j) Audited Financial Statements for Restricted Group -- with respect to any fiscal year of the Company as to which both of the following conditions would be satisfied:                     (i) the assets of all Unrestricted Subsidiaries, determined on a combined basis as of the last day of such year, exceed 20% of the consolidated total assets of the Company and its consolidated Subsidiaries, and                     (ii) the revenues of all Unrestricted Subsidiaries, determined on a combined basis for such fiscal year, exceed 20% of the consolidated revenues of the Company and its consolidated Subsidiaries,             upon the written request of the Required Holders, the Company will deliver to each holder that is an Institutional Investor the same financial statements and opinion with respect to the Company and its Restricted Subsidiaries as is provided pursuant to clauses (i) and (ii) of Section 7.1(b) with respect to the Company and its consolidated Subsidiaries (such delivery to be made no later than the later of (x) the time delivery is made of the financial statements referred to in such clauses, if such request is made at least 60 days before such time, or (y) 60 days after such request is made).                 (k) Requested Information -- with reasonable promptness, such other data and information relating to the business, operations, affairs, financial condition, assets or properties of the Company or any of the Restricted Subsidiaries or relating to the ability of the Company to perform its obligations hereunder and under the Notes as from time to time may be reasonably requested by any such holder including, without limitation, information required by 17 C.F.R. 230.144A, as amended from time to time.               7.2. Officer's Certificate.               Each set of financial statements delivered to a holder pursuant to Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a certificate of a Senior Financial Officer setting forth:                 (a) Covenant Compliance -- the information (including detailed calculations) required in order to establish whether the Company was in compliance with the requirements of Sections 10.1 through 10.7, inclusive, during the quarterly or annual period covered by the statements then being furnished (including with respect to each such Section, where applicable, the calculations of the maximum or minimum amount, ratio or percentage, as the case may be, permissible under the terms of such Sections, and the calculation of the amount, ratio or percentage then in existence); and                 (b) Event of Default -- a statement that such officer has reviewed the relevant terms hereof and has made, or caused to be made, under his or her supervision, a review of the transactions and conditions of the Company and the Subsidiaries from the beginning of the quarterly or annual period covered by the statements then being furnished to the date of the certificate and that such review shall not have disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default or, if any such condition or event existed or exists (including, without limitation, any such event or condition resulting from the failure of the Company or any Subsidiary to comply with any Environmental Law), specifying the nature and period of existence thereof and what action the Company shall have taken or proposes to take with respect thereto.   7.3. Inspection.               The Company shall permit the representatives of each holder that is an Institutional Investor:                 (a) No Default -- if no Default or Event of Default then exists, at the expense of such holder (with respect to its travel and other out-of-pocket costs and compensation expenses of its representatives) upon reasonable prior notice to the Company, to visit the principal executive office of the Company, to discuss the affairs, finances and accounts of the Company and the Subsidiaries with the Company's officers, and (with the consent of the Company, which consent will not be unreasonably withheld) its independent public accountants and its independent petroleum engineers, and (with the consent of the Company, which consent will not be unreasonably withheld) to visit the other offices and properties of the Company and each Subsidiary, all at such reasonable times as may be reasonably requested in writing, provided that you shall be permitted to make only two inspections per calendar year pursuant to the provisions of this subsection (a) (without limitation of the inspection rights of any Other Purchaser); and                 (b) Default -- if a Default or an Event of Default then exists, at the expense of the Company to visit and inspect any of the offices or properties of the Company or any Subsidiary, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers, independent public accountants and independent petroleum engineers (and by this provision the Company authorizes said accountants and engineers to discuss the affairs, finances and accounts of the Company and the Subsidiaries), all at such times and as often as may be requested             8. PREPAYMENT OF THE NOTES               8.1. Required Prepayments.               Regardless of the amount of the Notes which may be outstanding from time to time, the Company shall prepay or, in the case of principal amounts due at the maturity of any Note, pay, and there shall become due and payable on the respective dates specified below, the respective aggregate principal amounts of each Series of Notes hereinafter set forth opposite such dates (or such lesser amount as would constitute payment in full of the Notes of such Series): Date: Principal Amount of Series G Notes to be prepaid or paid: Principal Amount of Series H Notes to be prepaid or paid: Principal Amount of Series I Notes to be prepaid or paid: October 15, 2006 $20,000,000 $0 $0 October 15, 2008 $0 $50,000,000 $0 October 15, 2011 $0 $0 $37,000,000 Totals $20,000,000 $50,000,000 $37,000,000 The principal amount of any Note remaining outstanding at the maturity thereof shall be paid at such maturity. Each such prepayment or payment shall be at a price of 100% of the principal amount prepaid or paid, together with interest accrued thereon to (but not including) the date of prepayment or payment. No Make-Whole Amount shall be payable in connection with any mandatory prepayment or payment made pursuant to this Section 8.1.               8.2. Optional Prepayments with Make-Whole Amount; Rescission.                 (a) Optional Prepayments with Make-Whole Amount.   The Company may, at its option, upon notice as provided below, prepay at any time all, or from time to time any part of, the Notes, in a principal amount of not less than (i) in the case of a partial prepayment other than a Contingent Optional Prepayment, Five Million Dollars ($5,000,000), or (ii) in the case of a partial prepayment which is a Contingent Optional Prepayment, Two Million Dollars ($2,000,000), or, in either case, such lesser amount as shall then be outstanding, at one hundred percent (100%) of the principal amount so prepaid, plus the Make-Whole Amount determined for the prepayment date with respect to such principal amount. The Company will give each holder written notice (an "Optional Prepayment Notice") of each optional prepayment under this Section 8.2 not less than thirty (30) days and not more than sixty (60) days prior to the date fixed for such prepayment (the "Optional Prepayment Date"). Each such Optional Prepayment Notice shall                   (i) specify the Optional Prepayment Date,                   (ii) state whether such prepayment is contingent upon the completion of an asset disposition by the Company or a Restricted Subsidiary or the consummation of a new credit facility with another creditor or group of creditors (a "Contingent Optional Prepayment") and describe in reasonable detail the terms thereof,                   (iii) specify the aggregate principal amount of each Series to be prepaid on such date,                   (iv) specify the principal amount of each Note held by such holder to be prepaid (determined in accordance with Section 8.3),                   (v) specify the interest to be paid on the prepayment date with respect to such principal amount being prepaid, and                   (vi) be accompanied by a certificate of a Senior Financial Officer as to the estimated Make-Whole Amount due in connection with such prepayment (calculated as if the date of such notice were the date of the prepayment), setting forth the details of such computation.             Two (2) Business Days prior to such prepayment, the Company shall deliver to each holder a certificate of a Senior Financial Officer specifying the calculation of such Make-Whole Amount as of the specified prepayment date.                 (b) Rescission.   In the event that the Company shall give an Optional Prepayment Notice of any Contingent Optional Prepayment pursuant to Section 8.2(a), the Company thereafter shall have the right to rescind such Optional Prepayment Notice by giving each holder written notice of such rescission (a "Rescission Notice") not less than ten (10) Business Days prior to the Optional Prepayment Date specified in such Optional Prepayment Notice. Upon delivery of such Rescission Notice in accordance with this Section 8.2(b), the Company shall be relieved of any obligation to make the Contingent Optional Prepayment on the Optional Prepayment Date in respect of which such Rescission Notice was delivered.             . 8.3 Allocation of Partial Prepayments.             All partial prepayments of the Series G Notes, the Series H Notes and the Series I Notes pursuant to Section 8.1 shall be allocated to all outstanding Notes of the relevant Series ratably in accordance with the unpaid principal amounts thereof. All partial prepayments of the Notes pursuant to Section 8.2 shall be allocated to all outstanding Notes (without distinguishing among the different Series) ratably in accordance with the unpaid principal amounts thereof. Any partial prepayment of the Series G Notes, the Series H Notes and the Series I Notes pursuant to Section 8.2 shall reduce the principal amount of each required prepayment of such Series becoming due under Section 8.1 on and after the date of such prepayment in the inverse order of the maturity thereof.               8.4. Maturity; Surrender, etc.             In the case of each prepayment of Notes pursuant to this Section 8, the principal amount of each Note to be prepaid shall mature and become due and payable on the date fixed for such prepayment, together with interest on such principal amount accrued to such date and the applicable Make-Whole Amount, if any. From and after such date, unless the Company shall fail to pay such principal amount when so due and payable, together with the interest and Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to the Company and cancelled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note.               8.5. Purchase of Notes.             The Company will not and will not permit any Restricted Subsidiary or Affiliate to purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the outstanding Notes except upon the payment or prepayment of the Notes in accordance with the terms of this Agreement and the Notes. The Company will promptly cancel all Notes acquired by it or any Restricted Subsidiary or Affiliate pursuant to any payment or prepayment of Notes pursuant to any provision of this Agreement and no Notes may be issued in substitution or exchange for any such Notes.               8.6. Make-Whole Amount.             The term "Make-Whole Amount" means, with respect to any Series G Note, Series H Note or Series I Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called Principal, provided that the Make-Whole Amount may in no event be less than zero. For the purposes of determining the Make-Whole Amount, the following terms have the following meanings: "Called Principal" means, with respect to any Series G Note, Series H Note, or Series I Note, the principal of such Note that is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires. "Discounted Value" means, with respect to the Called Principal of any Series G Note, Series H Note, or Series I Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal. "Reinvestment Yield" means, with respect to the Called Principal of any Series G Note, Series H Note, or Series I Note, the sum of one half percent (.5%) per annum plus the yield to maturity implied by (i) the yields reported, as of 10:00 A.M. (New York City time) on the second (2nd) Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as Bloomberg Financial Markets Govt PX (or such other display as may replace Bloomberg Financial Markets Govt PX) for actively traded U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second (2nd) Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date. Such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the actively traded U.S. Treasury security with the constant maturity closest to and greater than the Remaining Average Life and (2) the actively traded U.S. Treasury security with the constant maturity closest to and less than the Remaining Average Life. "Remaining Average Life" means, with respect to any Called Principal, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (b) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment. "Remaining Scheduled Payments" means, with respect to the Called Principal of any Series G Note, Series H Note, or Series I Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date, provided that if such Settlement Date is not a date on which interest payments are due to be made under the terms of the Notes of such Series, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Section 8.2 or 12.1. "Settlement Date" means, with respect to the Called Principal of any Series G Note, Series H Note, or Series I Note, the date on which such Called Principal is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires.             9. AFFIRMATIVE COVENANTS.             The Company covenants that so long as any of the Notes are outstanding:               9.1. Compliance with Law.             The Company will and will cause each of the Subsidiaries to comply with all laws, ordinances, rules or regulations of Governmental Authorities to which each of them is subject, including, without limitation, Environmental Laws, and will obtain and maintain in effect all licenses, certificates, permits, franchises and other authorizations of Governmental Authorities necessary to the ownership and operation of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other authorizations of Governmental Authorities could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.               9.2. Insurance.             The Company will and will cause each of the Subsidiaries to maintain, with financially sound and reputable insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated, except to the extent that the failure to maintain such insurance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.               9.3. Maintenance of Properties.             The Company will and will cause each of the Subsidiaries to maintain and keep, or cause to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, provided that                 (a) no violation of this Section 9.3 shall be deemed to have occurred with respect to any property of the Company or any Subsidiary damaged or destroyed by a casualty occurrence, so long as the Company or such Restricted Subsidiary is proceeding diligently to repair or replace such property, and                 (b) this Section shall not prevent the Company or any Subsidiary from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and the Company has concluded that such discontinuance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect (which term shall not, for the purpose of this clause (b) only, include the discontinuance of the operation and maintenance of a Restricted Subsidiary's properties that would render such Restricted Subsidiary unable to perform its obligations under the Subsidiary Guaranty, and therefore result in a Material Adverse Effect only under clause (c) of the definition of such term).               9.4. Payment of Taxes and Claims             The Company will and will cause each of the Subsidiaries to file all tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent and all claims for which sums have become due and payable that have or might become a Lien on properties or assets of the Company or any Subsidiary, provided that neither the Company nor any Subsidiary need pay any such tax or assessment or claims if (a) the amount, applicability or validity thereof is contested by the Company or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Company or such Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of the Company or such Subsidiary or (b) the nonpayment of all such taxes and assessments in the aggregate could not reasonably be expected to have a Material Adverse Effect.               9.5. Corporate Existence, etc.             Subject to Section 10.5, the Company will at all times preserve and keep in full force and effect its corporate existence. Subject to Sections 10.5 and 10.6, the Company will at all times preserve and keep in full force and effect the corporate or other legal entity existence of each of the Subsidiaries (unless merged into the Company or a Subsidiary) and all rights, franchises, licenses and permits of the Company and the Subsidiaries unless, in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and effect such corporate or other legal entity existence, right, franchise, license or permit could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect (which term shall not (for the purpose of this Section 9.5 only) include, with respect to any Restricted Subsidiary, the termination of or failure to preserve and keep in full force and effect such corporate or other legal entity existence, right, franchise, license or permit that would render such Restricted Subsidiary unable to perform its obligations under the Subsidiary Guaranty, and therefore result in a Material Adverse Effect only under clause (c) of the definition of such term).               9.6. Pari Passu.             The Company covenants that its obligations under the Notes and under this Agreement and the Other Agreements do and will rank at least pari passu with all its other present and future unsecured Senior Debt.               9.7. Subsidiary Guaranty.             The Company will cause each Subsidiary which becomes a Restricted Subsidiary after the First Closing Date to execute and deliver to the holders a copy of the Joinder Agreement in the form attached to the Subsidiary Guaranty as Annex 2, duly executed by such Subsidiary, together with an opinion of counsel satisfactory to the Required Holders addressing with respect to such Subsidiary the issues relating to Subsidiaries and the Subsidiary Guaranty in the form of opinion attached hereto as Exhibit 4.4(a).             10. NEGATIVE COVENANTS.             The Company covenants that so long as any of the Notes are outstanding:               10.1. Net Worth.             The Company will not, at any time, permit Consolidated Net Worth to be less than the sum of (a) One Hundred Eighty Million Dollars ($180,000,000), plus (b) an aggregate amount equal to fifty percent (50%) of Consolidated Net Income (but, in each case, only if a positive number) for each completed fiscal year of the Company beginning with the fiscal year ending December 31, 1999.               10.2. Interest Coverage.             The Company will not, at any time, permit (a) EBITDA for the period of four consecutive fiscal quarters of the Company then most recently ended to be less than (b) five hundred percent (500%) of Consolidated Interest Expense for such period.               10.3. Debt Incurrence.                 (a) Company Debt. The Company will not, directly or indirectly, create, incur, assume, guarantee, or otherwise become directly or indirectly liable with respect to, any Debt (including, without limitation, any extension, renewal or refunding of Debt), unless on the date the Company becomes liable with respect to any such Debt and immediately after giving effect thereto and the concurrent retirement of any other Debt,                   (i) no Default or Event of Default exists, and                   (ii) Consolidated Debt does not exceed fifty-five percent (55%) of Total Capitalization.                 (b) Restricted Subsidiary Debt. The Company will not permit any of the Restricted Subsidiaries to, directly or indirectly, create, incur, assume, guarantee, or otherwise become directly or indirectly liable with respect to, any Debt (including, without limitation, any extension, renewal or refunding of Debt), unless on the date such Restricted Subsidiary becomes liable with respect to any such Debt and immediately after giving effect thereto and the concurrent retirement of any Debt,                   (i) no Default or Event of Default exists,                   (ii) the aggregate amount of Priority Debt does not exceed ten percent (10%) of Consolidated Tangible Assets, and                   (iii) Consolidated Debt does not exceed fifty-five percent (55%) of Total Capitalization.                 (c) Time of Incurrence of Debt. For the purposes of this Section 10.3, any Person becoming a Restricted Subsidiary after the date hereof shall be deemed, at the time it becomes a Restricted Subsidiary, to have incurred all of its then outstanding Debt, and any Person extending, renewing or refunding any Debt shall be deemed to have incurred such Debt at the time of such extension, renewal or refunding.               10.4. Liens.             The Company will not, and will not permit any of the Restricted Subsidiaries to, directly or indirectly create, incur, assume or permit to exist (upon the happening of a contingency or otherwise) any Lien on or with respect to any property (including, without limitation, any document or instrument in respect of goods or accounts receivable) of the Company or any Restricted Subsidiary, whether now owned or held or hereafter acquired, or any income or profits therefrom (whether or not provision is made for the equal and ratable securing of the Notes in accordance with the last paragraph of this Section 10.4), or assign or otherwise convey any right to receive income or profits, except:                 (a) Liens for taxes, assessments or other governmental charges the payment of which is not at the time required by Section 9.4;                 (b) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other similar Liens, in each case, incurred in the ordinary course of business for sums not yet due or the payment of which is being contested in accordance with the general procedures described in Section 9.4 relating to tax matters;                 (c) Liens (other than any Lien imposed by ERISA) incurred or deposits made in the ordinary course of business (i) in connection with workers' compensation, unemployment insurance and other types of social security or retirement benefits, or (ii) to secure (or to obtain letters of credit that secure) the performance of tenders, statutory obligations, surety bonds, appeal and supersedeas bonds (not in excess of Five Million Dollars ($5,000,000)), bids, leases (other than Capital Leases), performance bonds, purchase, construction or sales contracts and other similar obligations, in each case not incurred or made in connection with the borrowing of money, the obtaining of advances or credit or the payment of the deferred purchase price of property;                 (d) leases or subleases granted to others, easements, rights-of-way, restrictions and other similar charges or encumbrances, in each case incidental to, and not interfering with, the ordinary conduct of the business of the Company or any of the Restricted Subsidiaries, provided that such Liens do not, in the aggregate, materially detract from the value of such property with respect to its then current use;                 (e) Liens on property of the Company or any of the Restricted Subsidiaries securing Debt owing to the Company or to a Wholly-Owned Restricted Subsidiary;                 (f) Liens existing on the date of this Agreement and securing the Debt of the Company and the Restricted Subsidiaries identified as secured Debt in Schedule 5.15, but not any refinancing of such Debt;                 (g) Liens on property acquired or constructed by the Company or any Restricted Subsidiary after the date of this Agreement to secure Debt of the Company or such Restricted Subsidiary incurred in connection with or related to such acquisition or construction, and Liens existing on such property at the time of acquisition thereof, provided that                   (i) no such Lien shall extend to or cover any property other than the property being acquired or constructed (including contractual and other rights related thereto and proceeds thereof),                   (ii) the amount of Debt secured by any such Lien shall not exceed an amount equal to the lesser of the total purchase or construction price or Fair Market Value (as determined in good faith by the Board of Directors or the board of directors of such Restricted Subsidiary) of the property being acquired or constructed, determined at the time of such acquisition or at the time of substantial completion of such construction,                   (iii) such Lien shall be created concurrently with or within twelve months after such acquisition or substantial completion of such construction, and                   (iv) no Default or Event of Default shall exist at the time of creation, incurrence or assumption of such Lien;                 (h) Liens existing on property of a corporation at the time it becomes a Restricted Subsidiary or is merged or consolidated with the Company or a Restricted Subsidiary, provided that                   (i) no such Lien shall extend to or cover any property other than the property subject to such Lien at the time of any such transaction,                   (ii) the amount of Debt secured by any such Lien shall not exceed the Fair Market Value (as determined in good faith by the Board of Directors or the board of directors of such Restricted Subsidiary) of the property subject thereto, determined at the time of such transaction,                   (iii) such Lien was not created in contemplation of any such transaction, and                   (iv) no Default or Event of Default shall exist at the time of any such transaction;                 (i) Liens incidental to the conduct of the business referred to in Section 10.10 (including, without limitation, licenses, participation rights, rebate or revenue sharing obligations, or similar encumbrances), provided that such Liens have not arisen in connection with the incurrence of Debt; and                 (j) Liens, not otherwise permitted by the provisions of this Section 10.4, on property of the Company or any Restricted Subsidiary, provided that on the date the Company or such Restricted Subsidiary becomes liable with respect to the Debt secured by such Liens, and immediately after giving effect thereto and the concurrent retirement of any other Debt constituting Priority Debt,                   (i) no Default or Event of Default exists, and                 (ii) the aggregate amount of Priority Debt does not exceed ten percent (10%) of Consolidated Tangible Assets.             In case any property shall be subjected to a Lien in violation of this Section 10.4, the Company will forthwith make or cause to be made, to the fullest extent permitted by applicable law, provision whereby the Notes will be secured equally and ratably as to such property with all other obligations secured thereby pursuant to such agreements and instruments as shall be approved by the Required Holders, and the Company will promptly cause to be delivered to each holder of a Note an opinion, reasonably satisfactory to the Required Holders, of Andrews & Kurth Mayor Day Caldwell & Keeton, L.L.P. or other independent counsel satisfactory to the Required Holders to the effect that such agreements and instruments are enforceable in accordance with their terms, and in any event the Notes shall have the benefit, to the full extent that, and with such priority as, the holders of Notes may be entitled under applicable law, of an equitable Lien on such property (and any proceeds thereof) securing the Notes. Such violation of this Section 10.4 will constitute an Event of Default hereunder, whether or not any such provision is made or any equitable Lien is created pursuant to this Section 10.4.               10.5. Mergers and Consolidations.             The Company will not, and will not permit any of the Restricted Subsidiaries to, consolidate with or merge with any other corporation or convey, transfer, spin-off or lease substantially all of its assets in a single transaction or series of transactions to any Person (except that a Restricted Subsidiary may (x) consolidate with or merge with, or convey, transfer, spin-off or lease substantially all of its assets in a single transaction or series of transactions to, another Restricted Subsidiary or the Company and (y) convey, transfer, spin-off or lease all of its assets in compliance with the provisions of Section 10.6), provided that the foregoing restriction does not apply to the consolidation or merger of the Company with, or the conveyance, transfer, spin-off or lease of substantially all of the assets of the Company in a single transaction or series of transactions to, any Person so long as:                 (a) the successor formed by such consolidation or the survivor of such merger or the Person that acquires by conveyance, transfer, spin-off or lease substantially all of the assets of the Company as an entirety, as the case may be (the "Successor Corporation"), shall be a solvent corporation organized and existing under the laws of the United States of America, any state thereof or the District of Columbia and shall conduct substantially all of its business in one or more of such jurisdictions;                 (b) if the Company is not the Successor Corporation, such corporation shall have executed and delivered to each holder its assumption of the due and punctual performance and observance of each covenant and condition of this Agreement and the Notes (pursuant to such agreements and instruments as shall be reasonably satisfactory to the Required Holders), and the Company shall have caused to be delivered to each holder an opinion, reasonably satisfactory to the Required Holders, of Andrews & Kurth Mayor Day Caldwell & Keeton, L.L.P. or other nationally recognized independent counsel satisfactory to the Required Holders, to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and comply with the terms hereof;                 (c) immediately prior to, and immediately after giving effect to, such transaction, no Default or Event of Default would exist; and                 (d) immediately after giving effect to such transaction, the Successor Corporation would be permitted, pursuant to the provisions of Section 10.3, to incur at least One Dollar ($1) of additional Debt owing to a Person other than a Restricted Subsidiary of the Successor Corporation.             No such conveyance, transfer, spin-off or lease of substantially all of the assets of the Company shall have the effect of releasing the Company or any Successor Corporation from its liability under this Agreement or the Notes.               10.6. Sale of Assets.                 (a) Sale of Assets. The Company will not, and will not permit any of the Restricted Subsidiaries to, make any Transfer, provided that the foregoing restriction does not apply to a Transfer if:                   (i) the property that is the subject of such Transfer constitutes either (A) inventory held for sale, or (B) equipment, fixtures, supplies or materials no longer required in the operation of the business of the Company or such Restricted Subsidiary or that is obsolete, and, in the case of any Transfer described in clause (A) or clause (B), such Transfer is in the ordinary course of business (an "Ordinary Course Transfer");                   (ii) either                     (A) such Transfer is from a Restricted Subsidiary to the Company or a Wholly-Owned Restricted Subsidiary, or                     (B) such Transfer is from the Company to a Wholly-Owned Restricted Subsidiary,             so long as immediately before and immediately after the consummation of such transaction, and after giving effect thereto, no Default or Event of Default exists or would exist (collectively with any Ordinary Course Transfers, "Excluded Transfers"); or                   (iii) such Transfer is not an Excluded Transfer and all of the following conditions shall have been satisfied with respect thereto:                     (A) such Transfer does not involve a Substantial Portion of the property of the Company and the Restricted Subsidiaries,                     (B) in the good faith opinion of the Company, the Transfer is in exchange for consideration with a Fair Market Value at least equal to that of the property exchanged, and is in the best interests of the Company, and                     (C) immediately after giving effect to such transaction no Default or Event of Default would exist                 (b) Debt Prepayment Transfers and Reinvested Transfers.                   (i) Notwithstanding the provisions of Section 10.6(a), the determination of whether a Transfer involves a Substantial Portion of the property of the Company and the Restricted Subsidiaries, as provided in Section 10.6(a)(iii)(A), shall be made without taking into account the same proportion of the book value attributable to the property subject to such Transfer as shall be equal to the proportion of the Net Asset Sale Proceeds Amount (the "Designated Portion") to be applied to either (x) a prepayment of the Notes pursuant to Section 8.2 of this Agreement and a prepayment of the Old Notes pursuant to Section 8.2 of the Old Note Purchase Agreements, pro rata based on the then outstanding principal amount of and required Make-Whole Amount (with respect to the Old Notes, as defined in each of the Old Note Purchase Agreements) due with respect to the prepayment of each series of the Notes and the Old Notes (a "Prepayment Transfer") or (y) the acquisition of assets similar to the assets which were the subject of such Transfer (a "Reinvested Transfer") within one hundred eighty (180) days of the consummation of such Transfer, as specified in an Officer's Certificate delivered to each holder prior to, or contemporaneously with, the consummation of such Transfer.                   (ii) If, notwithstanding the certificate referred to in the foregoing clause (i), the Company shall fail to apply the entire amount of the Designated Portion as specified in such certificate within the period stated in Section 10.6(b)(i), the computation of whether such Transfer involved a Substantial Portion of the property of the Company and the Restricted Subsidiaries shall be recomputed, as of the date of such Transfer, by taking into account the same proportion of the book value attributable to the property subject to such Transfer as shall be equal to the proportion of the Net Asset Sale Proceeds Amount actually applied to either a Prepayment Transfer or a Reinvested Transfer within such period. If, upon the recomputation provided for in the preceding sentence, such Transfer involved a Substantial Portion of the property of the Company and the Restricted Subsidiaries, an Event of Default shall be deemed to have existed as of the expiration of such period.                 (c) Certain Definitions. The following terms have the following meanings:                   (i) Disposition Value -- means, at any time, with respect to any Transfer of property,                     (A) in the case of property that does not constitute capital stock of a Restricted Subsidiary, the book value thereof, valued at the amount taken into account (or which would be taken into account) in the consolidated balance sheet of the Company then most recently required to have been delivered to the holders pursuant to Section 7.1, and                     (B) in the case of property that constitutes capital stock of a Restricted Subsidiary, an amount equal to that percentage of the book value of the assets of the Restricted Subsidiary that issued such capital stock as is equal to the percentage that the book value of such capital stock represents of the book value of all of the outstanding capital stock of such Restricted Subsidiary (assuming, in making such calculations, that all Securities convertible into such capital stock are so converted and giving full effect to all transactions that would occur or be required in connection with such conversion), determined as of the date of the balance sheet referred to in the foregoing clause (A)                   (ii) Substantial Portion -- means, at any time, any property subject to a Transfer if                     (A) the Disposition Value of such property, when added to the Disposition Value of all other property of the Company and the Restricted Subsidiaries that has been the subject of a Transfer (other than an Excluded Transfer and subject, with respect to both such property and all such other property, to the provisions of Section 10.6(b)) during the then current fiscal year of the Company, exceeds an amount equal to fifteen percent (15%) of Consolidated Total Assets as reflected (or as would be reflected) in the consolidated balance sheet of the Company then most recently required to have been delivered to the holders pursuant to Section 7.1, or                     (B) the Disposition Value of such property, when added to the Disposition Value of all other property of the Company and the Restricted Subsidiaries that has been the subject of a Transfer (other than an Excluded Transfer and subject, with respect to both such property and all such other property, to the provisions of Section 10.6(b)) during the period beginning on the First Closing Date and ending on and including the date of the consummation of such Transfer, exceeds an amount equal to twenty-five percent (25%) of Consolidated Total Assets as reflected (or as would be reflected) in the consolidated balance sheet of the Company then most recently required to have been delivered to the holders pursuant to Section 7.1 hereof.                   (iii) Transfer -- means, with respect to any Person, any transaction in which such Person sells, conveys, transfers or leases (as lessor) any of its property, including, without limitation, capital stock of any other Person.               10.7. Restricted Payments and Restricted Investments.                 (a) Limitation. The Company will not, and will not permit any of the Restricted Subsidiaries to, directly or indirectly, declare, make or incur any liability to make any Restricted Payment or make or authorize any Restricted Investment unless immediately after giving effect to such action:                   (i) the sum of (x) the aggregate amount of outstanding Restricted Investments (valued immediately after such action), plus (y) the aggregate amount of Restricted Payments of the Company and the Restricted Subsidiaries declared or made during the period commencing on the First Closing Date, and ending on the date such Restricted Payment or Restricted Investment is declared or made, inclusive, would not exceed the sum of                     (A) Thirty-Five Million Dollars ($35,000,000), plus                     (B) fifty percent (50%) of Consolidated Net Income for the period commencing January 1, 1999 and ending on the date such Restricted Payment or such Restricted Investment is declared or made (or minus 100% of Consolidated Net Income for such period if Consolidated Net Income for such period is a loss), plus                     (C) the aggregate amount of Net Proceeds of Common Stock of the Company for such period; plus                     (D) the aggregate amount of Net Proceeds of Qualified Capital for such period; and                   (ii) the Company could incur, pursuant to Section 10.3, at least One Dollar ($1) of additional Debt owing to a Person other than a Restricted Subsidiary; and                   (iii) no Default or Event of Default would exist.                 (b) Time of Payment. The Company will not, nor will it permit any of the Restricted Subsidiaries to, authorize a Restricted Payment that is not payable within sixty (60) days of authorization.                 (c) Investments of Subsidiaries. Each Person which becomes a Restricted Subsidiary after the First Closing Date will be deemed to have made, on the date such Person becomes a Restricted Subsidiary, all Restricted Investments of such Person in existence on such date. Investments in any Person that ceases to be a Restricted Subsidiary after the First Closing Date (but in which the Company or another Restricted Subsidiary continues to maintain an Investment) will be deemed to have been made on the date on which such Person ceases to be a Restricted Subsidiary.               10.8. Limitations on Certain Restricted Subsidiary Actions.             The Company will not, and will not permit any of the Restricted Subsidiaries to, enter into any agreement which would restrict any Restricted Subsidiary's legal ability or right to:                 (a) pay dividends or make any other distributions on its common stock;                 (b) pay any Debt owing to the Company or another Restricted Subsidiary (other than waivers of subrogation);                 (c) make any Investment in the Company or another Restricted Subsidiary;                 (d) transfer its property to the Company or another Restricted Subsidiary (except that any such agreement may (i) prohibit the assignment of contractual rights, (ii) include grants of contractual rights of first refusal, and (iii) include similar contractual obligations not unusual in the course of such Restricted Subsidiary's business); or                 (e) Guaranty the Notes or any renewals or refinancings thereof;             provided , however, that       (i) the restrictions of this Section 10.8 shall not apply to                     (A) any such agreement in existence on the First Closing Date and set forth in Schedule 10.8,                     (B) this Agreement, or                     (C) other agreements relating to the creation of Senior Debt incurred in accordance with the terms of this Agreement, and                   (ii) the restrictions of clause (d) of this Section 10.8 shall not apply to any agreement relating to the creation of Priority Debt or Debt of Restricted Subsidiaries secured by Liens permitted by Section 10.4(a) to Section 10.4(i), inclusive, to the extent that such restrictions limit the ability of any Restricted Subsidiary to transfer the Property that secures such Priority Debt or such other Debt;             provided further that, in the case of the foregoing clauses (i) and (ii), such agreement does not impose any limitations on any Restricted Subsidiary's ability to perform its obligations under the Subsidiary Guaranty.               10.9 Affiliate Transactions.             The Company will not, and will not permit any of the Restricted Subsidiaries to, directly or indirectly, enter into any transaction (other than transactions among the Company and its wholly-owned Unrestricted Subsidiaries that are not, individually or in the aggregate, Material), including, without limitation, the purchase, sale or exchange of property or the rendering of any service, with any Affiliate of the Company or any of its Restricted Subsidiaries, except in the ordinary course of business of the Company or such Restricted Subsidiary and upon fair and reasonable terms no less favorable to the Company or such Restricted Subsidiary than it would obtain in a comparable arm's-length transaction with a Person not an Affiliate.               10.10. Line of Business.             The Company will not, and will not permit any of the Subsidiaries to, engage in any business if, as a result, the Company and the Subsidiaries, taken as a whole, would not be engaged primarily in the provision of (a) seismic data services, (b) exploration for, and development and ownership of, gas and oil reserves, (c) gas marketing and (d) businesses related to the foregoing businesses.             11. EVENTS OF DEFAULT.             An "Event of Default" shall exist if any of the following conditions or events shall occur and be continuing:               (a) the Company defaults in the payment of any principal of or Make-Whole Amount, if any, on any Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or               (b) the Company defaults in the payment of any interest on any Note for more than five (5) Business Days after the same becomes due and payable; or               (c) the Company defaults in the performance of or compliance with any term contained in Sections 10.1 through 10.9, inclusive, except as set forth in paragraph 11(d) below with respect to paragraphs (a), (b) and (c) of Section 10.4 for obligations then due aggregating less than Five Million Dollars ($5,000,000); or               (d) the Company defaults in the performance of or compliance with any term contained herein (other than those referred to in paragraphs (a), (b) and (c) of this Section 11) or incurs at any time Liens of the types described in paragraphs (a), (b) and (c) of Section 10.4 for obligations then due aggregating less than Five Million Dollars ($5,000,000), and such default is not remedied within thirty (30) days after the earlier of (i) a Responsible Officer obtaining actual knowledge of such default and (ii) the Company receiving written notice of such default from any holder (any such written notice to be identified as a "notice of default" and to refer specifically to this Section 11(d)); or               (e) any representation or warranty made in writing by or on behalf of the Company or any Restricted Subsidiary or by any officer of the Company or any Restricted Subsidiary in this Agreement or the Subsidiary Guaranty or in any writing furnished in connection with the transactions contemplated hereby proves to have been false or incorrect in any material respect on the date as of which made; o               (f) (i) the Company or any Restricted Subsidiary is in default (as principal or as guarantor or other surety) in the payment of any principal of or premium or make-whole amount or interest on any one or more issues of outstanding Debt in an aggregate principal amount of at least Ten Million Dollars ($10,000,000) beyond any period of grace provided with respect thereto, or (ii) the Company or any Restricted Subsidiary is in default in the performance of or compliance with any term of any evidence of any one or more issues of Debt in an aggregate outstanding principal amount of at least Ten Million Dollars ($10,000,000) or of any mortgage, indenture or other agreement relating thereto or any other condition exists, and the effect of such default or condition is to cause, or the holder or holders of such obligation (or a trustee on behalf of such holder or holders) as a result of such default or condition actually cause, such obligation to become due prior to any originally stated maturity, or to be repurchased by the Company or any Restricted Subsidiary prior to any originally scheduled maturity; or               (g) the Company or any Restricted Subsidiary (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing; or               (h) a court or governmental authority of competent jurisdiction enters an order appointing, without consent by the Company or any of the Subsidiaries, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company or any of the Subsidiaries, or any such petition shall be filed against the Company or any of the Subsidiaries and such petition shall not be dismissed within sixty (60) days; or               (i) a final judgment or judgments for the payment of money aggregating in excess of Five Million Dollars ($5,000,000) are rendered against one or more of the Company and the Subsidiaries and such judgments are not, within forty-five (45) days after entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within forty-five (45) days after the expiration of such stay; or               (j) (i) the Subsidiary Guaranty shall cease to be in full force and effect or shall be declared by a court or Governmental Authority of competent jurisdiction to be void, voidable or unenforceable against any Restricted Subsidiary,                 (ii) the validity or enforceability of the Subsidiary Guaranty against any Restricted Subsidiary shall be contested by such Restricted Subsidiary, the Company or any Affiliate, or                 (iii) any Restricted Subsidiary, the Company or any Affiliate shall deny that such Restricted Subsidiary has any further liability or obligation under the Subsidiary Guaranty.             12. REMEDIES ON DEFAULT, ETC.               12.1 Acceleration.                 (a) If an Event of Default with respect to the Company described in paragraph (g) or (h) of Section 11 (other than an Event of Default described in clause (i) of paragraph (g) or described in clause (vi) of paragraph (g) by virtue of the fact that such clause encompasses clause (i) of paragraph (g)) has occurred, all the Notes then outstanding shall automatically become immediately due and payable.                 (b) If any other Event of Default has occurred and is continuing, the Required Holders may at any time at its or their option, by notice or notices to the Company, declare all the Notes then outstanding to be immediately due and payable.                 (c) If any Event of Default described in paragraph (a) or (b) of Section 11 has occurred and is continuing, any holder or holders of Notes at the time outstanding affected by such Event of Default may at any time, at its or their option, by notice or notices to the Company, declare all the Notes held by it or them to be immediately due and payable.             Upon any Notes becoming due and payable under this Section 12.1, whether automatically or by declaration, such Notes will forthwith mature and the entire unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest thereon and (y) the Make-Whole Amount determined in respect of such principal amount (to the full extent permitted by applicable law), shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived. The Company acknowledges, and the parties hereto agree, that each holder has the right to maintain its investment in the Notes free from repayment by the Company (except as herein specifically provided for) and that the provision for payment of a Make-Whole Amount by the Company in the event that the Notes are prepaid or are accelerated as a result of an Event of Default is intended to provide compensation for the deprivation of such right under such circumstances.               12.2. Other Remedies.             If any Default or Event of Default has occurred and is continuing, and irrespective of whether any Notes have become or have been declared immediately due and payable under Section 12.1, the holder of any Note at the time outstanding may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise.               12.3. Rescission.             At any time after any Notes have been declared due and payable pursuant to clause (b) or (c) of Section 12.1, the Required Holders, by written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Company has paid all overdue interest on the Notes, all principal of and Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid other than by reason of such declaration, and all interest on such overdue principal and Make-Whole Amount, if any, and (to the extent permitted by applicable law) any overdue interest in respect of the Notes, at the Default Rate, (b) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 17, and (c) no judgment or decree has been entered for the payment of any monies due pursuant hereto or to the Notes. No rescission and annulment under this Section 12.3 will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon.               12.4 No Waivers or Election of Remedies, Expenses, etc.             No course of dealing and no delay on the part of any holder in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holder's rights, powers or remedies. No right, power or remedy conferred by this Agreement or by any Note upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. Without limiting the obligations of the Company under Section 15, the Company will pay to each holder on demand such further amount as shall be sufficient to cover all costs and expenses of such holder incurred in any enforcement or collection under this Section 12, including, without limitation, reasonable attorneys' fees, expenses and disbursements.             13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.               13.1. Registration of Notes.             The Company shall keep at its principal executive office a register for the registration and registration of transfers of Notes. The name and address of each holder of one or more Notes, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such register. Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes hereof, and the Company shall not be affected by any notice or knowledge to the contrary. The Company shall give to any holder that is an Institutional Investor promptly upon request therefor, a complete and correct copy of the names and addresses of all registered holders.               13.2. Transfer and Exchange of Notes.             Upon surrender of any Note at the principal executive office of the Company for registration of transfer or exchange (and in the case of a surrender for registration of transfer, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or his attorney duly authorized in writing and accompanied by the address for notices of each transferee of such Note or part thereof, and subject to compliance with all restrictions on transfer set forth herein and in such Note), the Company shall execute and deliver, at the Company's expense (except as provided below), promptly and, in any event, within ten (10) days of the surrender of such Note by the registered holder thereof, one or more new Notes (as requested by the holder thereof) in exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note. Each such new Note shall be payable to such Person as such holder may request and shall be substantially in the form of Exhibit 1G, Exhibit 1H or Exhibit 1I, as the case may be. Each such new Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid thereon. The Company may require payment of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer of Notes. Notes shall not be transferred in denominations of less than Twenty-Five Thousand Dollars ($25,000), provided that if necessary to enable the registration of transfer by a holder of its entire holding of Notes, one Note may be in a denomination of less than Twenty-Five Thousand Dollars ($25,000). Any transferee, by its acceptance of a Note registered in its name (or the name of its nominee), shall be deemed to have made the representations set forth in Section 6.1 (unless such transfer is effected pursuant to a transaction in which the representation set forth in such Section is not required in order to comply with the securities laws applicable to such transfer) and Section 6.3.               13.3. Replacement of Notes.             Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note (which evidence shall be, in the case of an Institutional Investor, notice from such Institutional Investor of such ownership and such loss, theft, destruction or mutilation), and                 (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it (provided that if an original Purchaser or another holder of Notes that is a Qualified Institutional Buyer is the holder of such Note, the unsecured agreement of indemnity of such holder shall be deemed to be satisfactory), or                 (b) in the case of mutilation, upon surrender and cancellation thereof,             the Company at its own expense shall execute and, within ten (10) days after such receipt, deliver, in lieu thereof, a new Note, dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon.             14. PAYMENTS ON NOTES.               14.1. Place of Payment.             The Company will punctually pay, or cause to be paid, the principal of and interest (and Make-Whole Amount, if any) on the Notes, as and when the same shall become due and payable according to the terms hereof and of the Notes. Subject to Section 14.2, payments of principal, Make-Whole Amount, if any, and interest becoming due and payable on the Notes shall be made at the principal office of the Company in Texas. The Company may at any time, by notice to each holder, change the place of payment of the Notes so long as such place of payment shall be either the principal office of the Company in such jurisdiction or the principal office of a bank or trust company in such jurisdiction.               14.2. Home Office Payment.             So long as you or your nominee shall be the holder of any Note, and notwithstanding anything contained in Section 14.1 or in such Note to the contrary, the Company will pay all sums becoming due on such Note for principal, Make-Whole Amount, if any, and interest by the method and at the address specified for such purpose below your name in Schedule A, or by such other method or at such other address as you shall have from time to time specified to the Company in writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written request of the Company made concurrently with or reasonably promptly after payment or prepayment in full of any Note, you shall surrender such Note for cancellation, reasonably promptly after any such request, to the Company at its principal executive office or at the place of payment most recently designated by the Company pursuant to Section 14.1. Prior to any sale or other disposition of any Note held by you or your nominee you will, at your election, either endorse thereon the amount of principal paid thereon and the last date to which interest has been paid thereon or surrender such Note to the Company in exchange for a new Note or Notes pursuant to Section 13.2. The Company will afford the benefits of this Section 14.2 to any Institutional Investor that is the direct or indirect transferee of any Note purchased by you under this Agreement.             15. EXPENSES, ETC.               15.1. Transaction Expenses.             Whether or not the transactions contemplated hereby are consummated, the Company will pay all reasonable attorneys' fees of Bingham Dana LLP, special counsel to you and the Other Purchasers, in connection with such transactions, and will pay all costs and expenses (including reasonable attorneys' fees of a special counsel and, if reasonably required, local or other counsel) incurred by you and each Other Purchaser or holder in connection with the consideration, evaluation, analysis, assessment, negotiation, preparation and/or execution of any amendments, waivers or consents under or in respect of this Agreement or the Notes (whether or not any such amendment, waiver or consent becomes effective), or in connection with any controversy or potential controversy thereunder, including, without limitation: (a) the costs and expenses incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights under this Agreement or the Notes or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement or the Notes, or by reason of being a holder, and (b) the costs and expenses, including financial advisors' fees, incurred in connection with the insolvency or bankruptcy of the Company or any Subsidiary or in connection with any work-out or restructuring of the transactions contemplated hereby and by the Notes. The Company will pay, and will save you and each other holder harmless from, all claims in respect of any fees, costs or expenses if any, of brokers and finders (other than those retained by you).               15.2. Survival.             The obligations of the Company under this Section 15 will survive the payment or transfer of any Note, the enforcement, amendment or waiver of any provision of this Agreement or the Notes, and the termination of this Agreement.             16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.             All representations and warranties contained herein shall survive the execution and delivery of this Agreement and the Notes, the purchase or transfer by you of any Note or portion thereof or interest therein and the payment of any Note (but not the payment in full of all of the Notes), and may be relied upon by any subsequent holder of a Note, regardless of any investigation made at any time by or on behalf of you or any other holder. All statements contained in any certificate or other instrument delivered by or on behalf of the Company pursuant to this Agreement shall be deemed representations and warranties of the Company under this Agreement. Subject to the preceding sentence, this Agreement and the Notes embody the entire agreement and understanding between you and the Company and supersede all prior agreements and understandings relating to the subject matter hereof.             17. AMENDMENT AND WAIVER.               17.1 Requirements.             This Agreement and the Notes may be amended, and the observance of any term hereof or of the Notes may be waived (either retroactively or prospectively), with (and only with) the written consent of the Company and the Required Holders, except that (a) no amendment or waiver of any of the provisions of Section 1 to Section 6, inclusive, or Section 21, or any defined term as it is used therein, will be effective as to you unless consented to by you in writing, and (b) no such amendment or waiver may, without the written consent of the holder of each Note at the time outstanding affected thereby, (i) subject to the provisions of Section 12 relating to acceleration or rescission, change the amount or time of any prepayment or payment of principal of, or reduce the rate or change the time of payment or method of computation of interest or of the Make-Whole Amount on, the Notes, (ii) change the percentage of the principal amount of the Notes the holders of which are required to consent to any such amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or 20.         17.2. Solicitation of Holders.                 (a) Solicitation. The Company will provide each holder (irrespective of the amount of Notes then owned by it) with sufficient information, sufficiently far in advance of the date a decision is required, to enable such holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof or of the Notes. The Company will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this Section 17 to each holder promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the requisite holders.                 (b) Payment. The Company will not directly or indirectly pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security, to any holder as consideration for, as an inducement to, or otherwise in connection with the entering into by any holder of any waiver or amendment of any of the terms and provisions hereof unless such remuneration is concurrently paid, or security is concurrently granted, on the same terms, ratably to each holder then outstanding even if such holder did not consent to such waiver or amendment.                 (c) Scope of Consent. Any consent made pursuant to this Section 17.2 by a holder of Notes that has transferred or has agreed to transfer its Notes to the Company, any Subsidiary or any Affiliate and has provided or has agreed to provide such written consent as a condition to such transfer shall be void and of no force and effect except solely as to such holder, and any amendments effected or waivers granted or to be effected or granted that would not have been or would not be so effected or granted but for such consent (and the consents of all other holders of Notes that were acquired under the same or similar conditions) shall be void and of no force and effect, retroactive to the date such amendment or waiver initially took or takes effect, except solely as to such holder.               17.3. Binding Effect, etc.             Any amendment or waiver consented to as provided in this Section 17 applies equally to all holders and is binding upon them and upon each future holder of any Notes and upon the Company without regard to whether such Note has been marked to indicate such amendment or waiver. No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon. No course of dealing between the Company and the holder of any Note nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any holder of such Note. As used herein, the term "this Agreement" and references thereto shall mean this Agreement as it may from time to time be amended or supplemented.               17.4. Notes held by Company, etc.             Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Notes then outstanding have approved or consented to any amendment, waiver or consent to be given under this Agreement or the Notes, or have directed the taking of any action provided herein or in the Notes to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes then outstanding, Notes directly or indirectly owned by the Company, any Wholly-Owned Restricted Subsidiary or any of the Company's Affiliates shall be deemed not to be outstanding.             18. NOTICES.             All notices and communications provided for hereunder shall be in writing and sent (a) by telecopy if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid), or (c) by a recognized overnight delivery service (with charges prepaid). Any such notice must be sent:               (i) if to you or your nominee, to you or it at the address specified for such communications in Schedule A, or at such other address as you or it shall have specified to the Company in writing,               (ii) if to any other holder, to such holder at such address as such other holder shall have specified to the Company in writing, or               (iii) if to the Company, to the Company at its address set forth at the beginning hereof to the attention of the Company's Chief Financial Officer, or at such other address as the Company shall have specified to each of the holders in writing.             Notices under this Section 18 will be deemed given only when actually received.             19. REPRODUCTION OF DOCUMENTS.             This Agreement and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by you at the Closings (except the Notes themselves), and (c) financial statements, certificates and other information previously or hereafter furnished to you, may be reproduced by you by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and you may destroy any original document so reproduced. The Company agrees and stipulates that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by you in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. This Section 19 shall not prohibit the Company or any other holder from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction.             20. CONFIDENTIAL INFORMATION.             For the purposes of this Section 20, "Confidential Information" means information delivered to you by or on behalf of the Company or any Subsidiary in connection with the transactions contemplated by or otherwise pursuant to this Agreement that is proprietary in nature and that was clearly marked or labeled or otherwise adequately identified when received by you as being confidential information of the Company or such Subsidiary, provided that such term does not include information that (a) was publicly known or otherwise known to you prior to the time of such disclosure, (b) subsequently becomes publicly known through no act or omission by you or any Person acting on your behalf, (c) otherwise becomes known to you other than through disclosure by the Company or any Subsidiary or (d) constitutes financial statements delivered to you under Section 7.1 that are otherwise publicly available. You will maintain the confidentiality of such Confidential Information in accordance with procedures adopted by you in good faith to protect confidential information of third parties delivered to you and will use such Confidential Information only for the purposes of evaluating and administering your investment in the Notes, provided that you may deliver or disclose Confidential Information to               (i) your directors, officers, employees, agents, attorneys and affiliates (to the extent such disclosure reasonably relates to the administration of the investment represented by your Notes),               (ii) your financial advisors and other professional advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of this Section 20,               (iii) any other holder,               (iv) any Institutional Investor to which you sell or offer to sell such Note or any part thereof or any participation therein (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20),               (v) any Institutional Investor from which you offer to purchase any Security of the Company (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20),               (vi) any federal or state regulatory authority having jurisdiction over you,               (vii) the National Association of Insurance Commissioners or any similar organization, or any nationally recognized rating agency that requires access to information about your investment portfolio, or               (viii) any other Person to which such delivery or disclosure may be necessary or appropriate (w) to effect compliance with any law, rule, regulation or order applicable to you, (x) in response to any subpoena or other legal process, (y) in connection with any litigation to which you are a party or (z) if an Event of Default has occurred and is continuing, to the extent you may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under your Notes and this Agreement.             Each holder, by its acceptance of a Note, will be deemed to have agreed to be bound by and to be entitled to the benefits of this Section 20 as though it were a party to this Agreement.             21. SUBSTITUTION OF PURCHASER.             You shall have the right to substitute any one of your Affiliates as the purchaser of the Notes that you have agreed to purchase hereunder, by written notice to the Company, which notice shall be signed by both you and such Affiliate, shall contain such Affiliate's agreement to be bound by this Agreement and shall contain a confirmation by such Affiliate of the accuracy with respect to it of the representations set forth in Section 6. Upon receipt of such notice, wherever the word "you" is used in this Agreement (other than in this Section 21), such word shall be deemed to refer to such Affiliate in lieu of you. In the event that such Affiliate is so substituted as a purchaser hereunder and such Affiliate thereafter transfers to you all of the Notes then held by such Affiliate, upon receipt by the Company of notice of such transfer, wherever the word "you" is used in this Agreement (other than in this Section 21), such word shall no longer be deemed to refer to such Affiliate, but shall refer to you, and you shall have all the rights of an original holder under this Agreement.             22. MISCELLANEOUS.               22.1. Successors and Assigns.             All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and permitted assigns (including, without limitation, any subsequent holder of a Note) whether so expressed or not.               22.2. Payments Due on Non-Business Days.             If any payment due on, or with respect to, any Note shall fall due on a day other than a Business Day, then such payment shall be made on the first (1st) Business Day following the day on which such payment shall have so fallen due, provided that if all or any portion of such payment shall consist of a payment of interest, for purposes of calculating such interest, such payment shall be deemed to have been originally due on such first (1st) following Business Day, such interest shall accrue and be payable to (but not including) the actual date of payment and the amount of the next succeeding interest payment shall be adjusted accordingly.               22.3. Severability.             Any provision of this Agreement that 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 (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction.               22.4. Construction.             Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant. Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person.               22.5. Counterparts.             This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto.               22.6. Governing Law.             THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.               22.7. Consent to Jurisdiction; Appointment of Agent.             (a) Consent to Jurisdiction. THE COMPANY HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE NOTES, OR ANY ACTION OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY BREACH HEREUNDER OR THEREUNDER, BROUGHT BY ANY HOLDER OF NOTES AGAINST THE COMPANY OR ANY OF ITS PROPERTY, MAY BE BROUGHT BY SUCH HOLDER OF NOTES IN ANY FEDERAL DISTRICT COURT LOCATED IN NEW YORK CITY, NEW YORK OR ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY, NEW YORK, AS SUCH HOLDER OF NOTES MAY IN ITS SOLE DISCRETION ELECT, AND BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, THE COMPANY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE NON-EXCLUSIVE IN PERSONAM JURISDICTION OF EACH SUCH COURT, AND THE COMPANY IRREVOCABLY WAIVES AND AGREES NOT TO ASSERT IN ANY PROCEEDING BEFORE ANY TRIBUNAL, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, ANY CLAIM THAT IT IS NOT SUBJECT TO THE IN PERSONAM JURISDICTION OF ANY SUCH COURT. IN ADDITION, THE COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY BROUGHT IN ANY SUCH COURT, AND HEREBY IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT THE ABILITY OR RIGHT OF ANY HOLDER OF NOTES TO OBTAIN JURISDICTION OVER THE COMPANY IN SUCH OTHER JURISDICTION AS MAY BE PERMITTED BY APPLICABLE LAW.                 (b) Agent for Service of Process. THE COMPANY HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT PROCESS SERVED EITHER PERSONALLY OR BY REGISTERED OR CERTIFIED MAIL WITH RETURN RECEIPT REQUESTED (POSTAGE PREPAID) SHALL CONSTITUTE, TO THE EXTENT PERMITTED BY LAW, ADEQUATE SERVICE OF PROCESS IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE NOTES, OR ANY ACTION OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN RESPECT OF ANY BREACH HEREUNDER OR THEREUNDER, BROUGHT BY ANY HOLDER OF NOTES AGAINST THE COMPANY OR ANY OF ITS PROPERTY. RECEIPT OF PROCESS SO SERVED SHALL BE CONCLUSIVELY PRESUMED AS EVIDENCED BY A DELIVERY RECEIPT FURNISHED BY THE UNITED STATES POSTAL SERVICE OR ANY COMMERCIAL DELIVERY SERVICE. WITHOUT LIMITING THE FOREGOING, THE COMPANY HEREBY APPOINTS, IN THE CASE OF ANY SUCH ACTION OR PROCEEDING BROUGHT IN THE COURTS OF OR IN THE STATE OF NEW YORK:                       CT CORPORATION SYSTEM 1633 BROADWAY NEW YORK, NEW YORK 10019             TO RECEIVE, FOR IT AND ON ITS BEHALF, SERVICE OF PROCESS. THE COMPANY SHALL AT ALL TIMES MAINTAIN AN AGENT FOR SERVICE OF PROCESS IN NEW YORK CITY, NEW YORK AND MAY FROM TIME TO TIME APPOINT SUCCEEDING AGENTS FOR SERVICE OF PROCESS BY NOTIFYING EACH HOLDER OF NOTES OF SUCH APPOINTMENT, WHICH AGENTS SHALL BE ATTORNEYS, OFFICERS OR DIRECTORS OF THE COMPANY, OR CORPORATIONS WHICH IN THE ORDINARY COURSE OF BUSINESS ACT AS AGENTS FOR SERVICE OF PROCESS. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT THE ABILITY OR RIGHT OF ANY HOLDER OF NOTES TO SERVE ANY WRITS, PROCESS OR SUMMONSES IN ANY MANNER PERMITTED BY APPLICABLE LAW.               22.8. Defeasance.                 (a) Option of Company. Anything to the contrary contained herein notwithstanding, the Company may, in its sole discretion and at any time upon not less than thirty (30) days' prior written notice to all holders, elect to establish a trust (the "Trust"), solely in favor of all holders of the Notes then outstanding, and irrevocably and absolutely assign, transfer, and convey to, and deposit into, said Trust an amount of United States Governmental Securities having interest and principal payments sufficient to pay in full all remaining principal and interest payments and, if any principal is to be repaid on a date other than the date scheduled therefor in Section 8.1, together with the Make-Whole Amount, if any, as the same shall fall due, in respect of all Notes then outstanding.                 (b) Discharge. Provided that                   (i) the Trust, the trustee thereof, and the terms and conditions (as well as the form and substance) of the indenture whereby the Trust shall have been established shall be reasonably satisfactory to the Required Holders,                   (ii) the purchase price of the United States Governmental Securities to be deposited into the Trust shall have been fully paid by the Company, and such United States Governmental Securities shall have been so deposited into the Trust (and each holder shall have received written verification thereof by the trustee of the Trust) and shall, as so deposited, be unencumbered by any Lien and sufficient to pay all principal, interest and Make-Whole Amount, if any, to fall due on the Notes then outstanding as provided in Section 22.8(a) (and each holder shall have received written verification of such sufficiency by the independent certified public accountants of recognized national standing selected by the Company),                   (iii) the Company shall have (A) paid in full all fees, costs and expenses of the trustee of the Trust and of all holders incurred in connection with the preparation of the trust indenture and the establishment of the Trust, including, without limitation, all reasonable attorneys' fees and disbursements, and (B) prepaid in full any and all fees, costs and expenses of the trustee of the Trust for the entire term of the Trust (and the holders of the Notes shall have received written confirmation from the trustee confirming its receipt of the payments required to be made to it pursuant to this clause (iii)),                   (iv) the Company shall have no continuing legal or equitable interest in the Trust or the United States Governmental Securities deposited into the Trust (other than a reversionary interest in any such United States Governmental Securities or the proceeds therefrom, remaining after the full, final and indefeasible payment of the principal amount of the Notes and all interest and Make-Whole Amount, if any, thereon) and shall have no right to direct or instruct the trustee of the Trust, or to remove such trustee, or otherwise to require such trustee to take any action with respect to such United States Governmental Securities or otherwise,                   (v) no Event of Default shall have occurred and be continuing at the time of such deposit,                   (vi) the Company shall have delivered the written notice referred to in Section 22.8(a) hereof to the holders and a legal opinion of Andrews & Kurth Mayor Day Caldwell & Keeton, L.L.P. or other independent counsel to the Company, reasonably satisfactory to the Required Holders stating, among other things which the Required Holders may reasonably request, that (A) the Trust is validly created and duly constituted and that the sole beneficiaries thereof are the holders, (B) the United States Governmental Securities deposited therein were validly contributed to the Trust and constitute a legal and valid res of the Trust, (C) the Company's actions in creating the Trust and contributing the United States Governmental Securities thereto were duly authorized and valid, (D) the Company, as the settlor of the Trust, has no right, title or interest in and to the Trust or the res thereof (other than a reversionary interest in any United States Governmental Securities, or the proceeds thereof, remaining after the full, final and indefeasible payment of the principal amount of the Notes and all interest and Make-Whole Amount, if any, thereon) and has no power of direction, or right of removal, with respect to the trustee of the Trust, (E) if any of the events described in clause (g) or clause (h) of Section 11 were to occur, the Trust and the res thereof would not be part of the estate of the Company and (F) the creation of the Trust and the depositing of the United States Governmental Securities therein shall not, for purposes of the Code with respect to any holder, result in a taxable event whereby (I) such holder may become liable to pay a tax on any gain deemed to have arisen with respect to such transaction or (II) such holder shall have been deemed to have suffered a loss with respect to such transaction,                   (vii) all principal, interest costs, expenses and other sums due and payable to the holders under the this Agreement, the Other Agreements and the Notes on the date the Trust is created shall have been paid in full, and                   (viii) the Company shall have delivered to the holders an opinion of independent certified public accountants of recognized national standing selected by the Company, reasonably satisfactory to the Required Holders and prepared at the expense of the Company (provided that the Company shall have the right to negotiate with such accountants regarding the cost of furnishing such opinion), stating that under GAAP the creation of the Trust and the depositing of the United States Governmental Securities therein shall not result, with respect to any holder, in an exchange of the Note or Notes of such holder for all or part of such United States Governmental Securities which exchange would result in a gain or loss being realized by such holder under GAAP in respect of such transaction,             then, and in that case, all obligations of the Company under this Agreement, the Other Agreements and the Notes shall be discharged; provided, however, if the contribution to the Trust of any United States Governmental Securities is invalidated, declared to be fraudulent or preferential, set aside, or if any such United States Governmental Securities are required to be returned or redelivered to the Company, or any custodian, trustee, receiver or any other Person under any bankruptcy act, state or federal law, common law or equitable cause, then, to the extent of such invalidation, return or redelivery, the obligations under this Agreement, the Other Agreements and the Notes (less any payments, which shall not have been themselves invalidated, returned or redelivered, made thereon from or in respect of the United States Governmental Securities so invalidated, returned or redelivered) shall be revived and restored.               22.9. GAAP.             Where the character or amount of any asset or liability or item of income or expense, or any consolidation or other accounting computation is required to be made for any purpose hereunder, it shall be done in accordance with GAAP as in effect on the date of, or at the end of the period covered by, the financial statements from which such asset, liability, item of income, or item of expense, is derived, or, in the case of any such computation, as in effect on the date as of which such computation is required to be determined, provided, that if any term defined herein includes or excludes amounts, items or concepts that would not be included in or excluded from such term if such term was defined with reference solely to generally accepted accounting principles, such term will be deemed to include or exclude such amounts, items or concepts as set forth herein.               2.10. Usury.             It is the intention of the parties hereto to comply with all applicable usury laws; accordingly, it is agreed that notwithstanding any provision to the contrary herein or in the Notes, or in any of the documents securing payment thereof or otherwise relating hereto, no such provision shall require the payment or permit the collection of interest in excess of the highest rate allowed by applicable law (the "Maximum Rate"). If any excess of interest in such respect is provided for, or shall be adjudicated to be so provided for, herein or in the Notes or in any of the documents securing payment thereof or otherwise relating hereto, then in such event.                 (a) the provisions of this Section 22.10 shall govern and control,                 (b) neither the Company, endorsers or Restricted Subsidiaries, nor their heirs, legal representatives, successors or assigns nor any other party liable for the payment on the Notes, shall be obligated to pay the amount of such interest to the extent that it is in excess of the Maximum Rate,                 (c) any such excess with respect to any such Note which may have been collected shall, at the election of the holder of such Note, be either applied as a credit against the then unpaid principal amount on such Note or refunded to the Company, and                 (d) the provisions hereof and of the Notes and any documents securing payment thereof shall be automatically reformed so that the effective rate of interest shall be reduced to the Maximum Rate. For the purpose of determining the Maximum Rate, all interest payments with respect hereto shall be amortized, prorated and spread throughout the full term of the Notes so that the effective rate of interest thereunder is uniform throughout the term thereof.                         [Remainder of page intentionally left blank. Next page is signature page.]                                       If you are in agreement with the foregoing, please sign the form of agreement on the accompanying counterpart of this Agreement and return it to the Company, whereupon the foregoing shall become a binding agreement between you and the Company.   Very truly yours,   SEITEL, INC.                 By:       Name:       Title:     The foregoing is hereby agreed to as of the date thereof.   [PURCHASER]     By __________________________ Name: Title: SCHEDULE A INFORMATION RELATING TO PURCHASERS Purchaser Name THE GUARDIAN INSURANCE & ANNUITY COMPANY , INC. Name in Which Note is Registered CUDD & CO. Note Registration Number; Principal Amount First Closing:      RH-1; $799,065.00 Second Closing:      RH-20; $700,935.00 Payment on Account of Note                Method      Account Information Federal Funds Wire Transfer The Chase Manhattan Bank ABA # 021-000-021 Chase/NYC/CTR/BNF A/C 900-9-000200 Reference A/C # G53637, GIAC - Guardian Tradition Re: (See "Accompanying information" below) Accompanying Information Name of Company:          SEITEL, INC. Description of Security:     7.19% Series H Senior Notes due October 15, 2008 PPN:               816074 C@ 5 Due Date and Application (as among principal, make whole and interest) of the payment being made: Address for Notices Related to Payments The Guardian Insurance & Annuity Company, Inc. c/o The Guardian Life Insurance Company of America 7 Hanover Square New York, NY 10004-2616 Attn:      Investment Accounting Dept. 17-B Fax:      212-598-7011 Address for All other Notices The Guardian Insurance & Annuity Company, Inc. c/o The Guardian Life Insurance Company of America 7 Hanover Square New York, NY 10004-2616 Attn:      Raymond J. Henry      Investment Department 20-D Fax:      212-919-2656 / 2658 Other Instructions the guardiAn INSURANCE & ANNUITY COMPANY, INC. By______________________________ Name: Title: Instructions re Delivery of Notes Chase Manhattan Bank 4 New York Plaza Ground Floor Receive Window New York, NY 10004 Re: A/C # G53637, GIAC - Guardian Tradition with a carbon copy to: The Guardian Life Insurance Company of America 7 Hanover Square, 20B New York, New York 10004 Attn:     Kevin Carey Tax Identification Number 13-6022143 Purchaser Name FORT DEARBORN LIFE INSURANCE COMPANY - INTEREST SENSITIVE PORTFOLIO Name in Which Note is Registered STRAFE AND CO. Note Registration Number; Principal Amount First Closing:      RH-2; $1,000,000.00 Second Closing:      $0 Payment on Account of Note                Method      Account Information Federal Funds Wire Transfer Bank One ABA # 044-000-037 For further credit to Bank One Acct. # 980401787 Attn:     A/C # 2600218700      Ft. Dearborn Life Insurance Company - Guardian ISP Re: (See "Accompanying information" below) Accompanying Information Name of Company:          SEITEL, INC. Description of Security:     7.19% Series H Senior Notes due October 15, 2008 PPN:               816074 C@ 5 Due Date and Application (as among principal, make whole and interest) of the payment being made: Address for Notices Related to Payments Fort Dearborn Life Insurance Company c/o The Guardian Life Insurance Company of America 7 Hanover Square New York, NY 10004-2616 Attn:      Investment Accounting Dept. 17-B Fax:      212-598-7011 Address for All other Notices Fort Dearborn Life Insurance Company c/o Guardian Asset Management Corp. Fixed Income Securities 7 Hanover Square - 20D New York, NY 10004-2616 Attn:      Raymond J. Henry Fax:      212-919-2656 / 2658 Other Instructions FORT DEARBORN LIFE INSURANCE COMPANY By:     Guardian Asset Management Corp. By______________________________ Name: Title: Instructions re Delivery of Notes Fort Dearborn Life Insurance Company c/o Bank One 1900 Polaris Parkway Columbus, OH 43240 Attn:     Trade Processing F/A/O:     A/C # 2600218700 FDL - ISP with a carbon copy to: The Guardian Life Insurance Company of America 7 Hanover Square, 20B New York, New York 10004 Attn:     Kevin Carey Tax Identification Number 31-0649116 Purchaser Name FORT DEARBORN LIFE INSURANCE COMPANY - MARKET VALUE ANNUITY ACCOUNT Name in Which Note is Registered STRAFE AND CO. Note Registration Number; Principal Amount First Closing:      RH-3; $500,000.00 Second Closing:      $0 Payment on Account of Note                Method      Account Information Federal Funds Wire Transfer Bank One ABA # 044-000-037 For further credit to Bank One Acct. # 980401787 Attn:     A/C # 2600218703      Ft. Dearborn Life Insurance Company - Guardian MVA Re: (See "Accompanying information" below) Accompanying Information Name of Company:          SEITEL, INC. Description of Security:     7.19% Series H Senior Notes due October 15, 2008 PPN:               816074 C@ 5 Due Date and Application (as among principal, make whole and interest) of the payment being made: Address for Notices Related to Payments Fort Dearborn Life Insurance Company c/o The Guardian Life Insurance Company of America 7 Hanover Square New York, NY 10004-2616 Attn:      Investment Accounting Dept. 17-B Fax:      212-598-7011 Address for All other Notices Fort Dearborn Life Insurance Company c/o Guardian Asset Management Corp. Fixed Income Securities 7 Hanover Square - 20D New York, NY 10004-2616 Attn:      Raymond J. Henry Fax:      212-919-2656 / 2658 Other Instructions FORT DEARBORN LIFE INSURANCE COMPANY By:     Guardian Asset Management Corp. By______________________________ Name: Title: Instructions re Delivery of Notes Fort Dearborn Life Insurance Company c/o Bank One 1900 Polaris Parkway Columbus, OH 43240 Attn:     Trade Processing F/A/O:     A/C # 2600218703 FDL - MVA with a carbon copy to: The Guardian Life Insurance Company of America 7 Hanover Square, 20B New York, New York 10004 Attn:     Kevin Carey Tax Identification Number 31-0649116 Purchaser Name THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA Name in Which Note is Registered CUDD & CO. Note Registration Number; Principal Amount First Closing:      RI-1; $5,000,000.00           RI-2; $4,196,262.00 Second Closing:      RI-12; $2,803,738.00 Payment on Account of Note                Method      Account Information Federal Funds Wire Transfer The Chase Manhattan Bank ABA # 021-000-021 Chase/NYC/CTR/BNF A/C 900-9-000200 Reference A/C # G05978, Guardian Life Re: (See "Accompanying information" below) Accompanying Information Name of Company:          SEITEL, INC. Description of Security:     7.34% Series I Senior Notes due October 15, 2011 PPN:               816074 C# 3 Due Date and Application (as among principal, make whole and interest) of the payment being made: Address for Notices Related to Payments The Guardian Life Insurance Company of America 7 Hanover Square New York, NY 10004-2616 Attn:      Investment Accounting Dept. 17-B Fax:      212-598-7011 Address for All other Notices The Guardian Life Insurance Company of America 7 Hanover Square New York, NY 10004-2616 Attn:      Raymond J. Henry      Investment Department 20-D Fax:      212-919-2656 / 2658 Other Instructions the guardiAn life INSURANCE COMPANY of america By______________________________ Name: Title: Instructions re Delivery of Notes Chase Manhattan Bank 4 New York Plaza Ground Floor Receive Window New York, NY 10004 Re: A/C # G05978 - Guardian Life with a carbon copy to: The Guardian Life Insurance Company of America 7 Hanover Square, 20B New York, New York 10004 Attn:     Kevin Carey Tax Identification Number 13-6022143 Purchaser Name BERKSHIRE LIFE INSURANCE COMPANY OF AMERICA Name in Which Note is Registered CUDD & CO. Note Registration Number; Principal Amount First Closing:      RI-3; $3,831,776.00 Second Closing:      RI-13; $1,168,224.00 Payment on Account of Note                Method      Account Information Federal Funds Wire Transfer The Chase Manhattan Bank ABA # 021-000-021 Chase/NYC/CTR/BNF A/C 900-9-000200 Reference A/C # G07064, Berkshire Life Insurance Re: (See "Accompanying information" below) Accompanying Information Name of Company:          SEITEL, INC. Description of Security:     7.34% Series I Senior Notes due October 15, 2011 PPN:               816074 C# 3 Due Date and Application (as among principal, make whole and interest) of the payment being made: Address for Notices Related to Payments Berkshire Life Insurance Company of America c/o The Guardian Life Insurance Company of America 7 Hanover Square New York, NY 10004-2616 Attn:      Investment Accounting Dept. 17-B Fax:      212-598-7011 Address for All other Notices Berkshire Life Insurance Company of America c/o The Guardian Life Insurance Company of America 7 Hanover Square New York, NY 10004-2616 Attn:      Raymond J. Henry      Investment Department 20-D Fax:      212-919-2656 / 2658 Other Instructions BERKSHIRE life INSURANCE COMPANY of america By______________________________ Name: Title: Instructions re Delivery of Notes Chase Manhattan Bank 4 New York Plaza Ground Floor Receive Window New York, NY 10004 Re: A/C # G07064 - Berkshire Life Insurance with a carbon copy to: The Guardian Life Insurance Company of America 7 Hanover Square, 20B New York, New York 10004 Attn:     Kevin Carey Tax Identification Number 13-6022143 Purchaser Name MONY LIFE INSURANCE COMPANY Name in Which Note is Registered J. ROMEO & CO. Note Registration Number; Principal Amount First Closing:      RI-4; $11,495,327.00 Second Closing:      RI-14; $3,504,673.00 Payment on Account of Note                Method      Account Information Federal Funds Wire Transfer JP Morgan Chase Manhattan Bank ABA # 021-000-021 For credit to Private Income Processing Acct. # 900-9000-200 For further credit to Acct. # G52963 Re:     (see "Accompanying Information" below) Accompanying Information Name of Company:          SEITEL, INC. Description of Security:     7.34% Series I Senior Notes due October 15, 2011 PPN:               816074 C# 3 Due Date and Application (as among principal, make whole and interest) of the payment being made: Address for Notices Related to Payments JP Morgan Chase Manhattan Bank 14201 N. Dallas Parkway, 13th Floor Dallas, TX 75254-2917 Fax:     469-477-1904 with a copy to: MONY Life Insurance Company 1740 Broadway New York, NY 10019 Attn:     Securities Custody Division      M.D. 6-39A Fax:     212-708-2152 Address for All other Notices MONY Life Insurance Company 1740 Broadway New York, NY 10019 Attn:     Capital Management Unit Fax:     212-708-2491 Other Instructions MONY LIFE INSURANCE COMPANY By:___________________________________ Name: Title: Instructions re Delivery of Notes MONY Life Insurance Company 1740 Broadway New York, NY 10019 Attn:     Law Department Tax Identification Number 13-1632487     Purchaser Name NATIONWIDE LIFE INSURANCE COMPANY Name in Which Note is Registered NATIONWIDE LIFE INSURANCE COMPANY Note Registration Number; Principal Amount First Closing:      RH-4; $9,000,000.00 Second Closing:      $0 Payment on Account of Note                Method      Account Information Federal Funds Wire Transfer The Bank of New York ABA # 021-000-018 BNF: IOC566 F/A/O Nationwide Life Insurance Company Attn:     P&I Department      PPN: 816074 C@ 5 Re:      (see "Accompanying Information" below) Accompanying Information Name of Company:          SEITEL, INC. Description of Security:     7.19% Series H Senior Notes due October 15, 2008 PPN:               816074 C@ 5 Due Date and Application (as among principal, make whole and interest) of the payment being made: Address for Notices Related to Payments Nationwide Life Insurance Company c/o The Bank of New York P.O. Box 19266 Attn:     P&I Department Newark, NJ 07195 with a copy to: Nationwide Life Insurance Company One Nationwide Plaza (1-32-05) Columbus, OH 43215-2220 Attn:     Investment Accounting Address for All other Notices Nationwide Life Insurance Company One Nationwide Plaza (1-33-07) Columbus, OH 43215-2220 Attn:     Corporate Fixed-Income Securities Other Instructions NATIONWIDE LIFE INSURANCE COMPANY By______________________________ Name: Title: Instructions re Delivery of Notes The Bank of New York One Wall Street 3rd Floor, Window A New York, NY 10286 F/A/O Nationwide Life Insurance Co. Acct. # 267829 Tax Identification Number 31-4156830 Purchaser Name NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY Name in Which Note is Registered NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY Note Registration Number; Principal Amount First Closing:      RH-5; $2,495,327.00 Second Closing:      RH-21; $3,504,673.00 Payment on Account of Note                Method      Account Information Federal Funds Wire Transfer The Bank of New York ABA # 021-000-018 BNF: IOC566 F/A/O Nationwide Life and Annuity Insurance Company Attn:     P&I Department      PPN: 816074 C@ 5 Re:      (see "Accompanying Information" below) Accompanying Information Name of Company:          SEITEL, INC. Description of Security:     7.19% Series H Senior Notes due October 15, 2008 PPN:               816074 C@ 5 Due Date and Application (as among principal, make whole and interest) of the payment being made: Address for Notices Related to Payments Nationwide Life and Annuity Insurance Company c/o The Bank of New York P.O. Box 19266 Attn:     P&I Department Newark, NJ 07195 with a copy to: Nationwide Life and Annuity Insurance Company One Nationwide Plaza (1-32-05) Columbus, OH 43215-2220 Attn:     Investment Accounting Address for All other Notices Nationwide Life and Annuity Insurance Company One Nationwide Plaza (1-33-07) Columbus, OH 43215-2220 Attn:     Corporate Fixed-Income Securities Other Instructions NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY By______________________________ Name: Title: Instructions re Delivery of Notes The Bank of New York One Wall Street 3rd Floor, Window A New York, NY 10286 F/A/O Nationwide Life and Annuity Insurance Co. Acct. # 267961 Tax Identification Number 31-1000740 Purchaser Name CONNECTICUT GENERAL LIFE INSURANCE COMPANY Name in Which Note is Registered CIG & CO. Note Registration Number; Principal Amount First Closing:      RH-6; $2,299,065.00           RH-7; $2,299,065.00           RH-8; $2,299,065.00           RH-9; $766,355.00           RH-10; $766,355.00           RH-11; $766,355.00 Second Closing:      RH-22; $700,935.00           RH-23; $700,935.00           RH-24; $700,935.00           RH-25; $233,645.00           RH-26; $233,645.00           RH-27; $233,645.00 Payment on Account of Note                Method      Account Information Federal Funds Wire Transfer Chase NYC/CTR ABA # 021-000-021 BNF = CIGNA Private Placements A/C = 9009001802 Re:      (see "Accompanying Information" below) Accompanying Information Name of Company:          SEITEL, INC. Description of Security:     7.19% Series H Senior Notes due October 15, 2008 PPN:               816074 C@ 5 Due Date and Application (as among principal, make whole and interest) of the payment being made: Address for Notices Related to Payments CIG & Co. c/o CIGNA Investments, Inc. 900 Cottage Grove Road Hartford, CT 06152-2146 Attn:      Securities Processing S-146 with a copy to: CIG & Co. c/o CIGNA Retirement & Investment Services 280 Trumbull Street Hartford, CT 06103 Attn:      Private and Alternative Investments H16B Fax:      860-534-7203 and a copy to: Chase Manhattan Bank Private Placement Servicing P.O. Box 1508 Bowling Green Station New York, NY 10081 Attn:      CIGNA Private Placements Fax:      212-552-3107 / 1005 Address for All other Notices CIG & Co. c/o CIGNA Retirement & Investment Services 280 Trumbull Street Hartford, CT 06103 Attn:      Private and Alternative Investments H16B Fax:      860-534-7203 Other Instructions CONNECTICUT GENERAL LIFE INSURANCE COMPANY By:     CIGNA Investments, Inc. (authorized agent)      By______________________________      Name:      Title: Instructions re Delivery of Notes Deliver Notes, together with CIGNA form entitled "Transmittal of Securities to Custodian", to: The Chase Manhattan Bank 4 New York Plaza, 11th Floor New York, NY 10004 Attn:      Jennifer John with a copy of the above to: CIGNA Retirement and Investment Services Investment Law Department, H16C 280 Trumbull Street Hartford, CT 06103 Attn:     William Duncan Tax Identification Number 13-3574027 Purchaser Name LIFE INSURANCE COMPANY OF NORTH AMERICA Name in Which Note is Registered CIG & CO. Note Registration Number; Principal Amount First Closing:      RH-12; $2,299,065.00 Second Closing:      RH-28; $700,935.00 Payment on Account of Note                Method      Account Information Federal Funds Wire Transfer Chase NYC/CTR ABA # 021-000-021 BNF = CIGNA Private Placements A/C = 9009001802 Re:      (see "Accompanying Information" below) Accompanying Information Name of Company:          SEITEL, INC. Description of Security:     7.19% Series H Senior Notes due October 15, 2008 PPN:               816074 C@ 5 Due Date and Application (as among principal, make whole and interest) of the payment being made: Address for Notices Related to Payments CIG & Co. c/o CIGNA Investments, Inc. 900 Cottage Grove Road Hartford, CT 06152-2146 Attn:      Securities Processing S-146 with a copy to: CIG & Co. c/o CIGNA Retirement & Investment Services 280 Trumbull Street Hartford, CT 06103 Attn:      Private and Alternative Investments H16B Fax:      860-534-7203 and a copy to: Chase Manhattan Bank Private Placement Servicing P.O. Box 1508 Bowling Green Station New York, NY 10081 Attn:      CIGNA Private Placements Fax:      212-552-3107 / 1005 Address for All other Notices CIG & Co. c/o CIGNA Retirement & Investment Services 280 Trumbull Street Hartford, CT 06103 Attn:      Private and Alternative Investments H16B Fax:      860-534-7203 Other Instructions LIFE INSURANCE COMPANY OF NORTH AMERICA By:     CIGNA Investments, Inc. (authorized agent)      By______________________________      Name:      Title: Instructions re Delivery of Notes Deliver Notes, together with CIGNA form entitled "Transmittal of Securities to Custodian", to: The Chase Manhattan Bank 4 New York Plaza, 11th Floor New York, NY 10004 Attn:      Jennifer John with a copy of the above to: CIGNA Retirement and Investment Services Investment Law Department, H16C 280 Trumbull Street Hartford, CT 06103 Attn:     William Duncan Tax Identification Number 13-3574027   Purchaser Name MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY Name in Which Note is Registered MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY Note Registration Number; Principal Amount First Closing:      RH-13; $1,685,981.00           RI-5; 1,302,803.50 Second Closing:      RH-29; $514,019.00           RI-15; $397,196.50 Payment on Account of Note                Method      Account Information Federal Funds Wire Transfer Citibank, N.A. 111 Wall Street New York, NY 10043 ABA # 021-000-089 For MassMutual Long-Term Pool Acct. # 4067-3488 Re:     (see "Accompanying Information" below) Accompanying Information Name of Company:          SEITEL, INC. Description of Security:     7.19% Series H Senior Notes due October 15, 2008 PPN:               816074 C@ 5 Description of Security:     7.34% Series I Senior Notes due October 15, 2011 PPN:               816074 C# 3 Due Date and Application (as among principal, make whole and interest) of the payment being made: Address for Notices Related to Payments Massachusetts Mutual Life Insurance Company c/o David L. Babson & Company Inc. 1295 State Street Springfield, MA 01111 Attn:     Securities Custody and Collection Department - F381 With telephonic advice of payment to: David L. Babson & Company Inc. Securities Custody and Collection Department Tel:     413-744-5104 / 5718 Address for All other Notices Massachusetts Mutual Life Insurance Company c/o David L. Babson & Company Inc. 1295 State Street Springfield, MA 01111 Attn:     Securities Investment Division Other Instructions MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By:     David L. Babson & Company Inc. as Investment Adviser By:___________________________________ Name: Title:       Instructions re Delivery of Notes Massachusetts Mutual Life Insurance Company c/o David L. Babson & Company Inc. 1295 State Street Springfield, MA 01111-0001 Attn:     Dean Dulchinos Tax Identification Number 04-1590850 Purchaser Name MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY Name in Which Note is Registered MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY Note Registration Number; Principal Amount First Closing:      RH-14; $842,990.50           RI-6; $689,719.50 Second Closing:      RH-30; $257,009.50           RI-16; $210,280.50 Payment on Account of Note                Method      Account Information Federal Funds Wire Transfer Chase Manhattan Bank, N.A. 4 Chase MetroTech Center New York, NY 10081 ABA # 021-000-021 For MassMutual Pension Management Acct. # 910-2594018 Re:     (see "Accompanying Information" below) Accompanying Information Name of Company:          SEITEL, INC. Description of Security:     7.19% Series H Senior Notes due October 15, 2008 PPN:               816074 C@ 5 Description of Security:     7.34% Series I Senior Notes due October 15, 2011 PPN:               816074 C# 3 Due Date and Application (as among principal, make whole and interest) of the payment being made: Address for Notices Related to Payments Massachusetts Mutual Life Insurance Company c/o David L. Babson & Company Inc. 1295 State Street Springfield, MA 01111 Attn:     Securities Custody and Collection Department - F381 With telephonic advice of payment to: David L. Babson & Company Inc. Securities Custody and Collection Department Tel:     413-744-5104 / 5718 Address for All other Notices Massachusetts Mutual Life Insurance Company c/o David L. Babson & Company Inc. 1295 State Street Springfield, MA 01111 Attn:     Securities Investment Division Other Instructions MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By:     David L. Babson & Company Inc. as Investment Adviser By:___________________________________ Name: Title:       Instructions re Delivery of Notes Massachusetts Mutual Life Insurance Company c/o David L. Babson & Company Inc. 1295 State Street Springfield, MA 01111-0001 Attn:     Dean Dulchinos Tax Identification Number 04-1590850   Purchaser Name MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY Name in Which Note is Registered MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY Note Registration Number; Principal Amount First Closing:      RH-15; $842,990.50           RI-7; $689,719.50 Second Closing:      RH-31; $257,009.50           RI-17; $210,280.50 Payment on Account of Note                Method      Account Information Federal Funds Wire Transfer Citibank, N.A. 111 Wall Street New York, NY 10043 ABA # 021-000-089 For MassMutual Spot Priced Contract Acct. # 3890-4953 Re:     (see "Accompanying Information" below) Accompanying Information Name of Company:          SEITEL, INC. Description of Security:     7.19% Series H Senior Notes due October 15, 2008 PPN:               816074 C@ 5 Description of Security:     7.34% Series I Senior Notes due October 15, 2011 PPN:               816074 C# 3 Due Date and Application (as among principal, make whole and interest) of the payment being made: Address for Notices Related to Payments Massachusetts Mutual Life Insurance Company c/o David L. Babson & Company Inc. 1295 State Street Springfield, MA 01111 Attn:     Securities Custody and Collection Department - F381 With telephonic advice of payment to: David L. Babson & Company Inc. Securities Custody and Collection Department Tel:     413-744-5104 / 5718 Address for All other Notices Massachusetts Mutual Life Insurance Company c/o David L. Babson & Company Inc. 1295 State Street Springfield, MA 01111 Attn:     Securities Investment Division Other Instructions MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By:     David L. Babson & Company Inc. as Investment Adviser By:___________________________________ Name: Title:       Instructions re Delivery of Notes Massachusetts Mutual Life Insurance Company c/o David L. Babson & Company Inc. 1295 State Street Springfield, MA 01111-0001 Attn:     Dean Dulchinos Tax Identification Number 04-1590850 Purchaser Name MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY Name in Which Note is Registered MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY Note Registration Number; Principal Amount First Closing:      RI-8; $574,766.25 Second Closing:      RI-18; $175,233.75 Payment on Account of Note                Method      Account Information Federal Funds Wire Transfer Citibank, N.A. 111 Wall Street New York, NY 10043 ABA # 021-000-089 For MassMutual Structured Settlement Fund Acct. # 4065-5423 Re:     (see "Accompanying Information" below) Accompanying Information Name of Company:          SEITEL, INC. Description of Security:     7.34% Series I Senior Notes due October 15, 2011 PPN:               816074 C# 3 Due Date and Application (as among principal, make whole and interest) of the payment being made: Address for Notices Related to Payments Massachusetts Mutual Life Insurance Company c/o David L. Babson & Company Inc. 1295 State Street Springfield, MA 01111 Attn:     Securities Custody and Collection Department - F381 With telephonic advice of payment to: David L. Babson & Company Inc. Securities Custody and Collection Department Tel:     413-744-5104 / 5718 Address for All other Notices Massachusetts Mutual Life Insurance Company c/o David L. Babson & Company Inc. 1295 State Street Springfield, MA 01111 Attn:     Securities Investment Division Other Instructions MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By:     David L. Babson & Company Inc. as Investment Adviser By:___________________________________ Name: Title:       Instructions re Delivery of Notes Massachusetts Mutual Life Insurance Company c/o David L. Babson & Company Inc. 1295 State Street Springfield, MA 01111-0001 Attn:     Dean Dulchinos Tax Identification Number 04-1590850   Purchaser Name MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY Name in Which Note is Registered MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY Note Registration Number; Principal Amount First Closing:      RH-16; $229,906.50           RI-9; $229,906.50 Second Closing:      RH-32; $70,093.50           RI-19; $70,093.50 Payment on Account of Note                Method      Account Information Federal Funds Wire Transfer Chase Manhattan Bank, N.A. 4 Chase MetroTech Center New York, NY 10081 ABA # 021-000-021 For MassMutual IFM Non-Traditional Acct. # 910-2509073 Re:     (see "Accompanying Information" below) Accompanying Information Name of Company:          SEITEL, INC. Description of Security:     7.19% Series H Senior Notes due October 15, 2008 PPN:               816074 C@ 5 Description of Security:     7.34% Series I Senior Notes due October 15, 2011 PPN:               816074 C# 3 Due Date and Application (as among principal, make whole and interest) of the payment being made: Address for Notices Related to Payments Massachusetts Mutual Life Insurance Company c/o David L. Babson & Company Inc. 1295 State Street Springfield, MA 01111 Attn:     Securities Custody and Collection Department - F381 With telephonic advice of payment to: David L. Babson & Company Inc. Securities Custody and Collection Department Tel:     413-744-5104 / 5718 Address for All other Notices Massachusetts Mutual Life Insurance Company c/o David L. Babson & Company Inc. 1295 State Street Springfield, MA 01111 Attn:     Securities Investment Division Other Instructions MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By:     David L. Babson & Company Inc. as Investment Adviser By:___________________________________ Name: Title:       Instructions re Delivery of Notes Massachusetts Mutual Life Insurance Company c/o David L. Babson & Company Inc. 1295 State Street Springfield, MA 01111-0001 Attn:     Dean Dulchinos Tax Identification Number 04-1590850 Purchaser Name C.M. LIFE INSURANCE COMPANY Name in Which Note is Registered C.M. LIFE INSURANCE COMPANY Note Registration Number; Principal Amount First Closing:      RH-17; $229,906.50           RI-10; $153,271.00 Second Closing:      RH-33; $70,093.50           RI-20; $46,729.00 Payment on Account of Note                Method      Account Information Federal Funds Wire Transfer Citibank, N.A. 111 Wall Street New York, NY 10043 ABA # 021-000-089 For Segment 43 - Universal Life Acct. # 4068-6561 Re:     (see "Accompanying Information" below) Accompanying Information Name of Company:          SEITEL, INC. Description of Security:     7.19% Series H Senior Notes due October 15, 2008 PPN:               816074 C@ 5 Description of Security:     7.34% Series I Senior Notes due October 15, 2011 PPN:               816074 C# 3 Due Date and Application (as among principal, make whole and interest) of the payment being made: Address for Notices Related to Payments C.M. Life Insurance Company c/o David L. Babson & Company Inc. 1295 State Street Springfield, MA 01111 Attn:     Securities Custody and Collection Department - F381 With telephonic advice of payment to: David L. Babson & Company Inc. Securities Custody and Collection Department Tel:     413-744-5104 / 5718 Address for All other Notices C.M. Life Insurance Company c/o David L. Babson & Company Inc. 1295 State Street Springfield, MA 01111 Attn:     Securities Investment Division Other Instructions C.M. LIFE INSURANCE COMPANY By:     David L. Babson & Company Inc. as Investment Sub-Adviser By:___________________________________ Name: Title:       Instructions re Delivery of Notes Massachusetts Mutual Life Insurance Company c/o David L. Babson & Company Inc. 1295 State Street Springfield, MA 01111-0001 Attn:     Dean Dulchinos Tax Identification Number 06-1041383 Purchaser Name MASSMUTUAL ASIA LIMITED Name in Which Note is Registered GERLACH & CO. Note Registration Number; Principal Amount First Closing:      RI-11; $191,588.75 Second Closing:      RI-21; $58,411.25 Payment on Account of Note                Method      Account Information Federal Funds Wire Transfer Citibank, N.A. 111 Wall Street New York, NY 10043 ABA # 021-000-089 Acct. # 30413797 Re:     (see "Accompanying Information" below) Accompanying Information Name of Company:          SEITEL, INC. Description of Security:     7.34% Series I Senior Notes due October 15, 2011 PPN:               816074 C# 3 Due Date and Application (as among principal, make whole and interest) of the payment being made: Address for Notices Related to Payments MassMutual Asia Limited c/o David L. Babson & Company Inc. 1295 State Street Springfield, MA 01111 Attn:     Securities Custody and Collection Department - F381 With telephonic advice of payment to: David L. Babson & Company Inc. Securities Custody and Collection Department Tel:     413-744-5104 / 5718 Address for All other Notices MassMutual Asia Limited c/o David L. Babson & Company Inc. 1295 State Street Springfield, MA 01111 Attn:     Securities Investment Division Other Instructions MASSMUTUAL ASIA LIMITED By:     David L. Babson & Company Inc. as Investment Sub-Adviser By:___________________________________ Name: Title:       Instructions re Delivery of Notes Citibank NA 333 West 34th Street 3rd Floor Securities Vault New York, NY 10001 Re:     Acct. # 849-195 Tax Identification Number None   Purchaser Name ALLSATE LIFE INSURANCE COMPANY Name in Which Note is Registered ALLSTATE LIFE INSURANCE COMPANY Note Registration Number; Principal Amount First Closing:      RG-1; $7,663,551.00 Second Closing:      RG-6; $2,336,449.00 Payment on Account of Note                Method      Account Information Federal Funds Wire Transfer Harris Trust and Savings Bank ABA # 071-000-288 BNF = Allstate Life Insurance Company Collection Acct. # 168-117-0 Re:     (see "Accompanying Information" below) Accompanying Information Name of Company:          SEITEL, INC. Description of Security:     7.04% Series G Senior Notes due October 15, 2006 PPN:               816074 C* 7 Due Date and Application (as among principal, make whole and interest) of the payment being made: Address for Notices Related to Payments Allstate Insurance Company Investment Operations - Private Placements 3075 Sanders Road, Suite G4A Northbrook, IL 60062-7127 Tel:     847-402-6672 Fax:     847-326-7032 Address for All other Notices Allstate Insurance Company Private Placements Department 3075 Sanders Road, Suite G5D Northbrook, IL 60062-7127 Tel:     847-402-8922 Fax:     847-402-3092 Other Instructions ALLSTATE LIFE INSURANCE COMPANY By:___________________________________ Name: Title:       By:___________________________________ Name: Title: Authorized Signatories Instructions re Delivery of Notes Harris Trust and Savings Bank 111 West Monroe Street, 6W Chicago, IL 60603 Attn:     Valerie Haney For Allstate Life Insurance Company Safekeeping Acct. # 846627 with a carbon copy to: Allstate Insurance Company 3075 Sanders Road, Suite G5A Northbrook, IL 60062-7127 Attn:     Doris Bryant Fax:     847-402-6639 Tax Identification Number 36-2554642 Purchaser Name PRINCIPAL LIFE INSURANCE COMPANY Name in Which Note is Registered PRINCIPAL LIFE INSURANCE COMPANY Note Registration Number; Principal Amount First Closing:      RG-2; $4,875,000.00           RG-3; $1,125,000.00           RG-4; $750,000.00           RG-5; $750,000.00 Second Closing:      RG-7; $1,625,000.00           RG-8; $375,000.00           RG-9; $250,000.00           RG-10; $250,000.00 Payment on Account of Note                Method      Account Information Federal Funds Wire Transfer Wells Fargo Bank Iowa, N.A. 7th & Walnut Streets Des Moines, IA 50309 ABA # 073-000-228 For credit to Principal Life Insurance Company Acct. # 0000014752 OBI PFGSE (S) B0064135** Re:     (see "Accompanying Information" below) Accompanying Information Name of Company:          SEITEL, INC. Description of Security:     7.04% Series G Senior Notes due October 15, 2006 PPN:               816074 C* 7 Due Date and Application (as among principal, make whole and interest) of the payment being made: Address for Notices Related to Payments Principal Capital Management, LLC 801 Grand Avenue Des Moines, IA 50392-0800 Attn:     Investment Accounting - Securities Tel:     515-247-0689 Fax:     515-248-2643 Address for all other Notices Principal Capital Management, LLC 801 Grand Avenue Des Moines, IA 50392-0800 Attn:     Investment Department - Securities Tel:     515-247-3495 Fax:     515-248-2490 Other Instructions PRINCIPAL LIFE INSURANCE COMPANY By:     Principal Capital Management, LLC,      a Delaware limited liability company,      its authorized signatory      By:___________________________________      Name:      Title:      By:___________________________________      Name:      Title:      Instructions re Delivery of Notes Principal Capital Management, LLC 801 Grand Avenue Des Moines, IA 50392-0800 Attn:     Jon C. Heiny, Esq. Tax Identification Number 42-0127290 Purchaser Name PHOENIX LIFE INSURANCE COMPANY Name in Which Note is Registered PHOENIX LIFE INSURANCE COMPANY Note Registration Number; Principal Amount First Closing:      RH-18; $5,364,486.00 Second Closing:      RH-34; $1,635,514.00 Payment on Account of Note                Method      Account Information Federal Funds Wire Transfer Chase Manhattan Bank, N.A. New York, NY ABA # 021-000-021 Acct. # 900-9000-200 Acct. Name: Income Processing Ref:     G05123      Phoenix Life      PPN = 816074 C@ 5      OBI = Seitel, Inc.      Rate = [coupon] Re:     (see "Accompanying Information" below) Accompanying Information Name of Company:          SEITEL, INC. Description of Security:     7.19% Series H Senior Notes due October 15, 2008 PPN:               816074 C@ 5 Due Date and Application (as among principal, make whole and interest) of the payment being made: Address for Notices Related to Payments Phoenix Life Insurance Company c/o Phoenix Investment Partners P.O. Box 150480 56 Prospect Street Hartford, CT 06115-0480 Attn:     Private Placements Address for All other Notices Phoenix Life Insurance Company c/o Phoenix Investment Partners P.O. Box 150480 56 Prospect Street Hartford, CT 06115-0480 Attn:     Private Placements Other Instructions PHOENIX LIFE INSURANCE COMPANY By:___________________________________ Name: Title:       Instructions re Delivery of Notes Phoenix Life Insurance Company One American Row P.O. Box 5056 Hartford, Connecticut 06102-5056 Attn:     John Mulrain      Law Department Tax Identification Number 06-0493340   Purchaser Name AMERICAN INVESTORS LIFE INSURANCE COMPANY Name in Which Note is Registered HARE & CO. Note Registration Number; Principal Amount First Closing:      RH-19; $3,831,777.00 Second Closing:      RH-35; $1,168,223.00 Payment on Account of Note                Method      Account Information Federal Funds Wire Transfer The Bank of New York New York, NY ABA # 021-000-018 BNF: IOC566 Attn:     P & I Department Ref:      American Investors Life Account 010048      PPN: 816074 C@ 5 Re:     (see "Accompanying Information" below) Accompanying Information Name of Company:          SEITEL, INC. Description of Security:     7.19% Series H Senior Notes due October 15, 2008 PPN:               816074 C@ 5 Due Date and Application (as among principal, make whole and interest) of the payment being made: Address for Notices Related to Payments American Investors Life Insurance Company c/o AmerUs Capital Management 699 Walnut Street, Suite 300 Des Moines, IA 50309 Attn:     Glena Rowley Tel:     515-362-3655 Fax:     515-283-3439 Address for All other Notices American Investors Life Insurance Company c/o AmerUs Capital Management 699 Walnut Street, Suite 300 Des Moines, IA 50309 Attn:     Steve Sweeney Tel:     515-362-3542 Fax:     515-362-3587 Other Instructions AMERICAN INVESTORS LIFE INSURANCE COMPANY By:     AmerUs Capital Management Group, Inc., its authorized attorney-in-fact By:___________________________________ Name: Title:       Instructions re Delivery of Notes The Bank of New York One Wall Street 3rd Floor, Window A F/A/O American Investors Life Insurance Company, A/C # 010048 New York, NY 10286 Attn:     Rich Reinhold      212-635-4611 or:     Anthony Marrero      212-635-4608 Tax Identification Number 48-0696320 (American Investors Life Insurance Company) 13-6062916 (Hare & Co.) SCHEDULE B DEFINED TERMS As used herein, the following terms have the respective meanings set forth below or set forth in the Section hereof following such term: Accredited Institution -- means any Person who is an "accredited investor" within the meaning of such term set forth in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. Affiliate -- means, at any time,       (a)     with respect to any Person other than the Company, any other Person that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such Person, and       (b)     with respect to the Company, a Person (other than a Wholly-Owned Restricted Subsidiary),            (i)     that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, the Company,            (ii)     that at such time beneficially owns or holds, directly or indirectly, ten percent (10%) or more of the Voting Stock of the Company, or            (iii)     ten percent (10%) or more of the Voting Stock of which is at such time beneficially owned or held by the Company or any one or more of the Subsidiaries. As used in this definition, "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting Securities, by contract or otherwise. Agreement -- is defined in Section 17.3. Board of Directors -- at any time means the board of directors of the Company or any committee thereof which, in the instance, shall have the lawful power to exercise the power and authority of such board of directors. Business Day -- means (a) for the purposes of Section 8.6 only, any day other than a Saturday, a Sunday or a day on which commercial banks in New York, New York are required or authorized to be closed, and (b) for the purposes of any other provision of this Agreement, any day other than a Saturday, a Sunday or a day on which commercial banks in Houston, Texas or New York, New York are required or authorized to be closed. Capital Lease -- means a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP. Capital Lease Obligation -- means, with respect to any Person and a Capital Lease, the amount of the obligation of such Person as the lessee under such Capital Lease which would, in accordance with GAAP, appear as a liability on a balance sheet of such Person. Closings -- is defined in Section 3.1. Closing Date -- is defined in Section 3.1. Code -- means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder from time to time. Company -- is defined in the introductory paragraph of this Agreement. Confidential Information -- is defined in Section 20. Consolidated Debt -- means, as of any date of determination, the total of all Debt of the Company and the Restricted Subsidiaries outstanding on such date, after eliminating all offsetting debits and credits between the Company and the Restricted Subsidiaries and all other items required to be eliminated in the course of the preparation of consolidated financial statements of the Company and the Restricted Subsidiaries in accordance with GAAP, provided that Consolidated Debt shall not include Qualified Capital Obligations. Consolidated Interest Expense -- means, with respect to any period, the sum (without duplication) of the following (in each case, eliminating all offsetting debits and credits between the Company and the Restricted Subsidiaries and all other items required to be eliminated in the course of the preparation of consolidated financial statements of the Company and the Restricted Subsidiaries in accordance with GAAP):       (a)     all interest in respect of Debt of the Company and the Restricted Subsidiaries (including imputed interest on Capital Lease Obligations) deducted in determining Consolidated Net Income for such period, and       (b)     all debt discount and expense amortized or required to be amortized in the determination of Consolidated Net Income for such period. Consolidated Net Income -- means, with reference to any period, the net income (or loss) of the Company and the Restricted Subsidiaries for such period (taken as a cumulative whole), as determined in accordance with GAAP, after eliminating all offsetting debits and credits between the Company and the Restricted Subsidiaries and all other items required to be eliminated in the course of the preparation of consolidated financial statements of the Company and the Restricted Subsidiaries in accordance with GAAP, provided that there shall be excluded:       (a)     any gains resulting from any write-up of any assets (but not any loss resulting from any write-down of any assets),       (b)     the income (or loss) of any Person accrued prior to the date it becomes a Restricted Subsidiary or is merged into or consolidated with the Company or a Restricted Subsidiary, and the income (or loss) of any Person, substantially all of the assets of which have been acquired in any manner by the Company or any Restricted Subsidiary, realized by such other Person prior to the date of acquisition,       (c)     in the case of a successor to the Company by consolidation or merger or as a transferee of its assets, any earnings of the successor corporation prior to such consolidation, merger or transfer of assets,       (d)     any aggregate net gain (but not any aggregate net loss) during such period arising from the sale, conversion, exchange or other disposition of capital assets (such term to include, without limitation, (i) all non-current assets and, without duplication, (ii) the following, whether or not current: all fixed assets, whether tangible or intangible, all inventory sold in conjunction with the disposition of fixed assets, and all securities),       (e)     any portion of such net income that cannot be freely converted into United States Dollars,       (f)     the income (or loss) of any Person (other than a Restricted Subsidiary) in which the Company or any Restricted Subsidiary has an ownership interest, except to the extent that any such income has been actually received by the Company or such Restricted Subsidiary in the form of cash dividends or similar cash distributions,       (g)     any gain arising from the acquisition of any security, or the extinguishment, under GAAP, of any Debt, of the Company or any Restricted Subsidiary,       (h)     any net income or gain or any net loss during such period from (i) any change in accounting principles in accordance with GAAP or (ii) any prior period adjustments resulting from any change in accounting principles in accordance with GAAP, and       (i)     any net income or gain (but not any net loss) during such period from (i) any extraordinary items or (ii) any discontinued operations or the disposition thereof. Consolidated Net Worth -- means, at any time, the sum, without duplication, of (a) the total stockholders' equity which would be shown in consolidated financial statements of the Company and the Restricted Subsidiaries prepared at such time in accordance with GAAP plus (b) Qualified Capital. Consolidated Tangible Assets -- means, at any time, Consolidated Total Assets at such time, minus       (a)     deferred assets, other than prepaid expenses which are refundable;      (b)     patents, copyrights, trademarks, trade names, service marks, brand names, franchises, goodwill, experimental expenses and other similar intangibles;       (c)     unamortized debt discount and expense; and       (d)     all other property which would be classified as intangible under GAAP. Consolidated Total Assets -- means, at any time, the amount at which the total assets of the Company and the Restricted Subsidiaries would be shown in consolidated financial statements of the Company and the Restricted Subsidiaries prepared at such time in accordance with GAAP, after deduction of depreciation, amortization and all other properly deductible valuation reserves. Contingent Optional Prepayment -- is defined in Section 8.2. Debt -- means, with respect to any Person, without duplication,       (a)     its obligations for borrowed money;       (b)     its obligations in respect of banker's acceptances, other acceptances, letters of credit and other instruments serving a similar function issued or accepted by banks and other financial institutions for the account of such Person (whether or not incurred in connection with the borrowing of money);       (c)     its obligations that are evidenced by bonds, notes, debentures or similar instruments;       (d)     its obligations for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinary course of business but including, without limitation, all obligations created or arising under any conditional sale or other title retention agreement with respect to any such property);       (e)     its Capital Lease Obligations;       (f)     its obligations in respect of all mandatorily redeemable preferred stock of such Person;       (g)     its obligations for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such obligations); and       (h)     any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (g) hereof. Debt of any Person shall include all obligations of such Person of the character described in clauses (a) through (h) to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP. Default -- means an event or condition the occurrence or existence of which would, with the lapse of time or the giving of notice or both, become an Event of Default. Default Rate -- means the rate of interest for overdue payments as stated in the first paragraph of the relevant Series of Notes. Designated Portion -- is defined in Section 10.6(b)(i). Disposition Value -- is defined in Section 10.6(c)(i). EBITDA -- means, in respect of any period, Consolidated Net Income for such period minus       (a)     to the extent added in the computation of such Consolidated Net Income, each of the following:            (i)     extraordinary gains, net of extraordinary losses, and            (ii)     gains, net of losses, arising from the disposition of property other than in the ordinary course of business, plus       (b)     to the extent deducted in the computation of such Consolidated Net Income, each of the following:            (i)     Consolidated Interest Expense, net of interest and other investment income,            (ii)     taxes imposed on or measured by income or excess profits of the Company and the Restricted Subsidiaries,            (iii)     the amount of all depreciation, depletion and amortization allowances and other non-cash expenses of the Company and the Restricted Subsidiaries,            (iv)     extraordinary losses, net of extraordinary gains, and            (v)     losses, net of gains, arising from the disposition of property other than in the ordinary course of business. Environmental Laws -- means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including but not limited to those related to Hazardous Materials or wastes, air emissions and discharges to waste or public systems. Equity Interest -- means       (a)     the outstanding Voting Stock of a corporation or other business entity,       (b)     the interest in the capital or profits of a corporation, limited liability company, partnership or joint venture, or       (c)     the beneficial interest in a trust or estate. ERISA -- means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect. ERISA Affiliate -- means any trade or business (whether or not incorporated) that is treated as a single employer together with the Company under section 414 of the Code. Event of Default -- is defined in Section 11. Exchange Act -- means the Securities Exchange Act of 1934, as amended. Excluded Transfer -- is defined in Section 10.6. Fair Market Value -- means, at any time and with respect to any property, the sale value of such property that would be realized in an arm's-length sale at such time between an informed and willing buyer and an informed and willing seller (neither being under a compulsion to buy or sell, respectively). GAAP -- means accounting principles as promulgated from time to time in statements, opinions and pronouncements by the American Institute of Certified Public Accountants and the Financial Accounting Standards Board and in such statements, opinions and pronouncements of such other entities with respect to financial accounting of for-profit entities as shall be accepted by a substantial segment of the accounting profession in the United States. Governmental Authority -- means       (a)     the government of            (i)     the United States of America or any State or other political subdivision thereof, or            (ii)     any jurisdiction in which the Company or any Subsidiary conducts all or any part of its business, or which asserts jurisdiction over any properties of the Company or any Subsidiary, or      (b)     any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government. Guaranty -- means, with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend or other obligation of any other Person in any manner, whether directly or indirectly, including (without limitation) obligations incurred through an agreement, contingent or otherwise, by such Person:       (a)     to purchase such indebtedness or obligation or any property constituting security therefor;       (b)     to advance or supply funds (i) for the purchase or payment of such indebtedness or obligation, or (ii) to maintain any working capital or other balance sheet condition or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such indebtedness or obligation;       (c)     to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such indebtedness or obligation of the ability of any other Person to make payment of the indebtedness or obligation; or       (d)     otherwise to assure the owner of such indebtedness or obligation against loss in respect thereof. In any computation of the indebtedness or other liabilities of the obligor under any Guaranty, the indebtedness or other obligations that are the subject of such Guaranty shall be assumed to be direct obligations of such obligor. Hazardous Material -- means any and all pollutants, toxic or hazardous wastes or any other substances that might pose a hazard to health or safety, the removal of which may be required or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage, or filtration of which is or shall be restricted, prohibited or penalized by any applicable law (including, without limitation, asbestos, urea formaldehyde foam insulation and polychlorinated biphenyls). holder -- means, at any time and with respect to any Note, the Person in whose name such Note is registered at such time in the register maintained by the Company pursuant to Section 13.1. Institutional Investor -- means (a) any original purchaser of a Note or an Affiliate thereof, (b) any holder of more than five percent (5%) in aggregate principal amount of the Notes then outstanding, and (c) any Accredited Institution. Investment -- means any investment, made in cash or by delivery of property, by the Company or any of the Subsidiaries in any Person, whether by acquisition of stock, indebtedness or other obligation or Security (including, without limitation, any interests in any partnership or joint venture), or by loan, Guaranty, advance, capital contribution or otherwise; provided that "Investment" does not include trade credit to the extent extended in the ordinary course of business. Lien -- means, with respect to any Person, any mortgage, lien, pledge, charge, security interest or other encumbrance, or any interest or title of any vendor, lessor, lender or other secured party to or of such Person under any conditional sale or other title retention agreement or Capital Lease, upon or with respect to any property or asset of such Person (including in the case of stock, stockholder agreements, voting trust agreements and all similar arrangements). Make-Whole Amount -- is defined in Section 8.6. Material -- means material in relation to the business, operations, affairs, financial condition, assets or properties of the Company and the Restricted Subsidiaries taken as a whole. Material Adverse Effect -- means a material adverse effect on (a) the business, operations, affairs, financial condition, assets or properties of the Company and the Restricted Subsidiaries, taken as a whole, (b) the ability of the Company to perform its obligations under this Agreement and the Notes, (c) the ability of any Restricted Subsidiary to perform its respective obligations under the Subsidiary Guaranty, or (d) the validity or enforceability of this Agreement, the Subsidiary Guaranty or the Notes. Maximum Rate -- is defined in Section 22.10. Memorandum -- is defined in Section 5.3. Multiemployer Plan -- means any Plan that is a "multiemployer plan" (as such term is defined in section 4001(a)(3) of ERISA). NAIC Annual Statement -- is defined in Section 6.3. Net Asset Sale Proceeds Amount -- means, with respect to any Transfer of any property by any Person, an amount equal to the difference of       (a)     the aggregate amount of the consideration (valued at the Fair Market Value of such consideration at the time of the consummation of such Transfer) received by such Person in respect of such Transfer, minus       (b)     all ordinary and reasonable out-of-pocket costs and expenses actually incurred by such Person in connection with such Transfer. Net Proceeds of Common Stock -- means, with respect to any period, cash proceeds (net of all costs and out-of-pocket expenses incurred in connection therewith, including, without limitation, placement, underwriting and brokerage fees and expenses) received by the Company and the Restricted Subsidiaries during such period from the sale of all common stock of the Company, including in such net proceeds:       (a)     the net amount paid upon issuance and exercise during such period of any right to acquire any common stock, or paid during such period to convert a convertible debt Security to common stock (but excluding any amount paid to the Company upon issuance of such convertible debt Security); and       (b)     any amount paid to the Company upon issuance of any convertible debt Security that is converted to common stock during such period. Net Proceeds of Qualified Capital -- means, with respect to any period, cash proceeds (net of all costs and out-of-pocket expenses incurred in connection therewith and in connection with the issuance and sale of any related Trust Preferred Securities, including, without limitation, placement, underwriting and brokerage fees and expenses) received by the Company during such period from the sale of all Qualified Junior Subordinated Notes. 1995 Notes -- means the Company's 7.17% Series A Senior Notes due December 30, 2001 in the original aggregate principal amount of $25,000,000, 7.17% Series B Senior Notes due December 30, 2002 in the original aggregate principal amount of $27,500,000 and 7.48% Series C Senior Notes due December 30, 2002 in the original aggregate principal amount of $22,500,000 issued pursuant to the 1995 Note Purchase Agreement. 1995 Note Purchase Agreement -- means each of the separate Note Purchase Agreements between the Company and the purchasers of the 1995 Notes, dated as of December 28, 1995, as amended from time to time. 1999 Notes -- means the Company's 7.03% Series D Senior Notes due February 15, 2004 in the original aggregate principal amount of $20,000,000, 7.28% Series E Senior Notes due February 15, 2009 in the original aggregate principal amount of $75,000,000 and 7.43% Series F Senior Notes due February 15, 2009 in the original aggregate principal amount of $43,000,000 issued pursuant to the 1999 Note Purchase Agreement. 1999 Note Purchase Agreement -- means each of the separate Note Purchase Agreements between the Company and the purchasers of the 1999 Notes, dated as of February 12, 1999, as amended from time to time. Notes -- is defined in Section 1. Officer's Certificate -- means a certificate of a Senior Financial Officer or of any other officer of the Company whose responsibilities extend to the subject matter of such certificate. Old Notes -- means the 1995 Notes and the 1999 Notes. Old Note Purchase Agreement -- means the 1995 Note Purchase Agreement and the 1999 Note Purchase Agreement. Optional Prepayment Date -- is defined in Section 8.2. Optional Prepayment Notice -- is defined in Section 8.2. Ordinary Course Transfer -- is defined in Section 10.6. Other Agreements -- is defined in Section 2. Other Purchasers -- is defined in Section 2. PBGC -- means the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any successor thereto. Person -- means an individual, partnership, corporation, limited liability company, partnership, association, joint venture, trust, unincorporated organization, or a government or agency or political subdivision thereof. Plan -- means an "employee benefit plan" (as defined in section 3(3) of ERISA) that is or, within the preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made, by the Company or any ERISA Affiliate or with respect to which the Company or any ERISA Affiliate may have any liability. Prepayment Transfer -- is defined in Section 10.6. Priority Debt -- means, without duplication, the sum of (a) all Debt of the Company secured by a Lien permitted only by Section 10.4(j) and (b) all Debt of Restricted Subsidiaries (except (i) Debt held by the Company or a Wholly-Owned Restricted Subsidiary, (ii) Debt of a Restricted Subsidiary that is an unsecured guaranty of Senior Debt and that ranks pari passu with the obligations of the Restricted Subsidiaries under the Subsidiary Guaranty, and (iii) Debt of a Restricted Subsidiary secured by a Lien permitted by the provisions of Section 10.4(a) through (i), inclusive). property or properties -- means, unless otherwise specifically limited, real or personal property of any kind, tangible or intangible, choate or inchoate. Purchaser -- is defined in Section 3.1. Qualified Capital -- means the total amount of capital in respect of Qualified Junior Subordinated Notes and the Trust Preferred Securities related thereto which would, on a consolidated basis, be shown in consolidated financial statements of the Company and the Subsidiaries prepared at such time in accordance with GAAP, provided that in no event shall the aggregate amount of Qualified Capital at any time exceed One Hundred Twenty-Five Million Dollars ($125,000,000). Qualified Capital Obligations -- means obligations of the Company in respect of any Qualified Junior Subordinated Notes and Qualified Junior Subordinated Guaranties. Qualified Institutional Buyer -- means you, each of the Other Purchasers, and any Person who is a "qualified institutional buyer," within the meaning of such term as set forth in Rule 144A(a)(1) under the Securities Act. Qualified Junior Subordinated Guaranty -- means, in respect of any issue of Trust Preferred Securities, a Guaranty by the Company to the holders of such Trust Preferred Securities of (a) the payment of all preferred cumulative cash dividends accumulating thereon and (b) the payments due on liquidation or redemption of such Trust Preferred Securities, but only in each case to the extent of funds held by the Special Purpose Trust which shall have issued such Trust Preferred Securities, and the obligations under which Guaranty shall be unsecured and rank subordinate and junior in right of payment to all Senior Debt (including, without limitation, all Debt of the Company under this Agreement, the Other Agreements and the Notes) to the same extent and on the same terms as the Qualified Junior Subordinated Notes issued by the Company to such Special Purpose Trust are subordinated to Senior Debt. Qualified Junior Subordinated Notes -- means any notes issued by the Company to a Special Purpose Trust in a principal amount equal to the proceeds received by such Special Purpose Trust from the issuance of Trust Preferred Securities and paid by such Special Purpose Trust to the Company in consideration for such notes, which notes shall (a) not mature, or otherwise require the payment of any of the principal thereof, prior to June 1, 2029, (b) be subject to the right of the Company to defer the payment of interest thereon at any time or from time to time for a period of at least twenty (20) consecutive quarterly periods, during which deferral period the Company shall not pay any dividends with respect to any of its capital stock or pay any principal, interest or other amounts owing in respect of any Qualified Capital Obligations or other Subordinated Debt, (c) be unsecured, (d) rank subordinate and junior in right of payment to all Senior Debt (including, without limitation, all Debt of the Company under this Agreement, the Other Agreements and the Notes upon the terms set forth in Exhibit A and (e) when aggregated with all other such notes, not exceed One Hundred Twenty-Five Million Dollars ($125,000,000) in aggregate outstanding principal amount. Reinvested Transfer -- is defined in Section 10.6. Required Holders -- means, at any time, the holders of at least a majority in principal amount of the Notes at the time outstanding (exclusive of Notes then owned by the Company or any of its Affiliates). Rescission Notice -- is defined in Section 8.2. Responsible Officer -- means any Senior Financial Officer and any other officer of the Company with responsibility for the administration of the relevant portion of this Agreement. Restricted Investments -- means all Investments except the following:       (a)     cash;       (b)     Investments in one or more Restricted Subsidiaries or any Person engaged in the business referred to in Section 10.10 that concurrently with such Investment becomes a Wholly-Owned Restricted Subsidiary;       (c)     Investments in United States Governmental Securities, provided that such obligations mature within 365 days from the date of acquisition thereof;       (d)     Investments in certificates of deposit or banker's acceptances issued by an Acceptable Bank, provided that such obligations mature within 365 days from the date of acquisition thereof;       (e)     Investments in commercial paper given the highest rating by a credit rating agency of recognized national standing and maturing not more than 270 days from the date of creation thereof; and         (f)     Investments in money market mutual funds that invest solely in so-called "money market" instruments maturing not more than one year after the acquisition thereof, which funds have assets in excess of Five Hundred Million Dollars ($500,000,000). For purposes of this Agreement, an Investment shall be valued at the lesser of (i) cost and (ii) the value at which such Investment is to be shown on the books of the Company and the Restricted Subsidiaries in accordance with GAAP. As used in this definition of "Restricted Investments": Acceptable Bank -- means any bank or trust company (i) which is organized under the laws of the United States of America or any State thereof and (ii) which has capital, surplus and undivided profits aggregating at least Five Hundred Million Dollars ($500,000,000). Restricted Payment -- means, whether effected directly or indirectly,       (a)     any Distribution in respect of the Company or any Restricted Subsidiary (other than on account of capital stock or other equity interests of a Restricted Subsidiary owned legally and beneficially by the Company or another Restricted Subsidiary), including, without limitation, any Distribution resulting in the acquisition by the Company of Securities which would constitute treasury stock; and       (b)     any payment, repayment, redemption, retirement, repurchase or other acquisition, direct or indirect, by the Company or any Restricted Subsidiary of, on account of, or in respect of, the principal of any Subordinated Debt (or any installment thereof) prior to the regularly scheduled maturity date thereof (as in effect on the date such Subordinated Debt was originally incurred). For purposes of this Agreement, the amount of any Restricted Payment made in property shall be the greater of (x) the Fair Market Value of such property (as determined in good faith by the board of directors (or equivalent governing body) of the Person making such Restricted Payment) and (y) the net book value thereof on the books of such Person, in each case determined as of the date on which such Restricted Payment is made. Distribution -- means, in respect of any corporation, association or other business entity:       (a)     dividends or other distributions or payments on capital stock or other equity interest of such corporation, association or other business entity (except distributions in such stock or other equity interest); and       (b)     the redemption or acquisition of such stock or other equity interests or of warrants, rights or other options to purchase such stock or other equity interests (except when solely in exchange for such stock or other equity interests). Restricted Subsidiary -- means and includes each and every Subsidiary other than any Subsidiary which, at the time of any determination hereunder, has been designated by the Board of Directors and by written notice of the Company to all of the holders to be an Unrestricted Subsidiary; provided, in any event, that each of the following shall at all times constitute a Restricted Subsidiary:       (a)     each Subsidiary identified as a Restricted Subsidiary on Schedule 5.4; and       (b)     each Subsidiary which owns, directly or indirectly, more than fifty percent (50%) of the Equity Interest of a Restricted Subsidiary.      Securities Act -- means the Securities Act of 1933, as amended from time to time. Security -- means "security" as defined by section 2(1) of the Securities Act. Senior Debt -- means any Debt of the Company that is not in any manner subordinated in right of payment or security in any respect to the Debt evidenced by the Notes or to any other Debt of the Company. Senior Financial Officer -- means the chief financial officer, principal accounting officer, treasurer or comptroller of the Company. Series -- means any one or more of the series of Notes issued hereunder. Series G Notes -- is defined in Section 1. Series H Notes -- is defined in Section 1. Series I Notes -- is defined in Section 1. Special Purpose Trust -- means a statutory business trust created under the laws of the State of Delaware pursuant to the filing of a certificate of trust with the Secretary of State of the State of Delaware, (a) the existence of which shall be for the exclusive purpose of (i) issuing Trust Common Securities to the Company and issuing and selling Trust Preferred Securities to investors, (ii) using the proceeds from such Trust Preferred Securities to acquire Qualified Junior Subordinated Notes and (iii) engaging in only those other activities necessary or incidental to the foregoing, (b) the sole assets of which will be such Qualified Junior Subordinated Notes and the proceeds thereof and (c) the sole source of revenue of which will be payments under such Qualified Junior Subordinated Notes. Notwithstanding anything else herein, any Special Purpose Trust shall be deemed to be an Unrestricted Subsidiary. Subordinated Debt -- means any Debt or other obligations of the Company (including, without limitation Qualified Capital Obligations) other than Senior Debt. Subsidiary -- means, as to any Person, any corporation, limited liability company, partnership, joint venture, trust or estate in which such Person or one or more of the Subsidiaries or such Person and one or more of the Subsidiaries own more than fifty percent (50%) of the Equity Interest. Unless the context otherwise clearly requires, any reference to a "Subsidiary" is a reference to a Subsidiary of the Company. Subsidiary Guaranty -- is defined in Section 4.10. Substantial Portion -- is defined in Section 10.6(c)(ii). Successor Corporation -- is defined in Section 10.5. Total Capitalization -- means, at any time, the sum of Consolidated Debt plus Consolidated Net Worth, in each case at such time. Transfer -- is defined in Section 10.6(c)(iii). Trust -- is defined in Section 22.8. Trust Common Securities -- means, in respect of a Special Purpose Trust, securities issued by such Special Purpose Trust representing common undivided beneficial interests in the assets of such Special Purpose Trust, one hundred percent (100%) of which securities shall be legally and beneficially owned by the Company. Trust Preferred Securities -- means, in respect of a Special Purpose Trust, securities issued by such Special Purpose Trust, having a stated par value and liquidation value and entitling the holders thereof to the payment (unless deferred) of preferred cumulative cash distributions at a fixed annual rate, representing preferred undivided beneficial interests in the assets of such Special Purpose Trust, provided that at the time of the initial issuance thereof, the Notes shall receive an investment grade rating from, or an investment grade rating of the Notes shall be confirmed by, a nationally recognized rating agency. United States Governmental Security -- means any direct obligation of, or obligation guaranteed by, the United States of America, or any agency controlled or supervised by or acting as an instrumentality of the United States of America pursuant to authority granted by the Congress of the United States of America, so long as such obligation or guarantee shall have the benefit of the full faith and credit of the United States of America which shall have been pledged pursuant to authority granted by the Congress of the United States of America. Unrestricted Subsidiary -- means each Subsidiary other than a Restricted Subsidiary. Voting Stock -- means the capital stock or similar interest of any class or classes (however designated) of a corporation or other business entity, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of the members of the board of directors (or Persons performing similar functions) of a corporation or other business entity. Wholly-Owned Restricted Subsidiary -- means, at any time, any Restricted Subsidiary one hundred percent (100%) of all of the Equity Interests (except directors' qualifying shares) and voting interests of which are owned by any one or more of the Company and the Company's other Wholly-Owned Restricted Subsidiaries at such time. SCHEDULE 4.9 CHANGES IN CORPORATE STRUCTURE        None. SCHEDULE 5.4 SUBSIDIARIES OF THE COMPANY AND OWNERSHIP OF SUBSIDIARY STOCK (a)     I.     Restricted Subsidiaries Name of Restricted Subsidiary Jurisdiction of Incorporation 100% of Stock Owned By: Seitel Data Corp. Delaware Seitel, Inc. Seitel Delaware, Inc. Delaware Seitel, Inc. Seitel Management, Inc. Delaware Seitel, Inc. Seitel Geophysical, Inc. Delaware Seitel, Inc. DDD Energy, Inc. Delaware Seitel, Inc. Seitel Gas & Energy Corp. Delaware Seitel, Inc. Seitel Power Corp. Delaware Seitel, Inc. Seitel Natural Gas, Inc. Delaware Seitel Gas & Energy Corp. Matrix Geophysical, Inc. Delaware Seitel, Inc. Exsol, Inc. Delaware Seitel, Inc. Datatel, Inc. Delaware Seitel Data Corp. Seitel Offshore Corp. Delaware Seitel Data Corp. Geo-Bank, Inc. Texas Seitel, Inc. Alternative Communication Enterprises, Inc. Texas Seitel, Inc. Seitel International, Inc. Cayman Islands Seitel Data Corp. African Geophysical, Inc. Cayman Islands Seitel Geophysical, Inc. Seitel Data, Ltd. Texas (limited partnership) Seitel Delaware, Inc. -- 1% g.p. Seitel Data Corp. --99% l.p. N360X, L.L.C. Texas- (limited liability company) Seitel Management, Inc - managing member     (b)     II.     Affiliates: Name of Unrestricted Subsidiary Jurisdiction of Incorporation 100% of Stock Owned By Seitel Canada Holdings, Inc. Delaware Seitel, Inc. Olympic Seismic Ltd. Alberta, Canada SEIC Holdings, Inc. EHI Holdings, Inc. Delaware Seitel Geophysical, Inc. 818312 Alberta Ltd. Alberta, Canada Seitel Canada Holdings, Inc. SEIC Holdings, Inc. Alberta, Canada SEIC Partners Limited Partnership SEIC L.L.C. Delaware SEIC Holdings, Ltd. SEIC Partners Limited Partnership Alberta, Canada Seitel Canada Holdings, Inc. - 99.89% l.p. SEIC, Inc. - .11% g.p. SEIC Trust Administration, Ltd. Alberta, Canada SEIC Holdings, Inc. SEIC, Inc. Delaware Seitel Canada Holdings, Inc. Seitel Canada, L.L.C. Delaware Seitel, Inc. Seitel International, CV Netherlands Seitel Solutions Holdings, L.L.C. -10% SI Holdings, G.P. - 90% Seitel IP Holdings, L.L.C. Delaware Seitel Solutions, Ltd. - 33% Seitel Solutions Canada, Ltd. - 33% Seitel International, CV - 34% Seitel Solutions Canada, Ltd. Alberta, Canada Seitel Solutions, Inc. Seitel Solutions Holdings, L.L.C. Delaware Seitel Solutions, L.L.C. Seitel Solutions, Inc. Delaware Seitel, Inc. Seitel Solutions, L.L.C. Delaware Seitel Solutions, Inc. Seitel Solutions, Ltd. Texas Seitel Solutions, Inc. - 1% g.p. Seitel Solutions, L.L.C. - 99% l.p. SI Holdings, G.P. Delaware Seitel Solutions, Inc. - 10% Seitel Solutions, L.L.C. - 90%     Other Affiliates: Digitel Data Joint Venture, 50% interest owned by Seitel Offshore Corp. Spectrum/SSI Joint Venture, 50% interest owned by Seitel International, Inc. TGC/SEI Joint Venture, 50% interest owned by Seitel Data Corp. SSC/SEI Joint Venture, 41% interest owned by Seitel Data Corp. Marsh Joint Venture, 50% interest owned by Seitel, Data Corp. Redmon/Smackover Joint Venture, 40% interest owned by DDD Energy, Inc. Vision Energy, Inc., a Delaware corporation, 19% owned by Seitel, Inc.     (d)     Reference is hereby made to the indebtedness listed on schedule 5.15 hereof. Each such item of indebtedness is guaranteed by the Restricted Subsidiaries pursuant to guaranties that are substantially similar to the Subsidiary Guaranty. SCHEDULE 5.5 FINANCIAL STATEMENTS   1.     Financial statements contained in the Company's Form 10-K for the twelve months ended December 31, 2000. 2.     Financial statements contained in the Company's Form 10-Q for the quarterly period ended March 31, 2001. 3.     Financial statements contained in the Company's Form 10-Q for the quarterly period ended June 30, 2001. SCHEDULE 5.8 CERTAIN LITIGATION        None. SCHEDULE 5.11 PATENTS, ETC.        None. SCHEDULE 5.12 ERISA   A.     The following Restricted Subsidiaries are ERISA Affiliates that maintain one or more Plans. There are no employee organizations in respect of any Plan or Multiemployer Plan. Datatel, Inc. DDD Energy, Inc. Matrix Geophysical, Inc. Seitel Management, Inc. Seitel Data Ltd. Seitel Solutions, Ltd. B.     All of the Restricted Subsidiaries may be considered ERISA Affiliates. The following Plans constitute all "employee benefit plans" with respect to which the Company or any "affiliate" of the Company is a "party-in-interest" or in respect of which the Notes could constitute an "employer security." All plans apply to all ERISA Affiliates listed in A. above except as specifically set forth below. Seitel, Inc. 401(k) Plan Medical Insurance through Humana Health Plan Dental Insurance through Fortis Benefits Insurance Company Life Insurance through United of Omaha Accidental Death and Dismemberment Insurance through United of Omaha Disability Insurance through United of Omaha Seitel, Inc. Flexible Employee Benefit Plan administered by Flex Corp. SCHEDULE 5.15 EXISTING DEBT IN EXCESS OF $100,000   Restricted Subsidiaries 1.     Unsecured Senior Notes with an outstanding aggregate principal amount of $28,333,333 as of September 30, 2001 issued pursuant to a Note Purchase Agreement dated as of December 28, 1995. 2.     Unsecured Senior Notes with an outstanding aggregate principal amount of $138,000,000 as of September 30, 2001 issued pursuant to a Note Purchase Agreement dated as of February 12, 1999. 3.     Unsecured revolving line of credit of up to $75,000,000 with Bank One NA as agent pursuant to a Revolving Credit Agreement dated June 29, 2001. The outstanding borrowings under this facility as of September 30, 2001 were approximately $68,900,000. 4.     Capital lease of computer equipment from LINC Monex Leasing, Inc./The Manifest Group. The outstanding principal amount of this capital lease at September 30, 2001 was $193,000. 5.     Loan secured by a pledge of certain seismic data from Heller Financial Leasing, Inc. The outstanding principal amount of this loan at September 30, 2001 was $10,000,000. 6.     Deferred purchase price payable in cash from production from certain producing oil and gas wells to SPV, Inc. The aggregate amount of this deferred purchase price, including principal and imputed interest, was $1,375,000 at September 30, 2001. Unrestricted Subsidiaries 1.     Secured Revolving Line of Credit of Olympic Seismic Ltd. with the Royal Bank of Canada The outstanding borrowings under this facility as of September 30, 2001 was US$595,000. SCHEDULE 10.8 CERTAIN AGREEMENTS BY RESTRICTED SUBSIDIARIES   1.     Guaranties of unsecured Senior Notes issued by Seitel, Inc. with an outstanding aggregate principal amount of $28,333,333 as of September 30, 2001 issued pursuant to a Note Purchase Agreement dated as of December 28, 1995. 2.     Guaranties of unsecured Senior Notes issued by Seitel, Inc. with an outstanding aggregate principal amount of $138,000,000 as of September 30, 2001 issued pursuant to a Note Purchase Agreement dated as of February 12, 1999. 3.     Guaranties of unsecured revolving line of credit of Seitel, Inc. of up to $75,000,000 with Bank One NA as agent pursuant to a Revolving Credit Agreement dated June 29, 2001. The outstanding borrowings under this facility as of September 30, 2001 were approximately $68,900,000. 4.     Capital lease of computer equipment from LINC Monex Leasing, Inc./The Manifest Group. The outstanding principal amount of this capital lease at September 30, 2001 was $193,000. 5.     Loans and guaranties thereof secured by a pledge of certain seismic data from Heller Financial Leasing, Inc. The outstanding principal amount of this loan at September 30, 2001 was $10,000,000. 6.     Deferred purchase price payable in cash from production from certain producing oil and gas wells to SPV, Inc. The aggregate amount of this deferred purchase price, including principal and imputed interest, was $1,375,000 at September 30, 2001. EXHIBIT A Subordination Terms Note:      The term "Securities" refers to the instruments evidencing the debt subordinated by the following provisions; the term "Holder" refers to a holder of Securities. SECTION 1.01.     Securities Subordinate to Senior Indebtedness The Securities shall be subordinated to Senior Indebtedness as set forth in this Article One. The Company covenants and agrees, and each Holder of a Security of any series by such Holder's acceptance thereof likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article One, the indebtedness represented by the Securities of such series and the payment of the principal amount, interest, premium (if any), and such other amounts, if any, payable in respect of each and all of the Securities of such series are hereby expressly made subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness; provided, however, that no provision of this Article One shall prevent the occurrence of any default or Event of Default hereunder. "Senior Notes" means, collectively, (i) (a) the Company's 7.17% Series A Senior Notes due December 30, 2001 in the original aggregate principal amount of $25,000,000, (b) the Company's 7.17% Series B Senior Notes due December 30, 2002 in the original aggregate principal amount of $27,500,000, and (c) the Company's Series C Senior Notes due December 30, 2002 in the original aggregate principal amount of $22,500,000, in each case, issued pursuant to separate Note Purchase Agreements, dated as of December 28, 1995, as such notes and agreements may be amended from time to time, (ii) (a) the Company's 7.03% Series D Senior Notes due February 15, 2004 in the original aggregate principal amount of $20,000,000, (b) the Company's 7.28% Series E Senior Notes due February 15, 2009 in the original aggregate principal amount of $75,000,000, and (c) the Company's Series F Senior Notes due February 15, 2009 in the original aggregate principal amount of $43,000,000, in each case, issued pursuant to separate Note Purchase Agreements, dated as of February 12, 1999, as such notes and agreements may be amended from time to time and (iii) (a) the Company's 7.04% Series G Senior Notes due October 15, 2006 in the original aggregate principal amount of $20,000,000, (b) the Company's 7.19% Series H Senior Notes due October 15, 2008 in the original aggregate principal amount of $50,000,000, and (c) the Company's Series I Senior Notes due October 15, 2011 in the original aggregate principal amount of $37,000,000, in each case, issued pursuant to separate Note Purchase Agreements, dated as of October 15, 2001, as such notes and agreements may be amended from time to time. "Senior Indebtedness" means the principal of (and premium or make-whole amount, if any) and interest on (including interest, if any, accruing after the filing of a petition initiating any proceeding pursuant to any Federal bankruptcy law or any other applicable Federal or State law) and other amounts due on or in connection with the Senior Notes and any Indebtedness of the Company incurred, assumed or guaranteed by the Company, whether outstanding on the date of the Indenture or thereafter incurred, assumed or guaranteed and all renewals, extensions and refundings of any such Indebtedness of the Company; provided, however, that the following will not constitute Senior Indebtedness:       (a)     any Indebtedness of the Company as to which, in the instrument creating the same or evidencing the same or pursuant to which the same is outstanding, it is expressly provided that such Indebtedness of the Company shall be subordinated to or pari passu with the Securities;       (b)     Indebtedness of the Company in respect of the Securities;       (c)     any Indebtedness of the Company constituting trade accounts payable arising in the ordinary course of business;       (d)     any Indebtedness of the Company initially issued to any other trust which issues preferred securities or other securities similar to preferred securities; and       (e)     any Indebtedness of the Company to any Subsidiary of the Company, other than a trust referred to in the preceding clause (d). SECTION 1.02.     Payment Over of Proceeds upon Dissolution, Etc. Upon any distribution of assets of the Company in the event of       (a)     any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relative to the Company or to its creditors, as such, or to its assets, or       (b)     any liquidation, dissolution or other winding up of the Company, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or       (c)     any assignment for the benefit of creditors or any other marshalling of assets and liabilities of the Company, then and in such event:       (1) the holders of Senior Indebtedness shall be entitled to receive payment in full of all amounts due or to become due on or in respect of all Senior Indebtedness, or provision shall be made for such payment in cash, before the Holders of the Securities of any series are entitled to receive any payment on account of the principal amount, interest, premium (if any), or such other amounts, if any, as may be provided for in respect of the Securities of such series; and       (2) any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, by set-off or otherwise, to which the Holders or the Trustee would be entitled but for the provisions of this Article One, including any such payment or distribution which may be payable or deliverable by reason of the payment of any other Indebtedness of the Company being subordinated to the payment of the Securities of such series, shall be paid by the liquidating trustee or agent or other person making such payment or distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, directly to the holders of Senior Indebtedness or their representative or representatives or to the trustee or trustees under any indenture under which any instruments evidencing any of such Senior Indebtedness may have been issued, ratably according to the aggregate amounts remaining unpaid on account of the principal of, and premium or make-whole amount, if any, and interest on the Senior Indebtedness held or represented by each, to the extent necessary to make payment in full of all Senior Indebtedness remaining unpaid, after giving affect to any concurrent payment or distribution to the holders of such Senior Indebtedness. In the event that, notwithstanding the foregoing provisions of this Section 1.02, the Trustee or the Holder of any Security of any series shall receive any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, including any such payment or distribution which may be payable or deliverable by reason of the payment of any other Indebtedness of the Company being subordinated to the payment of the Securities of such series, before all Senior Indebtedness is paid in full or payment thereof provided for, and if such fact shall then have been made known to the Trustee as provided in Section 1.11, or, as the case may be, such Holder, then and in such event such payment or distribution shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other person making payment or distribution of assets of the Company for application to the payment of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all Senior Indebtedness in full, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. For purposes of this Article One only, the words "cash, property or securities," or any combination thereof, shall be deemed not to include shares of capital stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinated, at least to the extent provided in this Article One with respect to the Securities, to the payment of all Senior Indebtedness which may at the time be outstanding and to any securities issued to the holders of Senior Indebtedness in respect of the Senior Indebtedness under any such plan of reorganization or readjustment. SECTION 1.03.     Prior Payment to Senior Indebtedness upon Acceleration of Securities. In the event that any Securities of any series are declared due and payable before their Stated Maturity, then and in such event the holders of Senior Indebtedness shall be entitled to receive payment in full of all amounts due or to become due on or in respect of all Senior Indebtedness or provision shall be made for such payment in cash, before the Holders of the Securities of such series are entitled to receive any payment (including any payment which may be payable by reason of the payment of any other indebtedness of the Company being subordinated to the payment of the Securities of such series) by the Company on account of the principal of (or premium or make-whole amount, if any) or interest or other amounts on Securities of such series or on account of the purchase or other acquisition of Securities of such series. In the event that, notwithstanding the foregoing, the Company shall make any payment to the Trustee or the Holder of any Securities of any series prohibited by the foregoing provisions of this Section 1.03, and if such facts then shall have been known or thereafter shall have been made known to the Trustee (as provided in section 1.11) or to such Holder, as the case may be, pursuant to the terms of this Indenture, then and in such event such payment shall be paid over and delivered forthwith to the Company by or on behalf of the person holding such payment for the benefit of the holders of Senior Indebtedness. The provisions of this Section 1.03 shall not apply to any payment with respect to which Section 1.02 would be applicable. SECTION 1.04.     Default in Senior Indebtedness. In the event and during the continuation of any default by the Company in the payment of principal, premium, if any, interest or any other payment due on any Senior Indebtedness of the Company, as the case may be, beyond any applicable grace period with respect thereto, or in the event that the maturity of any Senior Indebtedness of the Company has been accelerated because of any default, then, in any such case, no payment shall be made by the Company with respect to the principal (including redemption payments, if any) of, premium or make-whole amount, if any, or interest or other amounts on the Securities until such default is cured or waived or ceases to exist or any such acceleration or demand for payment has been rescinded. In the event that, notwithstanding the foregoing, the Company shall make any payment to the Trustee or the Holder of any Securities of any series prohibited by the foregoing provisions of this Section 1.04, and if such facts then shall have been known or thereafter shall have been made known to the Trustee (as provided in Section 1.11) or to such Holder, as the case may be, pursuant to the terms of this Indenture, then and in such event such payment shall be paid over and delivered forthwith to the Company by or on behalf of the person holding such payment for the benefit of the holders of senior Indebtedness. The provisions of this Section 1.04 shall not apply to any payment with respect to which Section 1.02 would be applicable. SECTION 1.05.     Limitations on Acceleration and Enforcement. At any time when the Company may not make payments in respect of the Securities as a result of the application of Section 1.04, no Holder of Securities will:       (a)     accelerate or cause to permit the acceleration of the maturity of any of the Securities; or       (b)     commence, cause the commencement of, participate in or support any action or proceeding (whether at law or in equity) against the Company to recover all or any part of the indebtedness represented by the Securities or any action to commence or prosecute any bankruptcy or similar proceeding in respect of the Company unless the holders of at least a majority in principal amount of the Senior Notes at the time outstanding (exclusive of Senior Notes then owned by the Company or any of its subsidiaries or affiliates) shall have agreed in writing in advance to, and shall have joined in, such proceedings. SECTION 1.06.     Payment Permitted if No Default. Nothing contained in this Article One or elsewhere in this Indenture or in any of the Securities shall prevent (a) the Company, at any time except during the pendency of any case, proceeding, dissolution, liquidation or other winding up, assignment for the benefit of creditors or other marshalling of assets and liabilities of the Company referred to in Section 1.02 or under the conditions described in Sections 1.03 or 1.04, from making payments at any time of the principal amount, interest or such other amounts, if any, as may be provided for in this Indenture, as the case may be, in respect of the Securities, or (b) the application by the Trustee or the retention by any Holder of any money deposited with it hereunder to the payment of or on account of the principal amount, interest or such other amounts, if any, as may be provided for in this Indenture, as the case may be, in respect of the Securities if the Trustee did not have, at the time provided in the proviso to the first paragraph of Section 1.11, notice that such payment would have been prohibited by the provisions of this Article One. SECTION 1.07.     Subrogation Rights of Holders of Senior Indebtedness. Subject to the payment in full of all Senior Indebtedness, the Holders of the Securities of any series shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Indebtedness pursuant to the provisions of this Article One to the rights of the holders of such Senior Indebtedness to receive payments or distributions of cash, property or securities applicable to the Senior Indebtedness until the principal amount, interest or such other amounts, if any, as provided for in this Indenture, as the case may be, in respect of the Securities of such series shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of any cash, property or securities to which the Holders of the Securities of such series or the Trustee would be entitled except for the provisions of this Article One, and no payments pursuant to the provisions of this Article One to the Company or to the holders of Senior Indebtedness by Holders of the Securities of such series or the Trustee, shall, as between the Company, its creditors other than holders of Senior Indebtedness and the Holders of the Securities of such series, be deemed to be a payment or distribution by the Company to or on account of the Senior Indebtedness. SECTION 1.08.     Provision Solely to Define Relative Rights. The provisions of this Article One are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities of any series, on one hand, and the holders of Senior Indebtedness, on the other hand. Nothing contained in this Article One or elsewhere in this Indenture or in the Securities of any series is intended to or shall:       (a)     impair, as between the Company and the Holders of the Securities of such series, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Securities of such series the principal amount, interest or such other amounts, if any, as may be provided for in this Indenture, as the case may be, in respect of the Securities of such series as and when the same shall become due and payable in accordance with the terms of the Securities of such series and this Indenture and which, subject to the rights under this Article One of the holders of Senior Indebtedness, is intended to rank equally with all other general obligations of the Company; or       (b)     affect the relative rights against the Company of the Holders of the Securities of such series and creditors of the Company other than holders of Senior Indebtedness; or       (c)     prevent the Trustee or the Holder of any Security of such series from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article One of the holders of Senior Indebtedness to receive cash, property or securities otherwise payable or deliverable to the Trustee or such Holder. SECTION 1.09.     Trustee to Effectuate Subordination. Each Holder of a Security by such Holder's acceptance thereof authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article One and appoints the Trustee such Holder's attorney-in-fact for any and all such purposes. SECTION 1.10.     No Waiver of Subordination Provision. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of, or notice to, the Trustee or the Holders of the Securities of any series, without incurring responsibility to the Holders of the Securities of such series and without impairing or releasing the subordination provided in this Article One or the obligations hereunder of the Holders of the Securities of such series to the holders of Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, or increase the amount of, Senior Indebtedness, or otherwise amend or supplement in any manner Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise dispose of or deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (iii) release any person liable in any manner for the payment or collection of Senior Indebtedness; (iv) exercise or refrain from exercising any rights against the Company or any other person; and (v) apply any sums paid in respect of Senior Indebtedness to Senior Indebtedness, regardless of who made such payment or how such payment was realized. SECTION 1.11.     Notice to Trustee. The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Securities of any series. Failure to give such notice shall not affect the subordination of the Securities of such series to Senior Indebtedness. Notwithstanding the provisions of this Article One or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Securities of such series, unless and until the Trustee shall have received written notice thereof in the manner prescribed by this Indenture from the Company or a holder of Senior Indebtedness or from any trustee or agent therefor; and, prior to the receipt of any such written notice, the Trustee, subject to the provisions of Section [regarding the duties and responsibilities of the Trustee], shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received, at least three Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal amount, interest, or such other amounts as may be provided for in this Indenture in respect of any Security), the notice with respect to such money provided for in this Section 1.11, then, anything herein contained to the contrary notwithstanding, the Trustee shall have the full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by within three Business Days prior to such date. Subject to the provisions of Section [regarding the duties and responsibilities of the Trustee], the Trustee shall be entitled to rely on the delivery to it of a written notice by a person representing himself to be a holder of Senior Indebtedness (or a trustee or agent on behalf of such holder) to establish that such notice has been given by a holder of Senior Indebtedness (or a trustee or agent on behalf of any such holder). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article One, the Trustee may request such person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such person, the extent to which such person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such person under this Article One, and if such evidence if not furnished, the Trustee may defer any payment which it may be required to make for the benefit of such person pursuant to the terms of this Indenture pending judicial determination as to the right of such person to receive such payment. SECTION 1.12.     Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Company referred to in this Article One, the Trustee, subject to the provisions of Section [regarding the duties and responsibilities of the Trustee], and the Holders of the Securities of any series shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution, winding up or similar case or proceeding is pending, or a certificate of the trustee in bankruptcy, liquidating trustee, custodian, receiver, assignee for the benefit of creditors, agent or other person making such payment or distribution, delivered to the Trustee or to the Holders of Securities of such series, for the purpose of ascertaining the persons entitled to participate in such payment or distribution, the holders of Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article One. SECTION 1.13.     Trustee Not Fiduciary for Holders of Senior Indebtedness. The Trustee shall be deemed not to owe any fiduciary duty to the holders of Senior Indebtedness. The Trustee shall not be charged with knowledge of the existence of Senior Indebtedness (other than the Senior Notes) or of any facts that would prohibit any payment hereunder unless the Trustee shall have received notice thereof in the manner prescribed by this Indenture. With respect to the holders of Senior Indebtedness, the Trustee undertakes to perform or to observe only such of its covenants or obligation as are specifically set forth in this Article One and no implied covenants or obligations with respect to holders of Senior Indebtedness shall be read into this Indenture against the Trustee. SECTION 1.14.     Rights of Trustee as Holder of Senior Indebtedness; Preservation of Trustee's Rights. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article One with respect to any Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article One shall apply to claims of, or payments to, the Trustee under or pursuant to Section [concerning fees and expenses of the Trustee]. SECTION 1.15     Article One Applicable to Paying Agents. The term "Trustee" as used in this Article One shall (unless the context otherwise requires) be construed as extending to and including the Paying Agent within its meaning as fully for all intents and purposes as if the Paying Agent were named in this Article One in addition to or in place of the Trustee; provided, however, that Sections 1.11 and 1.13 shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying A. EXHIBIT 1G [FORM OF SERIES G NOTE] THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY ONLY BE REOFFERED AND SOLD IN COMPLIANCE WITH THE REGISTRATION PROVISIONS OF SUCH ACT OR PURSUANT TO AN EXEMPTION THEREFROM. SEITEL, INC. 7.04% Series G Senior Note Due October 15, 2006 No. RG-[__]     [Date] $[________]      PPN: 816074 C* 7 SEITEL, INC. (the "Company"), a Delaware corporation, for value received, hereby promises to pay to [_____________________] or registered assigns the principal sum of [_________________] DOLLARS ($[________]) on October 15, 2006 and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the unpaid principal balance thereof from the date of this Note at the rate of seven and four hundredths percent (7.04%) per annum, semiannually on the fifteenth day of October and April in each year, commencing on the later of April 15, 2002, or the payment date next succeeding the date hereof, until the principal amount hereof shall become due and payable; and to pay on demand interest on any overdue principal (including any overdue prepayment of principal) and Make-Whole Amount, if any, and (to the extent permitted by applicable law) on any overdue installment of interest, at a rate equal to the lesser of (a) the highest rate allowed by applicable law or (b) the greater of (i) nine and four hundredths percent (9.04%) per annum and (ii) two percent (2%) over the rate of interest publicly announced by Morgan Guaranty Trust Company of New York in New York, New York as its "base" or "prime" rate. Payments of principal, Make-Whole Amount, if any, and interest shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts to the registered holder hereof at the address shown in the register maintained by the Company for such purpose, in the manner provided in the Note Purchase Agreement (defined below). This Note is one of an issue of Series G Notes of the Company issued in an aggregate principal amount limited to Twenty Million Dollars ($20,000,000) pursuant to the separate Note Purchase Agreements (collectively, the "Note Purchase Agreement"), each dated as of October 15, 2001, between the Company and each of the purchasers listed on Schedule A thereto, and is entitled to the benefits thereof. Capitalized terms used herein and not otherwise defined herein have the meanings specified in the Note Purchase Agreement. As provided in the Note Purchase Agreement, this Note may be prepaid, in whole or in part, together with a Make-Whole Amount. The Notes and all other obligations of the Company under the Note Purchase Agreement have been unconditionally guarantied by the Restricted Subsidiaries pursuant to the Guaranty, dated as of October 15, 2001, entered into by such Restricted Subsidiaries. This Note is a registered Note and is transferable, subject to the restrictions set forth in the Note Purchase Agreement and in the legend above, only by surrender thereof as specified in Section 13.2 of the Note Purchase Agreement. Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof, and the Company shall not be affected by any notice or knowledge to the contrary. Under certain circumstances, as specified in the Note Purchase Agreement, the principal of this Note (together with any applicable Make-Whole Amount) may be declared due and payable in the manner and with the effect provided in the Note Purchase Agreement. It is the intention of the parties hereto to comply with all applicable usury laws; accordingly, it is agreed that notwithstanding any provision to the contrary herein or in the Note Purchase Agreement, or in any of the documents securing payment hereof or otherwise relating hereto, no such provision shall require the payment or permit the collection of interest in excess of the highest rate allowed by applicable law (the "Maximum Rate"). If any excess of interest in such respect is provided for, or shall be adjudicated to be so provided for, herein or in the Note Purchase Agreement or in any of the documents securing payment hereof or otherwise relating hereto, then in such event (a) the provisions of this paragraph shall govern and control, (b) neither the Company, endorsers or Restricted Subsidiaries, nor their heirs, legal representatives, successors or assigns nor any other party liable for the payment hereof, shall be obligated to pay the amount of such interest to the extent that it is in excess of the Maximum Rate, (c) any such excess which may have been collected shall, at the election of the holder of this Note, be either applied as a credit against the then unpaid principal amount hereof or refunded to the Company, and (d) the provisions hereof and of the Note Purchase Agreement and any documents securing payment hereof shall be automatically reformed so that the effective rate of interest shall be reduced to the Maximum Rate. For the purpose of determining the Maximum Rate, all interest payments with respect hereto shall be amortized, prorated and spread throughout the full term hereof so that the effective rate of interest hereunder is uniform throughout the term hereof. THIS NOTE AND THE NOTE PURCHASE AGREEMENT ARE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, INTERNAL NEW YORK LAW.   SEITEL, INC.                 By:       Name:       Title:   EXHIBIT 1H [FORM OF SERIES H NOTE] THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY ONLY BE REOFFERED AND SOLD IN COMPLIANCE WITH THE REGISTRATION PROVISIONS OF SUCH ACT OR PURSUANT TO AN EXEMPTION THEREFROM. SEITEL, INC. 7.19% Series H Senior Note Due October 15, 2008 No. RH-[__]     [Date] $[________]      PPN: 816074 C@ 5 SEITEL, INC. (the "Company"), a Delaware corporation, for value received, hereby promises to pay to [_____________________] or registered assigns the principal sum of [_________________] DOLLARS ($[________]) on October 15, 2008 and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the unpaid principal balance thereof from the date of this Note at the rate of seven and nineteen hundredths percent (7.19%) per annum, semiannually on the fifteenth day of October and April in each year, commencing on the later of April 15, 2002 or the payment date next succeeding the date hereof, until the principal amount hereof shall become due and payable; and to pay on demand interest on any overdue principal (including any overdue prepayment of principal) and Make-Whole Amount, if any, and (to the extent permitted by applicable law) on any overdue installment of interest, at a rate equal to the lesser of (a) the highest rate allowed by applicable law or (b) the greater of (i) nine and nineteen hundredths percent (9.19%) per annum and (ii) two percent (2%) over the rate of interest publicly announced by Morgan Guaranty Trust Company of New York in New York, New York as its "base" or "prime" rate. Payments of principal, Make-Whole Amount, if any, and interest shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts to the registered holder hereof at the address shown in the register maintained by the Company for such purpose, in the manner provided in the Note Purchase Agreement (defined below). This Note is one of an issue of Series H Notes of the Company issued in an aggregate principal amount limited to Fifty Million Dollars ($50,000,000) pursuant to separate Note Purchase Agreements (collectively, the "Note Purchase Agreement"), each dated as of October 15, 2001, between the Company and each of the purchasers listed on Schedule A thereto, and is entitled to the benefits thereof. Capitalized terms used herein and not otherwise defined herein have the meanings specified in the Note Purchase Agreement. As provided in the Note Purchase Agreement, this Note is subject to prepayment, in whole or in part, in certain cases without a Make-Whole Amount and in other cases with a Make-Whole Amount. The Company agrees to make required prepayments on account of such Notes in accordance with the provisions of the Note Purchase Agreement. The Notes and all other obligations of the Company under the Note Purchase Agreement have been unconditionally guarantied by the Restricted Subsidiaries pursuant to the Guaranty, dated as of October 15, 2001, entered into by such Restricted Subsidiaries. This Note is a registered Note and is transferable, subject to the restrictions set forth in the Note Purchase Agreement and in the legend above, only by surrender thereof as specified in Section 13.2 of the Note Purchase Agreement. Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof, and the Company shall not be affected by any notice or knowledge to the contrary. Under certain circumstances, as specified in the Note Purchase Agreement, the principal of this Note (together with any applicable Make-Whole Amount) may be declared due and payable in the manner and with the effect provided in the Note Purchase Agreement. It is the intention of the parties hereto to comply with all applicable usury laws; accordingly, it is agreed that notwithstanding any provision to the contrary herein or in the Note Purchase Agreement, or in any of the documents securing payment hereof or otherwise relating hereto, no such provision shall require the payment or permit the collection of interest in excess of the highest rate allowed by applicable law (the "Maximum Rate"). If any excess of interest in such respect is provided for, or shall be adjudicated to be so provided for, herein or in the Note Purchase Agreement or in any of the documents securing payment hereof or otherwise relating hereto, then in such event (a) the provisions of this paragraph shall govern and control, (b) neither the Company, endorsers or Restricted Subsidiaries, nor their heirs, legal representatives, successors or assigns nor any other party liable for the payment hereof, shall be obligated to pay the amount of such interest to the extent that it is in excess of the Maximum Rate, (c) any such excess which may have been collected shall, at the election of the holder of this Note, be either applied as a credit against the then unpaid principal amount hereof or refunded to the Company, and (d) the provisions hereof and of the Note Purchase Agreement and any documents securing payment hereof shall be automatically reformed so that the effective rate of interest shall be reduced to the Maximum Rate. For the purpose of determining the Maximum Rate, all interest payments with respect hereto shall be amortized, prorated and spread throughout the full term hereof so that the effective rate of interest hereunder is uniform throughout the term hereof. THIS NOTE AND THE NOTE PURCHASE AGREEMENT ARE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, INTERNAL NEW YORK LAW.   SEITEL, INC.                 By:       Name:       Title:   EXHIBIT 1I [FORM OF SERIES I NOTE] THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY ONLY BE REOFFERED AND SOLD IN COMPLIANCE WITH THE REGISTRATION PROVISIONS OF SUCH ACT OR PURSUANT TO AN EXEMPTION THEREFROM. SEITEL, INC. 7.34% Series I Senior Note Due October 15, 2011 No. RI-[__]     [Date] $[________]      PPN: 816074 C# 3 SEITEL, INC. (the "Company"), a Delaware corporation, for value received, hereby promises to pay to [_____________________] or registered assigns the principal sum of [_________________] DOLLARS ($[________]) on October 15, 2011 and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the unpaid principal balance thereof from the date of this Note at the rate of seven and thirty-four hundredths percent (7.34%) per annum, semiannually on the fifteenth day of October and April in each year, commencing on the later of April 15, 2002, or the payment date next succeeding the date hereof, until the principal amount hereof shall become due and payable; and to pay on demand interest on any overdue principal (including any overdue prepayment of principal) and Make-Whole Amount, if any, and (to the extent permitted by applicable law) on any overdue installment of interest, at a rate equal to the lesser of (a) the highest rate allowed by applicable law or (b) the greater of (i) nine and thirty-four hundredths percent (9.34%) per annum and (ii) two percent (2%) over the rate of interest publicly announced by Morgan Guaranty Trust Company of New York in New York, New York as its "base" or "prime" rate. Payments of principal, Make-Whole Amount, if any, and interest shall be made in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of public and private debts to the registered holder hereof at the address shown in the register maintained by the Company for such purpose, in the manner provided in the Note Purchase Agreement (defined below). This Note is one of an issue of Series I Notes of the Company issued in an aggregate principal amount limited to Thirty-Seven Million Dollars ($37,000,000) pursuant to the separate Note Purchase Agreements (collectively, the "Note Purchase Agreement"), each dated as of October 15, 2001, between the Company and each of the purchasers listed on Schedule A thereto, and is entitled to the benefits thereof. Capitalized terms used herein and not otherwise defined herein have the meanings specified in the Note Purchase Agreement. As provided in the Note Purchase Agreement, this Note may be prepaid, in whole or in part, together with a Make-Whole Amount. The Notes and all other obligations of the Company under the Note Purchase Agreement have been unconditionally guarantied by the Restricted Subsidiaries pursuant to the Guaranty, dated as of October 15, 2001, entered into by such Restricted Subsidiaries. This Note is a registered Note and is transferable, subject to the restrictions set forth in the Note Purchase Agreement and in the legend above, only by surrender thereof as specified in Section 13.2 of the Note Purchase Agreement. Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof, and the Company shall not be affected by any notice or knowledge to the contrary. Under certain circumstances, as specified in the Note Purchase Agreement, the principal of this Note (together with any applicable Make-Whole Amount) may be declared due and payable in the manner and with the effect provided in the Note Purchase Agreement. It is the intention of the parties hereto to comply with all applicable usury laws; accordingly, it is agreed that notwithstanding any provision to the contrary herein or in the Note Purchase Agreement, or in any of the documents securing payment hereof or otherwise relating hereto, no such provision shall require the payment or permit the collection of interest in excess of the highest rate allowed by applicable law (the "Maximum Rate"). If any excess of interest in such respect is provided for, or shall be adjudicated to be so provided for, herein or in the Note Purchase Agreement or in any of the documents securing payment hereof or otherwise relating hereto, then in such event (a) the provisions of this paragraph shall govern and control, (b) neither the Company, endorsers or Restricted Subsidiaries, nor their heirs, legal representatives, successors or assigns nor any other party liable for the payment hereof, shall be obligated to pay the amount of such interest to the extent that it is in excess of the Maximum Rate, (c) any such excess which may have been collected shall, at the election of the holder of this Note, be either applied as a credit against the then unpaid principal amount hereof or refunded to the Company, and (d) the provisions hereof and of the Note Purchase Agreement and any documents securing payment hereof shall be automatically reformed so that the effective rate of interest shall be reduced to the Maximum Rate. For the purpose of determining the Maximum Rate, all interest payments with respect hereto shall be amortized, prorated and spread throughout the full term hereof so that the effective rate of interest hereunder is uniform throughout the term hereof. THIS NOTE AND THE NOTE PURCHASE AGREEMENT ARE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, INTERNAL NEW YORK LAW.   SEITEL, INC.                 By:       Name:       Title:   EXHIBIT 4.4(a) [FORM OF OPINION OF SPECIAL COUNSEL FOR THE COMPANY] EXHIBIT 4.4(b) [FORM OF OPINION OF SPECIAL COUNSEL FOR THE PURCHASERS] EXHIBIT 4.10 [FORM OF SUBSIDIARY GUARANTY] --------------------------------------------------------------------------------  

EXHIBIT 10.16   SECOND AMENDMENT AND WAIVER TO REFUNDING CREDIT AGREEMENT   This Second Amendment and Waiver to Refunding Credit Agreement (this “Amendment and Waiver”) is entered into as of March 1, 2001, among Cornerstone Propane, L.P., a Delaware limited partnership (the “Borrower”), the undersigned financial institutions (each a “Lender” and together constituting the “Required Lenders”, as said terms are defined in the Credit Agreement referred to below) and Bank of America, N.A. (formerly Bank of America National Trust and Savings Association), as agent for the Lenders as are or may become parties to said Credit Agreement (in such capacity, the “Agent”).   R E C I T A L S   A.            The Borrower is a party to a Refunding Credit Agreement dated as of November 20, 1998 with the Agent and the Lenders party thereto, as amended by a First Amendment to Refunding Credit Agreement (the “First Amendment”) dated as of June 30, 2000 with the Agent and the Lenders party thereto (such Refunding Credit Agreement as so amended by the First Amendment is referred to herein as the “Credit Agreement”).   B.            NorthWestern Corporation (“NOR”) executed a Guaranty (the “Guaranty Agreement”) dated as of June 30, 2000, in favor of the Agent for the benefit of itself and the Lenders.  Cornerstone Holding Corp. and Flame, Inc. have executed Guaranties (the “Original Guaranties”) in favor of the Trustee.   C.            The Borrower is a party to a Waiver Agreement (the “Original Waiver”) dated as of June 30, 2000 with the Agent and the Lenders party thereto.  As part of the Original Waiver, NOR agreed to reset the Guarantied Amount (as defined in the Guaranty Agreement) at $70,000,000 and that the Guarantied Amount could not be reduced below $70,000,000 without the consent of 100% of the Lenders.   D.            The Borrower has requested that the Agent and the Lenders currently parties to the Credit Agreement, (i) amend certain provisions of the Credit Agreement and (ii) waive any failure, actual or alleged, of the Borrower to comply with Section 8.2.4 of Credit Agreement as of September 30, 2000 and December 31, 2000, and the Agent and the Required Lenders, subject to the terms, conditions and limitations set forth herein, have agreed to do so.   AGREEMENT   NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:   1.             Defined Terms; Section and Paragraph References.  Initially capitalized terms used but not defined in this Amendment and Waiver shall have the meanings assigned to such terms in the Credit Agreement.  All “Section” references herein are to sections of the Credit Agreement unless otherwise specified.  All “paragraph” references herein are to paragraphs of this Amendment and Waiver unless otherwise specified.   2.             Amendments and Agreements.  On the terms of this Amendment and Waiver and subject to the satisfaction of the conditions precedent set forth below in paragraph 4 and, with respect to paragraph 2(a) below, the continuing conditions in paragraph 5, the Credit Agreement is amended and the Borrower agrees as follows:   (a)           Amendment of Section 8.2.4.  Section 8.2.4 of the Credit Agreement is hereby amended by inserting, at the end of said Section, a new paragraph to read as follows, in lieu of the paragraph added by Section 1.3 of the First Amendment:   “Notwithstanding the foregoing provisions of this Section 8.2.4, so long as (i) the Guaranty Agreement shall be in full force and effect, (ii) NOR is in compliance with all of its material obligations thereunder and (iii) NOR has not attempted to revoke in writing any of its obligations under the Guaranty Agreement:   (A)          the Total Funded Indebtedness to Consolidated Cash Flow Ratio as of any relevant date and for the period then ending shall, solely for purposes of the foregoing clause (a) of this Section 8.2.4 (and any related compliance report), be computed by subtracting the lesser of (i) the applicable “Guarantied Amount” on such date as specified in or pursuant to the Guaranty Agreement and (ii) the Guarantied Obligations (as defined in the Guaranty Agreement) outstanding on such date from the sum of the consolidated Debt, Capitalized Lease Liabilities and Synthetic Lease Obligations of the Borrower and the Restricted Subsidiaries (to the extent not resulting in a negative number);   (B)           the ratio of Consolidated Cash Flow to Consolidated Interest Expense as of any relevant date and for the period then ending shall, solely for purposes of the foregoing clause (b) of this Section 8.2.4 (and any related compliance report), be computed by excluding from the denominator of such ratio an amount equal to the average interest rate applicable to the Loans for the period then ending multiplied by the lesser of (i) the average “Guarantied Amount” applicable during the period then ending as specified in or pursuant to the Guaranty Agreement and (ii) the average Guarantied Obligations (as defined in the Guaranty Agreement) outstanding during the period then ending; and   (C)           in making the calculations required by Section 8.2.4, all adjustments for discontinued operations of the Borrower or any Subsidiary (or any of their divisions) shall be made in accordance with GAAP except that, regardless of compliance with GAAP, the Borrower may exclude from Consolidated Net Income losses relating to the discontinued natural gas financial trading operations of Coast Energy Group for the quarters ended June 30, 2000, September 30, 2000 and December 31, 2000, but not in excess of $4,600,000, $4,200,000 and $1,200,000, respectively.   In the event that (i) the Guaranty Agreement shall cease to be in full force and effect, (ii) NOR fails to comply with any of its material obligations under the Guaranty Agreement or (iii) NOR attempts to revoke in writing any of its obligations under the Guaranty Agreement, any Default or Event of Default which would have existed under the Credit Agreement shall be retroactively reinstated, and the Agent and the Lenders shall have all of their rights and remedies under the Credit Agreement, including any rights and remedies arising from a Default or Event of Default occasioned by a violation of this Section 8.2.4.”   (b)           Optional Termination of Acquisition Loan Commitment.  Pursuant to Section 2.2.1 of the Credit Agreement, after giving effect to the prepayment of the $10,000,000 in principal amount of the Acquisition Loans referred to in paragraph 4(b), the Acquisition Loan Commitment Amount is hereby reduced to the aggregate outstanding principal amount of the Acquisition Loans on the Second Amendment and Waiver Effective Date.   (c)           Reduction in Working Capital Loan Commitment Amount. Pursuant to Section 2.2.1 of the Credit Agreement, the Working Capital Loan Commitment Amount is hereby reduced to $70,000,000.   (d)           Increase in Clean Down.  Section 8.1.9 of the Credit Agreement is amended by replacing the amount “$10,000,000” with the amount “$20,000,000”.   (e)           Amendment Fees.  The Borrower agrees to pay to the Agent, for the pro rata account of each Lender, non-refundable amendment fees (without regard to usage) as follows:  (i) on or before the Second Amendment and Waiver Effective Date, a non-refundable amendment fee equal to the Working Capital Loan Commitment Amount (as reduced pursuant hereto) multiplied by 25 basis points, (ii) on or before the 90th day following the Second Amendment and Waiver Effective Date, a non-refundable amendment fee equal to the Working Capital Loan Commitment Amount then in effect, if any, multiplied by 25 basis points and (iii) on or before the 180th day following the Second Amendment and Waiver Effective Date, a non-refundable amendment fee equal to the Working Capital Loan Commitment Amount then in effect, if any, multiplied by 50 basis points.  Such amendment fees shall be fully earned on the date paid and are nonrefundable.   3.             Waiver.   (a)           In accordance with Section 11.1 of the Credit Agreement and, subject to the terms and conditions set forth in this Amendment and Waiver, on a one time basis, the Required Lenders hereby waive compliance with Section 8.2.4 of Credit Agreement as of September 30, 2000 and December 31, 2000.   (b)           The waiver given herein is a one time waiver strictly limited to its terms and shall not have any force and effect other than as expressly set forth herein.  The Agent and the Lenders specifically retain all their present and future rights under the Credit Agreement, including rights in connection with the representations, conditions and covenants thereof, except as specifically modified by the limited waiver described in paragraph 2(a).  No further waiver, either of additional terms or for any additional period, or consents of any kind, shall be implied from the waiver granted herein.  Without limiting the foregoing, the Borrower expressly acknowledges that neither the Agent nor any Lender has made any statement, promise or commitment, or given any promise or assurance, express or implied, that any waiver would be granted in the future.   4.             Conditions Precedent to the Effectiveness of this Amendment and Waiver.  The effectiveness of the amendment and agreements contained in paragraph 2 above and the one time waiver granted pursuant to paragraph 3 above is conditioned upon, and such amendments, agreements and waiver shall not be effective until, satisfaction in full of each of the following (the first date on which all of the following have been satisfied being referred to herein as the “Second Amendment and Waiver Effective Date”), and shall, solely in the case of the amendment and agreements contained in paragraph 2(a) above and the one time waiver granted pursuant to paragraph 3 above, only be effective thereafter so long as the continuing conditions contained in paragraph 5 below are complied with:   (a)           The Agent shall have received, on behalf of the Lenders, this Amendment and Waiver, duly executed and delivered by or on behalf of the Borrower, the Agent and the Required Lenders under the Credit Agreement and by NOR.   (b)           The Borrower prepays the principal of the Acquisition Loans by $10,000,000.   (c)           The Agent shall have received, on behalf of the Lenders, copies of partnership authorizations for this Amendment and Waiver for the Borrower and resolutions of the board of directors of each of the Managing General Partner, the Restricted Subsidiaries and NOR authorizing and ratifying the transactions contemplated hereby, certified by the Secretary or an Assistant Secretary of such Person.   (d)           The Agent shall have received a legal opinion satisfactory to it from the Borrower’s legal counsel as to the due authorization, execution delivery and binding effect of this Second Amendment and Waiver and as to no conflict with, other or default under, the Borrower’s charter documents or, to such counsel’s knowledge, any document or agreement to which the Borrower is a party providing for the borrowing of money or the issuance of debt securities.   (e)           Each of the representations and warranties set forth in this Amendment and Waiver shall be true and correct on a date when all other conditions set forth in the other paragraphs of this paragraph 4 shall have been satisfied.  No Default or Event of Default (other than that which might exist by virtue of paragraph 8.2.4 absent this Amendment and Waiver) shall have occurred and be continuing or would result from the consummation of the transactions contemplated in this Amendment and Waiver.   (f)            The Agent shall have received the amendment fees referred to in clause (i) of paragraph 2(e) and the last sentence of paragraph 2(e).   (g)           All invoices of the Agent’s counsel dated prior to April 1, 2001 shall have been paid in full.   5.             Continuing Condition to Effectiveness of Amendment and Waiver.  The  amendment contained in paragraph 2(a) above and the waiver set forth in paragraph 3 above shall be subject to, in addition to the conditions set forth in paragraph 4 above, the conditions that (a) at no time after November 10, 2000 shall the Borrower, without the prior written consent of 100% of the Lenders, request an Acquisition Loan under the Credit Agreement, (b) pursuant to Section 3.1(a) of the Credit Agreement, on or before November 30, 2001, the Borrower makes a voluntary prepayment of all then outstanding Acquisition Loans, and (c) no more than $2,275,000 in guaranty or analogous fees relating to the Guaranty Agreement is paid to NOR prior to the date on which all of the Obligations have been paid in full and the Commitments shall have terminated.  If the Borrower shall fail to comply with any of the conditions contained in the foregoing sentence (regardless of the satisfaction of the conditions contained in paragraph 4 above), the amendment contained in paragraph 2(a) above and the waiver set forth in paragraph 3 above shall automatically and immediately terminate and be rescinded, the provisions of Section 8.2.4 shall be retroactively reinstated and any Event of Default or Default which would have existed under Section 8.2.4 shall be retroactively reinstated, except that the amendments contained in Sections 2(b),(c),(d) and (e) shall remain in effect for all purposes.  Upon such termination and rescission, the Agent and the Lenders shall have all of their rights and remedies under the Credit Agreement, including any rights and remedies arising from a Default or Event of Default occasioned by a violation of Section 8.2.4.   6.             Representations and Warranties.  In order to induce the Agent and the Required Lenders to enter into this Amendment and Waiver, the Borrower represents and warrants to the Agent and each Lender as follows:   (a)           Power and Authority.  The Borrower has all requisite partnership power and authority to enter into this Amendment and Waiver and to carry out the transactions contemplated by, and perform its obligations under, the Credit Agreement.   (b)           Authorization of Agreements.  The execution and delivery of this Amendment and Waiver  by the Borrower, and the performance of the Credit Agreement by the Borrower have been duly authorized by all necessary partnership action, and this Amendment and Waiver has been duly executed and delivered on behalf of the Borrower.   (c)           Enforceability.  The Credit Agreement constitutes the legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except as enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, fraudulent transfer or other similar laws relating to or affecting the rights of creditors generally, (ii) general principles of equity (regardless of whether considered in a proceeding in equity or at law), including, without limitation (A) the possible unavailability of specific performance, injunctive relief or any other equitable remedy, and (B) concepts of materiality, reasonableness, good faith and fair dealing, and (iii) rights of indemnification or contribution being limited by Federal and state securities laws and the public policy underlying such laws.   (d)           No Conflict.  The execution and delivery by the Borrower of this Amendment and Waiver and the performance by the Borrower of the Credit Agreement do not and will not (i) contravene, in any material respect, any provision of any law, regulation, decree, ruling, judgment or order that is applicable to the Borrower or its properties or other assets, (ii) result in a breach of or constitute a default under the certificate of limited partnership or partnership agreement of the Borrower or any material agreement, indenture, lease or instrument binding upon it, or its properties or other assets or (iii) result in the creation or imposition of any Liens on its properties other than as permitted under the Credit Agreement.   (e)           Governmental Consents.  No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Borrower of this Amendment and Waiver.   (f)            Representations and Warranties in the Credit Agreement.  The Borrower confirms that (i) the representations and warranties contained in Article VII of the Credit Agreement are true and correct in all material respects, except to the extent any such representation and warranty is expressly stated to have been made as of a specific date, in which case it shall be true and correct as of such specific date and (ii) no Default or Event of Default (other than that which might exist by virtue of Section 8.2.4 absent this Amendment and Waiver) has occurred and is continuing.   (g)           Restricted Subsidiaries.  As of the date of this Amendment and Waiver, the Borrower has no Restricted Subsidiaries other than Cornerstone Holding and Flame.   7.             Counterparts; Notice of Effectiveness.  This Amendment and Waiver may be executed by the parties hereto in any number of counterparts, all of which shall constitute together but one and the same agreement, and any such person may become a party hereto by executing any such counterpart.  Facsimile signatures shall be effective and binding for all purposes.  In proving any matter with respect to this Amendment and Waiver it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought.   8.             Ratification of Credit Agreement.  The Credit Agreement, as amended and after giving effect to this Amendment and Waiver, is hereby ratified and confirmed in all respects.   9.             Governing Law.  This Amendment and Waiver shall be deemed to be a contract made under and governed by the internal laws of the State of New York.   IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment and Waiver, as of the date first above written.     CORNERSTONE PROPANE, L.P.             By: CORNERSTONE PROPANE GP, INC.,       its Managing General Partner                       By:       Name:       Title:         BANK OF AMERICA, N.A., as Agent for the Lenders                 By:       Name       Title:                   BANK OF AMERICA, N.A.                 By:       Name:       Title:         UNION BANK OF CALIFORNIA, N.A.             By:     Name:     Title:         FLEET NATIONAL BANK           By:       Name:       Title           FIRST UNION NATIONAL BANK           By:     Name:     Title:         THE BANK OF NOVA SCOTIA           By:     Name:     Title:         CREDIT AGRICOLE INDOSUEZ           By:     Name:     Title:     Each of the undersigned hereby acknowledges and consents to the foregoing Second Amendment and Waiver to Refunding Credit Agreement, reaffirms the terms of its Guaranty in favor of the Trustee and acknowledges that such Guaranty remains in full force and effect in accordance with its terms.   Dated:     CORNERSTONE HOLDING CORP           By:     Name:     Title:           FLAME, INC.           By:     Name:     Title:       The undersigned hereby (a) acknowledges and consents to the foregoing Second Amendment and Waiver to Refunding Credit Agreement, (b) reaffirms the terms of its Guaranty Agreement dated as of June 30, 2000 in favor of the Agent, (c) acknowledges and agrees that the Guarantied Amount under such Guaranty Agreement is and remains at $70,000,000, (d) agrees that the Guarantied Amount cannot be reduced below $70,000,000 without the consent of 100% of the Lenders, and any attempted or purported reduction in contravention of the foregoing shall be null and void, (e) agrees that if the Guarantied Amount under such Guaranty Agreement is increased above $70,000,000 after the date hereof, the Guarantied Amount under such Guaranty Agreement may not thereafter be reduced below such increased amount without the consent of the Required Lenders, and any attempted or purported reduction in contravention of the foregoing shall be null and void, and (f) acknowledges that such Guaranty Agreement remains in full force and effect in accordance with its terms.   Dated as of March 1, 2001 NORTHWESTERN CORPORATION           By:     Name:     Title:    

Exhibit 10.34 LABOR READY, INC.. 2000 STOCK OPTION PLAN (AS AMENDED FEBRUARY 20, 2001) -------------------------------------------------------------------------------- SECTION 1. PURPOSE           The purpose of the 2000 Stock Option Plan (the “Plan”) is to enhance the long-term shareholder value of Labor Ready, Inc., a Washington corporation (the “Company”), by aligning the interests of its employees with those of its shareholders by offering opportunities to all full-time employees of the Company and its Subsidiaries (as defined in Section 2) to own shares in the Company and thereby participate in the Company’s growth and success, and to encourage them to remain in the service of the Company and its Subsidiaries.  Officers and Directors of the Company are not eligible to participate in this Plan. SECTION 2. DEFINITIONS           For purposes of the Plan, the following terms shall be defined as set forth below:           2.1.    “Board” means the Board of Directors of the Company.           2.2.    “Code” means the Internal Revenue Code of 1986, as amended from time to time.           2.3.    “Common Stock” means the common stock of the Company.           2.4.    “Corporate Transaction” means any of the following events:                     2.4.1. Consummation of any merger or consolidation of the Company in which the Company is not the continuing or surviving corporation, or pursuant to which shares of Common Stock are converted into cash, securities, or other property, if following such merger or consolidation the holders of the Company’s outstanding voting securities immediately prior to such merger or consolidation own less than 50% of the outstanding voting securities of the surviving corporation;                     2.4.2. Consummation of any sale, lease, exchange, or other transfer, in one transaction or a series of related transactions, of all or substantially all of the Company’s assets, other than a transfer of the Company’s assets to a majority-owned subsidiary corporation of the Company; or                     2.4.3. Approval by the holders of the Common Stock of any plan or proposal for the liquidation or dissolution of the Company.           Ownership of voting securities shall take into account and shall include ownership as determined by applying Rule 13d-3(d)(1)(i) (as in effect on the date of adoption of the Plan) under the Exchange Act.           2.5     "Director" means an individual duly elected or appointed to the Company's board of directors.           2.6     “Disability” means “permanent and total disability” as that term is defined for purposes of Section 22(e)(3) of the Code.           2.7     “Early Retirement” means early retirement as that term is defined by the Plan Administrator from time to time for purposes of the Plan.           2.8     "Employee" means a person continuously employed for not less than one month by the Company or by any current or future Subsidiary of the Company on a regular basis.           2.9     “Exchange Act” means the Securities Exchange Act of 1934, as amended.           2.10   “Fair Market Value” shall be as established in good faith by the Plan Administrator or (a) if the Common Stock is listed on the Nasdaq National Market, the closing sale price for the Common Stock as reported by the Nasdaq National Market for the date upon which the “Fair Market Value” is to be determined, or (b) if the Common Stock is listed on the New York Stock Exchange or the American Stock Exchange, the closing sale price for the Common Stock as such price is officially quoted in the composite tape of transactions on such exchange for the date upon which the “Fair Market Value” is to be determined.  If there is no such reported price for the Common Stock for any date in question, then the reported price available on the last trading day immediately preceding such date shall be used to determine the Fair Market Value.           2.11   “Grant Date” means the date on which the Plan Administrator adopted the granting resolution or a later date designated in a resolution of the Plan Administrator as the date an Option is to be granted.           2.12   "Officer" means the Chief Executive Officer, President, Vice-President, Chief Financial Officer and such other executive management persons designated by the Board of Directors from time to time, all in conformity with NYSE rule 312.03.           2.13   “Option” means a nonqualified stock option granted under this Plan, which grants the recipient the right to purchase Common Stock.           2.14   “Optionee” means (i) the person to whom an Option is granted; (ii) for an Optionee who has died, the personal representative of the Optionee’s estate, the person(s) to whom the Optionee’s rights under the Option have passed by will or by the applicable laws of descent and distribution, or the beneficiary designated in accordance with Section 9; or (iii) person(s) to whom an Option has been transferred in accordance with Section 9.           2.15   “Plan Administrator” means the Board or any committee of the Board designated to administer the Plan under Section 3.1.           2.16   “Retirement” means retirement as of the individual’s normal retirement date as that term is defined by the Plan Administrator from time to time for purposes of the Plan.           2.17   “Securities Act” means the Securities Act of 1933, as amended.           2.18   “Subsidiary”, except as provided in Section 8.3 in connection with Incentive Stock Options, means any entity that is directly or indirectly controlled by the Company or in which the Company has a significant ownership interest, as determined by the Plan Administrator, and any entity that may become a direct or indirect parent of the Company.           2.19   “Successor Corporation” has the meaning set forth under Section 10.2. SECTION 3. ADMINISTRATION           3.1.    Plan Administrator.  The Plan shall be administered by the Board or a committee or committees (which term includes subcommittees) appointed by, and consisting of one or more members of, the Board.  The Board may delegate the responsibility for administering the Plan with respect to designated classes of eligible persons to different committees consisting of two or more members of the Board, subject to such limitations as the Board deems appropriate.  Committee members shall serve for such term as the Board may determine, subject to removal by the Board at any time.           3.2.    Administration and Interpretation by the Plan Administrator.  Except for the terms and conditions explicitly set forth in the Plan, the Plan Administrator shall have exclusive authority, in its discretion, to determine all matters relating to Options under the Plan, including the selection of Employees to be granted Options, the number of shares of Common Stock subject to an Option, all terms, conditions, restrictions and limitations, if any, of an Option and the terms of any instrument that evidences the Option.  The Plan Administrator shall also have exclusive authority to interpret the Plan and may from time to time adopt, and change, rules and regulations of general application for the Plan’s administration.  The Plan Administrator’s interpretation of the Plan and its rules and regulations, and all actions taken and determinations made by the Plan Administrator pursuant to the Plan, shall be conclusive and binding on all parties involved or affected.  The Plan Administrator may delegate administrative duties to such of the Company’s officers as it so determines. SECTION 4. STOCK SUBJECT TO THE PLAN           4.1.    Authorized Number of Shares.  Subject to adjustment from time to time as provided in Section 10.1, a maximum of 3,000,000 shares of Common Stock (subject to appropriate adjustment in the case of stock splits, stock dividends and the like) shall be available for issuance under the Plan.  Shares issued under the Plan shall be drawn from authorized and unissued shares or shares now held or subsequently acquired by the Company.           4.2.    Reuse of Shares.  Any shares of Common Stock that have been made subject to an Option but that cease to be subject to the Option (other than by reason of exercise of the Option to the extent it is exercised for shares) shall again be available for issuance in connection with future grants of Options under the Plan. SECTION 5. ELIGIBILITY           Options may be granted under the Plan to Employees as the Plan Administrator from time to time selects. SECTION 6. ACQUISITIONS           6.1.             Acquired Company Option Awards.      Notwithstanding anything in the Plan to the contrary, the Plan Administrator may grant Options under the Plan in substitution for awards issued under other plans, or assume under the Plan awards issued under other plans, if the other plans are or were plans of other acquired entities (“Acquired Entities”) (or the parent of the Acquired Entity) and the new Option is substituted, or the old award is assumed, by reason of a merger, consolidation, acquisition of property or of stock, reorganization or liquidation (the “Acquisition Transaction”).  In the event that a written agreement pursuant to which the Acquisition Transaction is completed is approved by the Board and said agreement sets forth the terms and conditions of the substitution for or assumption of outstanding awards of the Acquired Entity, said terms and conditions shall be deemed to be the action of the Plan Administrator without any further action by the Plan Administrator, and the persons holding such awards shall be deemed to be Optionees. SECTION 7. TERMS AND CONDITIONS OF OPTIONS           7.1     Form and Grant of Options.  The Plan Administrator shall have the authority, in its sole discretion, to determine the amount of Options to be made under the Plan.  Options may be granted singly or in combination.           7.2     Option Exercise Price.  The exercise price for shares purchased under an Option shall be as determined by the Plan Administrator, but shall not be less than 100% of the Fair Market Value of the Common Stock on the Grant Date.           7.3     Term of Options.  The term of each Option shall be as established by the Plan Administrator or, if not so established, shall be 5 years from the Grant Date.           7.4     Exercise of Options.  The Plan Administrator shall establish and set forth in each instrument that evidences an Option the time at which or the installments in which the Option shall become exercisable, which provisions may be waived or modified by the Plan Administrator at any time.  If not so established in the instrument evidencing the Option, the Option will become exercisable according to the following schedule, which may be waived or modified by the Plan Administrator at any time:   Period of Holder’s Continuous Employment or Service With the Company or Its Subsidiaries From the Option Grant Date Percent of Total Option That Is Exercisable     After 1 year 25% Each l year period of continuous service completed thereafter An additional 25% After 4 years 100% To the extent that the right to purchase shares has accrued thereunder, an Option may be exercised from time to time by written notice to the Company, in accordance with procedures established by the Plan Administrator, setting forth the number of shares with respect to which the Option is being exercised and accompanied by payment in full as described in Section 7.5.           7.5     Payment of Exercise Price.  The exercise price for shares purchased under an Option shall be paid in full to the Company by delivery of consideration equal to the product of the Option exercise price and the number of shares purchased.  Such consideration must be paid in cash or by check or, unless the Plan Administrator in its sole discretion determines otherwise, either at the time the Option is granted or at any time before it is exercised, a combination of cash and/or check and if and so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, delivery of a properly executed exercise notice, together with irrevocable instructions, to (i) a brokerage firm designated by the Company to deliver promptly to the Company the aggregate amount of sale or loan proceeds to pay the Option exercise price and any withholding tax obligations that may arise in connection with the exercise and (ii) the Company to deliver the certificates for such purchased shares directly to such brokerage firm, all in accordance with the regulations of the Federal Reserve Board. In addition, the exercise price for shares purchased under an Option may be paid, either singly or in combination with one or more of the alternative forms of payment authorized by this Section 7.5 or by such other consideration as the Plan Administrator may permit.           7.6     Post-Termination Exercises.  The Plan Administrator shall establish and set forth in each instrument that evidences an Option whether the Option will continue to be exercisable, and the terms and conditions of such exercise, if an Optionee ceases to be employed by, or to provide services to, the Company or its Subsidiaries, which provisions may be waived or modified by the Plan Administrator at any time.  If not so established in the instrument evidencing the Option, the Option will be exercisable according to the following terms and conditions, which may be waived or modified by the Plan Administrator at any time.           Any portion of an Option that is not exercisable on the date of termination of the Optionee’s employment or services shall terminate on such date. A transfer of employment or services between or among the Company and its Subsidiaries shall not be considered a termination of employment or services.  The effect of a Company-approved leave of absence on the terms and conditions of an Option shall be determined by the Plan Administrator, in its sole discretion. SECTION 8. ASSIGNABILITY           No Option granted under the Plan may be assigned, pledged, or transferred by the Optionee other than by will or by the applicable laws of descent and distribution, and, during the Optionee’s lifetime, such Option may be exercised only by the Optionee or a permitted assignee or transferee of the Optionee (as provided below). SECTION 9. ADJUSTMENTS           9.1     Adjustment of Shares.  In the event that, at any time or from time to time, a stock dividend, stock split, spin-off, combination or exchange of shares, recapitalization, merger, consolidation, distribution to shareholders other than a normal cash dividend, or other change in the Company’s corporate or capital structure results in (a) the outstanding shares, or any securities exchanged therefor or received in their place, being exchanged for a different number or class of securities of the Company or of any other corporation or (b) new, different or additional securities of the Company or of any other corporation being received by the holders of shares of Common Stock of the Company, then the Plan Administrator shall make proportional adjustments in (i) the maximum number and kind of securities subject to the Plan as set forth in Section 4.1 and (ii) the number and kind of securities that are subject to any outstanding Option and the per share price of such securities, without any change in the aggregate price to be paid therefor.  The determination by the Plan Administrator as to the terms of any of the foregoing adjustments shall be conclusive and binding.           9.2     Adjustment of Options.  The Plan Administrator shall have the discretion, exercisable at any time before a sale, merger, consolidation, reorganization, liquidation, or change in control of the Company, as defined by the Plan Administrator, to take such further action as it determines to be necessary or advisable, and fair and equitable to Optionees, with respect to Options.  Such authorized action may include (but shall not be limited to) establishing, amending or waiving the type, terms, conditions or duration of, or restrictions on, Options so as to provide for earlier, later, extended or additional time for exercise and other modifications, and the Plan Administrator may take such actions with respect to all Optionees, to certain categories of Optionees or only to individual Optionees.  The Plan Administrator may take such action before or after granting Options to which the action relates and before or after any public announcement with respect to such sale, merger, consolidation, reorganization, liquidation, or change in control that is the reason for such action.           9.3     Limitations. The grant of Options will in no way affect the Company’s right to adjust, reclassify, reorganize, or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. SECTION 10. WITHHOLDING           The Company may require the Optionee to pay to the Company the amount of any withholding taxes that the Company is required to withhold with respect to the grant or exercise of any Option. Subject to the Plan and applicable law, the Plan Administrator may, in its sole discretion, permit the Optionee to satisfy withholding obligations, in whole or in part, by paying cash, by electing to have the Company withhold shares of Common Stock or by transferring shares of Common Stock to the Company, in such amounts as are equivalent to the Fair Market Value of the withholding obligation.  The Company shall have the right to withhold from any shares of Common Stock issuable pursuant to an Option or from any cash amounts otherwise due or to become due from the Company to the Optionee an amount equal to such taxes.  The Company may also deduct from any Option any other amounts due from the Optionee to the Company or a Subsidiary. SECTION 11. AMENDMENT AND TERMINATION OF PLAN           11.1   Amendment of Plan.  The Plan may be amended only by the Board in such respects as it shall deem advisable.           11.2   Termination of Plan.  The Board may suspend or terminate the Plan at any time.  The Plan will have no fixed expiration date.           11.3   Consent of Optionee.  The amendment or termination of the Plan shall not, without the consent of the Optionee, impair or diminish any rights or obligations under any Option theretofore granted under the Plan. SECTION 12. GENERAL           12.1   Option Agreements.  Options granted under the Plan shall be evidenced by a written grant in such form as approved by the Plan Administrator from time to time.           12.2   Continued Employment or Services; Rights in Options.  None of the Plan, participation in the Plan, or any action of the Plan Administrator taken under the Plan shall be construed as giving any person any right to be retained in the employ of the Company or limit the Company’s right to terminate the employment or services of any person.           12.3   No Rights as a Shareholder.  No Option shall entitle the Optionee to any dividend, voting, or other right of a shareholder unless and until the date of issuance under the Plan of the shares that are the subject of such Option, free of all applicable restrictions.           12.4   No Trust or Fund.  The Plan is intended to constitute an “unfunded” plan.  Nothing contained herein shall require the Company to segregate any monies or other property, or shares of Common Stock, or to create any trusts, or to make any special deposits for any immediate or deferred amounts payable to any Optionee, and no Optionee shall have any rights that are greater than those of a general unsecured creditor of the Company.           12.5   Costs and Expenses.  Except as provided herein with respect to the payment of taxes, all costs and expenses of administering the Plan shall be borne by the Company and shall not be charged to any grant nor any employee receiving a grant.           12.6   Golden Parachute Taxes.  In the event that any amounts paid or deemed paid to an employee under this Plan are deemed to constitute “excess parachute payments” as defined in Section 280G of the Code (taking into account any other payments made under this Plan and any other compensation paid or deemed paid to an employee), or if any employee is deemed to receive an “excess parachute payment” by reason of his or her vesting of Options pursuant to Section 10 hereof, the amount of such payments or deemed payments shall be reduced (or, alternatively the provisions of Section 10 shall not act to vest options to such employee), so that no such payments or deemed payments shall constitute excess parachute payments.  The determination of whether a payment or deemed payment constitutes an excess parachute payment shall be in the sole discretion of the Plan Administrator.           12.7   Foreign Employees.  Without amending the Plan, the Board may authorize the Plan Administrator to grant options to eligible employees who are foreign nationals on such terms and conditions different from those specified in this Plan as may in the judgment of the Board be necessary or desirable to foster and promote achievement of the purposes of the Plan, and, in furtherance of such purposes the Board may make such modifications, amendments, procedures, subplans, and the like as may be necessary or advisable to comply with the provisions of the laws in other countries in which the Company operates or has employees.           12.8    Governing Law.  This Plan shall be governed by and construed in accordance with the laws of the State of Washington.           12.9    Severability. If any provision of the Plan or any Option is determined to be invalid, illegal or unenforceable in any jurisdiction, or as to any person, or would disqualify the Plan or any Option under any law deemed applicable by the Plan Administrator, such provision shall be construed or deemed amended to conform to applicable laws, or, if it cannot be so construed or deemed amended without, in the Plan Administrator’s determination, materially altering the intent of the Plan or the Option, such provision shall be stricken as to such jurisdiction, person or Option, and the remainder of the Plan and any such Option shall remain in full force and effect. SECTION 15. EFFECTIVE DATE           The effective date of the Plan is the date on which it is adopted by the Board. Adopted by the Board on 14 March, 2000 and as amended on February 20, 2001  

Exhibit 10.7 EMPLOYMENT AGREEMENT       This Employment Agreement (this “Agreement”) is entered into as of June 1, 2001 between Sequoia Software Corporation, a Maryland corporation (the "Company”), and Paul Martin (the “Employee”).       IN CONSIDERATION OF the mutual covenants and agreements hereinafter set forth, the parties hereto hereby agree as follows: 1. Employment.       The Company hereby employs the Employee, and the Employee hereby accepts employment with the Company, upon the terms and conditions hereinafter set forth. 2. Term.       Unless Employee’s employment hereunder is terminated earlier pursuant to Section 5 of this Agreement, Employee’s employment hereunder shall begin on the date hereof and shall expire two (2) years from the date hereof, provided that upon the expiration of the first two (2) years of such employment, the Employee’s employment hereunder shall continue for additional consecutive extension terms of one (1) year each until either party gives notice of termination to the other at least one hundred eighty (180) days prior to end of the then current term. The term of employment described in the immediately preceding sentence, including any extensions but without giving effect to any earlier termination provided for under Section 5 of this Agreement, is hereinafter described as the “Contract Term.” The period of time during which the Employee actually is employed hereunder, giving effect to any termination of employment under Section 5 of this Agreement, is hereinafter described as the “Term.” 3. Duties and Responsibilities.       3.1 During the Term, the Employee shall devote his full attention and expend his best efforts, energies, and skills, on a full-time basis, to the business of the Company and any corporation, partnership or other entity controlled by the Company (each, a “Subsidiary”). For purposes of this Agreement, the term the “Company” shall mean the Company and all Subsidiaries.       3.2 During the Term, the Employee shall serve as the Chief Technology Officer of the Company. In the performance of all of his responsibilities as the Chief Technology Officer hereunder, the Employee shall be subject to all of the Company’s policies, rules and regulations applicable to its employees of comparable status, shall report directly to, and be subject to the direction and control of, the President of the Company, and shall perform such duties as shall reasonably be assigned to him by the President and are consistent with those duties assigned employees of comparable status. In performing such duties, the Employee will be subject to and abide by, and will cause employees of the   -------------------------------------------------------------------------------- Company to be subject to and abide by, all policies and procedures developed by senior management of the Company.       3.3 In order to induce the Company to enter into this Agreement, the Employee represents and warrants to the Company that (a) the Employee is not a party or subject to any employment agreement or arrangement with any other person, firm, company, corporation or other business entity, and (b) the Employee is subject to no restraint, limitation or restriction by virtue of any law, any contract or otherwise which would impair the Employee’s right or ability (i) to enter the employ of the Company, or (ii) to perform fully his duties and obligations pursuant to this Agreement. 4. Compensation and Benefits.       4.1 For all services rendered by the Employee under this Agreement, the Company shall pay or cause to be paid to the Employee, and the Employee shall accept, the Base Salary (as such term is hereinafter defined in this Article 4) and participation in the Sequoia Software Corporation 2000 Stock Incentive Plan, all in accordance with and subject to the terms of this Agreement. The term “Compensation” shall mean the Base Salary and participation in the Sequoia Software Corporation 2000 Stock Incentive Plan.       4.2 During the Term, the Company shall pay the Employee a “Base Salary” at an annual rate of One Hundred Thirty Thousand Dollars ($130,000), payable in installments in accordance with the Company’s regular payroll practices and subject to all withholding required by law. The Board of Directors of the Company (the “Board of Directors”), or the Compensation Committee thereof, shall review the Base Salary of the Employee at least annually and may grant increases thereto in its sole discretion.       4.3 During the Employee’s employment under this Agreement, the Employee shall be eligible to participate in the Sequoia Software Corporation 2000 Stock Incentive Plan, and other stock plans as may be maintained by the Company from time to time, in whole or in part. The Employee’s awards under such stock plans shall be determined by the Company, the Board of Directors or such person or administrative body as provided under such plans.       4.4 During the Term, the Employee shall be entitled to (i) participation in such employee retirement, and welfare benefit plans, programs, policies and arrangements as maintained by the Company from time to time, in whole or in part, for employees of his level; subject to, and to the extent that, the Employee is eligible under such benefit plans in accordance with their respective terms (ii) paid vacation, holidays, leave of absence, leave for illness, funeral leave and temporary disability leave in accordance with the policies of the Company; and (iii) perquisites as from time to time provided by the Company to employees of his level.       4.5 During the Term, the Employee is authorized to incur reasonable expenses in the performance of his duties hereunder. The Company shall reimburse the Employee for all such expenses upon the presentation by the Employee, not less frequently than monthly, of signed, itemized accounts of such expenditures and vouchers, all in accordance with the Company’s procedures and policies as adopted and in effect from time to time and applicable to its employees of comparable status. -2- -------------------------------------------------------------------------------- 5. Termination.       5.1 The Company may terminate the Employee’s employment under this Agreement at any time for Cause. “Cause” shall exist for such termination if Employee (i) is adjudicated guilty of a felony by a court of competent jurisdiction, (ii) commits any act of fraud or intentional misrepresentation, (iii) has materially breached any covenant set forth in this Agreement or willfully violated any direction of the Board of Directors, which breach or willful violation the Employee has not cured within thirty (30) days following notice by the Board of Directors to the Employee of the breach or willful violation, or (iv) has made any material misrepresentation to the Company under Section 3.3 hereof.       5.2 The Company may terminate the Employee’s employment under this Agreement at any time without Cause. If the Company breaches any term of this Agreement and fails to cure such breach within thirty (30) days of notice of such breach from the Employee, and if Employee terminates his employment with the Company within thirty (30) days after the period for the cure of the breach by the Company expires, the Company shall be deemed to have terminated the Employee’s employment hereunder without Cause.       5.3 The Employee may voluntarily terminate his employment under this Agreement at any time. For the purposes of this Agreement, if the Employee terminates his employment under this Agreement pursuant to the second sentence of Section 5.2 above, he shall not be deemed to have terminated such employment under this Section 5.3.       5.4 The election of the Company to give notice in accordance with Section 2 above that the Employee’s employment hereunder will not be extended for an additional one (1) year term shall not constitute a termination of the Employee’s employment hereunder by the Company without Cause for the purposes of Section 5.2 above. 6. Severance Payments.       If the Employee’s employment under this Agreement is terminated during the Term of the Agreement by the Company without Cause, the Employee shall be entitled to continuation in payment of his Base Salary, at the rate in effect immediately before the date of termination, for a period equal to the greater of (a) the period from the day after his last day of employment hereunder through the last day of the Term of this Agreement, or (b) one (1) year, provided that the Employee (i) honors the restrictive covenants as provided in Section 7 of this Agreement and (ii) executes a release of all claims arising from his employment by the Company, in such form as may then be used by the Company respecting termination of employees. 7. Restrictive Covenants.       The Employee shall execute and be bound by the Employee Invention, Assignment and Confidentiality Agreement, which is attached hereto as Exhibit A. The Employee agrees that the Employee Invention, Assignment and Confidentiality Agreement constitutes a separate agreement independently supported by good and adequate consideration and, notwithstanding anything in this -3- -------------------------------------------------------------------------------- Agreement to the contrary, shall be severable from the other provisions of, and shall survive, this Agreement. 8. Miscellaneous.       8.1 This Agreement is a personal contract, and the rights and interests of the Employee hereunder may not be sold, transferred, assigned, pledged or hypothecated except as otherwise expressly permitted by the provisions of this Agreement. The Employee shall not under any circumstances have any option or right to require payment hereunder otherwise than in accordance with the terms hereof. Except as otherwise expressly provided herein, the Employee shall not have any power of anticipation, alienation or assignment of payments contemplated hereunder, and all rights and benefits of the Employee shall be for the sole personal benefit of the Employee, and no other person shall acquire any right, title or interest hereunder by reason of any sale, assignment, transfer claim or judgment or bankruptcy proceedings against the Employee; provided, however, that in the event of the Employee’s death, the Employee’s estate, legal representatives or heirs, as appropriate, shall succeed to and acquire all rights and benefits that accrued to the Employee pursuant to, and in accordance with, the terms of this Agreement.       8.2 The Company shall have the right to assign this Agreement to any successor to substantially all of its business or assets, and any such successor shall be bound by all of the provisions hereof.       8.3 Any notice required or permitted by or in connection with this Agreement shall be in writing and shall be made by hand delivery, by Federal Express, or other similar overnight delivery service, or by certified mail, unrestricted delivery, return receipt requested, postage prepaid, addressed to the addressee at the appropriate address set forth below or to such other address as may be hereafter specified by written notice by the addressee to the other party to this Agreement. Notice shall be considered given as of the date of the hand delivery, one (1) calendar day after delivery to Federal Express or similar overnight delivery service, or three (3) calendar days after the date of mailing, independent of the date of actual delivery or whether delivery is ever in fact made. If to the Company: Sequoia Software Corporation 8890 McGaw Road, Columbia, Maryland 21045 Attention: Board of Directors If to the Employee: Paul Martin c/o Sequoia Software Corporation 8890 McGaw Road, Columbia, Maryland 21045       8.4 This Agreement may not be changed, amended, terminated or superseded orally, but only by an agreement in writing, nor may any of the provisions hereof be waived orally, but only by an instrument in writing, in any such case signed by the party against whom enforcement of any change, amendment, termination, waiver, modification, extension or discharge is sought.       8.5 Except as otherwise provided herein, this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Maryland, without giving any effect to the principles of conflicts of laws. -4- --------------------------------------------------------------------------------       8.6 All descriptive headings and captions of the several sections of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.       8.7 If any provision of this Agreement, or part thereof, is held to be unenforceable, the remainder of this Agreement and provision, as the case may be, shall nevertheless remain in full force and effect.       8.8 Each of the parties hereto shall, at any time and from time to time hereafter, upon the reasonable request of the other, take such further actions and execute, acknowledge and deliver all such instruments of further assurance as necessary to carry out the provisions of this Agreement.       8.9 This Agreement contains the entire agreement and understanding between the Company and the Employee with respect to the subject matter hereof and supersedes all prior understandings and agreements, including any prior employment contract or agreement, whether oral or written, between the parties hereto with respect to the specific subject matter hereof. No representations or warranties of any kind or nature relating to the Company or its affiliates or their respective businesses, assets, liabilities, operations, future plans or prospects have been made by or on behalf of the Company to the Employee; nor have any representations or warranties of any kind or nature been made by the Employee to the Company, except as expressly set forth in this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date hereinabove written. -5- -------------------------------------------------------------------------------- EXHIBIT A EMPLOYEE INVENTION, ASSIGNMENT AND CONFIDENTIALITY AGREEMENT       In consideration, and as a condition of my employment with Sequoia Software Corporation, a Maryland corporation (the “Company”), I hereby represent to, and agree with the Company as follows: 1. Purpose of Agreement.       I understand that the Company is or will be engaged in a continuous program of research, development, production and marketing in connection with its business and that it is critical for the Company to preserve and protect its “Confidential Information” (as defined in Section 6 below), its rights in “Inventions” (as defined in Section 2 below) and in all related intellectual property rights. Accordingly, I am entering into this Employee Invention Assignment and Confidentiality Agreement (the “Agreement”) as a condition of my employment with the Company, whether or not I am expected to create inventions of value for the Company. 2. Disclosure of Inventions.       I will promptly disclose in confidence to the Company all inventions, improvements, designs, original works of authorship, formulas, processes, compositions of matter, computer software programs, Internet products and services, e-commerce products and services, e-entertainment products and services, databases, mask works and trade secrets (the “Inventions”) that I make or conceive or first reduce to practice or create, either alone or jointly with others, during the period of my employment, whether or not in the course of my employment, and whether or not such Inventions are patentable, copyrightable or protectible as trade secrets. 3. Work for Hire; Assignment of Inventions.       I acknowledge and agree that any copyrightable works prepared by me within the scope of my employment are “works for hire” under the Copyright Act and that the Company will be considered the author and owner of such copyrightable works. I agree that all Inventions that (i) are developed using equipment, supplies, facilities or trade secrets of the Company, (ii) result from work performed by me for the Company, or (iii) relate to the Company’s business or current or anticipated research and development, will be the sole and exclusive property of the Company and are hereby irrevocably assigned by me to the Company from the moment of their creation and fixation in tangible media. 4. Assignment of Other Rights.       In addition to the foregoing assignment of Inventions to the Company, I hereby irrevocably transfer and assign to the Company: (i) all worldwide patents, patent applications, copyrights, mask works, trade secrets and other intellectual property rights in any Invention; and (ii) any and all “Moral Rights” (as defined below) that I may have in or with respect to any -6- -------------------------------------------------------------------------------- Invention. I also hereby forever waive and agree never to assert any and all Moral Rights I may have in or with respect to any Invention, even after termination of my work on behalf of the Company. “Moral Rights” mean any rights to claim authorship of an Invention, to object to or prevent the modification of any Invention, or to withdraw from circulation or control the publication or distribution of any Invention, and any similar right, existing under judicial or statutory law of any country in the world, or under any treaty, regardless of whether or not such right is denominated or generally referred to as a “moral right.” 5. Assistance.       I agree to assist the Company in every proper way to obtain for the Company and enforce patents, copyrights, mask work rights, trade secret rights and other legal protections for the Company’s Inventions in any and all countries. I will execute any documents that the Company may reasonably request for use in obtaining or enforcing such patents, copyrights, mask work rights, trade secrets and other legal protections. My obligations under this section will continue beyond the termination of my employment with the Company, provided that the Company will compensate me at a reasonable rate after such termination for time or expenses actually spent by me at the Company’s request on such assistance. I appoint the Secretary of the Company as my attorney-in-fact to execute documents on my behalf for this purpose. 6. Confidentiality Obligations.       6.1 Acknowledgement. I understand that my employment by the Company creates a relationship of confidence and trust with respect to any information of a confidential or secret nature that may be disclosed to me by the Company that relates to the business of the Company or to any parent, subsidiary, affiliate, customer, consultant or supplier of the Company or any other party with whom the Company or any other party with whom the Company agrees to hold such information (including any and all copies thereof) of such party in confidence (the “Confidential Information”). Such Confidential Information is defined more specifically in Section 6.3 below.       6.2 Obligations. I agree to take the following steps to preserve the confidential and proprietary nature of Confidential Information:             (a) Non-Disclosure. At all times both during and after my employment with Company, I will not use, disclose or transfer any of the Confidential Information other than as authorized by Company, except as may be necessary to perform my duties as an employee of the Company for the benefit of the Company. I understand that I am not allowed to sell, license or otherwise exploit any products (including software or content in any form) which embody or otherwise exploit in whole or in part any Confidential Information.             (b) Disclosure Prevention. I will take all reasonable precautions to prevent the inadvertent or accidental exposure of Confidential Information. -7- --------------------------------------------------------------------------------             (c) Removal. I will not remove any Confidential Information from Company’s premises or make copies of such materials except for use in Company’s business.             (d) Return. I will return promptly to Company all Confidential Information and copies thereof at any time upon the request of Company, in any event and without such request, prior to the termination of my employment by Company. I agree not to retain any tangible or intangible copies of any Confidential Information after my termination of employment for any reason. Upon termination of my employment, I will not take with me any documents or materials or copies thereof containing any Confidential Information.       6.3 Confidential Information. The following materials and information (including any and all copies thereof), whether having existed, now existing, or to be developed or created during the term of my employment by Company (herein referred to collectively as the “Confidential Information”) whether tangible or intangible, and whether or how stored, compiled or memorialized physically, electronically, graphically, photographically or in writing, are covered by this Agreement and acknowledged by me to be valuable, special and unique assets of Company the disclosure of which, may be materially damaging.             (a) Software. All information relating to existing software products and software in various stages of research and development which are not generally known to the public or within the Internet industry or trade in which Company competes (such as know-how, Inventions, design specifications, algorithms, technical formulas, engineering data, benchmark test results, search engines, Internet and e-commerce tools, methodologies, procedures, techniques, and information processing processes) and the physical embodiments of such information (such as drawings, specification sheets, design notes, source code, object code, HTML code, XML code, scripts, applets, load modules, schematics, flow charts, logic diagrams, procedural diagrams, coding sheets, work sheets, documentation, annotations, printouts, studies, manuals, proposals and any other written or machine-readable manuals, proposals and any other written or machine readable expressions of such information as are fixed in any tangible media).             (b) Other Products and Services. All information relating to consulting, Inventions, entertainment content, research and development and other proprietary products or services, whether existing or in various stages of research and development, which are not generally known to the public or within the Internet industry or trade in which Company competes (such as know-how, content, specifications, technical data, engineering data, processes, techniques, methodologies, and strategies) and the physical embodiments of such information (such as drawings, schematics, data files, video, text, pictures, sound, graphics, specification sheets, instructor manuals, course materials, training aids, video cassettes, transparencies, slides, taped recordings of presentations, proposals, printouts, studies, contracts, maintenance manuals, documentation, and any other written or machine-readable expressions of such information as are fixed in any tangible media).             (c) Business Procedures. All information concerning or relating to the way Company conducts its business which is not generally known to the public or within the Internet industry (such as internal business procedures, controls, internal telephone numbers, plans, -8- -------------------------------------------------------------------------------- licensing techniques and practices, supplier, subcontractor, consultant, and prime contractor names and contracts and other vendor information, computer system passwords and other computer security controls, financial information, distributor information, and employee data) and the physical embodiments of such information (such as check lists, samples, services and operational manuals, contracts, proposals, print-outs, correspondence, forms, listings, ledgers, financial statements, financial reports, financial and operational analyses, financial and operational studies, management reports of every kind, databases, personnel records pertaining to employees other than myself, and any other written or machine-readable expressions of such information as are fixed in any tangible media).             (d) Marketing Plans and Customer Lists. All information pertaining to Company’s marketing plans and strategies; forecasts and projections; marketing practices, procedures and policies; financial data; discounts; margins; costs; credit terms; pricing practices, procedures and policies; domain names; goals and objectives; quoting practices, procedures and policies; and customer data including customer lists, contracts, representatives, requirements and needs, specifications, data provided by or about prospective existing or past customers and contract terms applicable to such customers and Web site visitor data, and the physical embodiments of such information (such as license agreements, customer lists, print-outs, databases, marketing plans, marketing reports, strategic business plans, marketing analyses and management reports, seminar and class attendee rosters, trade show or exhibit attendee listings, listings of potential customers and leads, and any other written or machine-readable expressions of such information as are fixed in any tangible media).             (e) Not Generally Known. Any information in addition to the foregoing which is not generally known to the public or within the Internet or software industry or trade in which Company competes, and the physical embodiments of such information in any tangible form, whether written or machine-readable in nature.       6.4 General Knowledge. The general skills, knowledge and experience gained during my employment with Company, and information publicly available or generally known within the industry or trade in which Company competes, is not considered Confidential Information. Also, upon termination of my employment with Company, I shall not, subject to the provisions of Section 7 below, be restricted from working with a person or entity which has independently developed information or materials similar to Confidential Information as long as I comply with my continuing obligations under this Agreement.       6.5 Information Disclosed Remains Property of Company. I agree and acknowledge that all ideas, concepts, information, and written material disclosed to me by Company, or acquired from a customer or prospective customer of Company are and shall remain the sole and exclusive property and Confidential Information of Company or such customers, and are disclosed in confidence by Company or permitted to be acquired from such customers in reliance on my agreement to maintain them in confidence and not to use or disclose them to any other person except in furtherance of Company’s business and for Company’s benefit. -9- -------------------------------------------------------------------------------- 7. Non-Competition Covenant.       7.1 Competitor Defined. The term “Competitor” shall refer to any person, firm, corporation, partnership or other business entity engaged in or about to become engaged in the production, licensing, sale or marketing of any product or service or planned business of Company:             (a) which is similar to or directly competitive with Company’s proprietary Internet, e-commerce or software, research and development or development of any product or service of Company with which I have been directly concerned through my work for Company during the preceding two (2) years; or             (b) with respect to which I have acquired Confidential Information.       7.2 Restrictive Covenant. As a material inducement to Company to enter into this Agreement, I covenant and agree that without the Company’s prior written consent, during my employment with Company and for a period of one (1) year following the termination of my employment, whether such termination be with or without cause, I shall not enter the employ of any Competitor, nor engage during such period, directly or indirectly, voluntarily or involuntarily, as principal, agent, officer, employee or otherwise, anywhere in the United States, in any actions to solicit, divert or take away any customer or supplier of Company, or provide services to, or assist in any manner any Competitor, or otherwise compete with Company in the sale or licensing, of any products or services competitive with the game, Internet, e-commerce or e-entertainment products or services developed or marketed by Company in the United States. Notwithstanding the foregoing, I shall retain the right to invest in or have an interest in entities traded on any public market or offered by any national brokerage house, provided that said interest does not exceed one percent (1%) of the voting control of said entity. In addition, I may make passive investments in privately held entities that are determined by the Board of Directors of the Company not to be competitors of the Company.       7.3 Employee’s Acknowledgements and Agreements. I acknowledge that the covenant in Section 7.2 has a unique, very substantial and immeasurable value to Company. I acknowledge and agree that the Internet, e-commerce and software products and services developed by Company are or are intended to be marketed and licensed to customers worldwide. I further acknowledge and agree to the reasonableness of this covenant not to compete and the reasonableness of the geographic area and duration of time which are a part of said covenant. I also acknowledge and agree that this covenant will not impair me from becoming gainfully employed, or otherwise earning a livelihood following termination of employment with Company. 8. Non-Solicitation.       I agree that any attempt on my part to induce others to leave Company’s employ, or any effort by me to interfere with Company’s relationship with its other employees would be harmful and damaging to Company. I agree that during employment and for a period of two (2) years -10- -------------------------------------------------------------------------------- thereafter, I will not in any way, directly or indirectly (i) induce or attempt to induce any employee of Company to quit employment with Company; (ii) otherwise interfere with or disrupt Company’s relationship with its employees; (iii) solicit, entice, or hire away any employee of Company; or (iv) hire or engage any employee of Company or any former employee of Company whose employment with Company ceased less than one (1) year before the date of such hiring or engagement. 9. Project Completion.       I agree to give Company at least thirty (30) days prior written notice of termination to minimize any adverse effect on Company for any project in which I might be involved on behalf of Company. I agree to use my best efforts prior to termination to complete any project then assigned to me to the reasonable satisfaction of the Company, and to be available thereafter as reasonably required to assist with a transition and to answer questions explaining the work done by me prior to termination. 10. Notification.       I hereby authorize the Company to notify my actual or future employers of the terms of this Agreement and my responsibilities hereunder. 11. Name and Likeness Rights.       I hereby authorize the Company to use, reuse, and to grant others the right to use and reuse my name, photograph, likeness (including caricature), voice, and biographical information, and any reproduction or simulation thereof, in any media now known or hereafter developed (including, but not limited to, film, video and digital or other electronic media), both during and after my employment, for whatever purposes the Company deems necessary. 12. Injunctive Relief.       I agree that damages in the event of any breach or threatened breach of this Agreement by me would be difficult to ascertain and that the Company may suffer irreparable harm. I therefore agree that, notwithstanding anything in this Agreement to the contrary, the Company, in addition to and without limiting any other remedy or right it may have, shall have the right to an injunction or other equitable relief in any court of competent jurisdiction enjoining any such breach. I hereby waive any and all defenses I may have on the ground of lack of jurisdiction or competence of the court to grant such an injunction or other equitable relief. The existence of this right shall not preclude any other rights and remedies at law or in equity which the Company may have. 13. Assignment.       My rights, interest and benefits hereunder shall not be assigned, transferred, pledged, or hypothecated in any way by me. The rights and obligations of the Company under this -11- -------------------------------------------------------------------------------- Agreement shall inure to the benefit of and be binding upon the successors of Company. If Company shall at any time be merged or consolidated with or into another corporation, or if substantially all the assets of Company are transferred to another corporation, the provisions of this Agreement shall be binding on and shall inure to the benefit of the corporation resulting from such merger or consolidation or to which such assets shall be transferred. 14. Governing Law; Severability.       This Agreement will be governed and interpreted in accordance with the internal laws of the State of Maryland, without regard to or application of choice-of-law rules or principles. In the event that any provision of this Agreement is found by a court, arbitrator or other tribunal to be illegal, invalid or unenforceable, then such provision shall not be voided, but shall be enforced to the maximum extent permissible under applicable law, and the remainder of this Agreement shall remain in full force and effect. 15. Forum Selection.       The parties agree that any legal proceeding, commenced by one party against the other, shall be brought in any state or Federal court having proper jurisdiction, within the State of Maryland. Both parties submit to such jurisdiction, and waive any objection to venue and/or claim of inconvenient forum. 16. No Breach of Prior Agreement.       I represent that my performance of all the terms of this Agreement and my duties as an employee of the Company will not breach any invention assignment, proprietary information, confidentiality or similar agreement with any former employer or other party. I represent that I will not bring with me to the Company or use in the performance of my duties for the Company any documents or materials or intangibles of a former employer or third party that are not generally available to the public or have not been legally transferred to the Company. 17. Counterparts.       This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 18. Headings.       The captions and headings of this Agreement are included for ease of reference only and will be disregarded in interpreting or construing this Agreement. All references herein to sections will refer to sections of this Agreement. -12- -------------------------------------------------------------------------------- 19. Entire Agreement.       This Agreement constitutes the entire agreement and understanding of the parties with respect to the subject matter of this Agreement, and supersedes all prior understandings and agreements, whether oral or written, between the parties hereto with respect to the specific subject matter hereof. -13-

EXHIBIT 10.3   MEDIA 100 INC. Key Employee Incentive Plan (1992), as amended through May 5, 2000 1.          Plan; Purpose; General.  The purpose of this Key Employee Incentive Plan (1992) (the "Plan") is to advance the interests of Media 100 Inc. (formerly Data Translation, Inc.) (the "Company") by enhancing the ability of the Company and its subsidiaries to attract and retain selected advisers, consultants, key employees and directors, by creating for such persons incentives and rewards for their contributions to the success of the Company, and by encouraging such persons to become owners of shares of the Company's Common Stock, par value $0.01 per share (the "common stock" or "stock").  Options granted pursuant to the Plan may be incentive stock options as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") (such options being referred to herein as "incentive options") or non-incentive options.  The proceeds received from the sale of stock pursuant to the Plan shall be used for general corporate purposes.  Except as otherwise expressly provided with respect to an option grant, no option granted pursuant to the Plan shall be an incentive option. 2.          Effective Date of Plan.  This Plan will become effective upon approval by at least a majority of the votes cast at the next duly called Annual Meeting of Stockholders of the Company at which a quorum representing a majority of the voting power of all outstanding voting stock of the Company is, either in person or by proxy, present and voting thereon or at any adjournment thereof.  Grants of awards under the Plan may be made prior to that date (but after Board adoption of the Plan), subject to approval of the Plan by such shareholders.1 -------------------------------------------------------------------------------- 1  The Plan was approved by the requisite vote of stockholders at the Annual Meeting of Stockholders of the Company held on April 8, 1992.   3.          Administration of the Plan.  The Plan will be administered by the Board of Directors (the "Board") of the Company.  The Board will have authority to take all action necessary or appropriate hereunder, to interpret its provisions, and to decide all questions and resolve all disputes which may arise in connection therewith.  Such determinations of the Board shall be conclusive and shall bind all parties.              The Board may, in its discretion, delegate some or all of its powers with respect to the Plan to the Executive Compensation and Stock Option Committee or any other committee (the "Committee"), in which event all references to the Board hereunder, except the references in Section 11 hereof, shall be deemed to refer to the Committee.  The Committee, if one is appointed, shall consist of not fewer than two members, and each member of the Committee shall be, at the time of his appointment and at any time he exercises discretion in administering the Plan, a "non-employee director" as that term is defined in Rule 16b-3 adopted pursuant to the Securities Exchange Act of 1934, as amended.  A majority of the members of any such Committee shall constitute a quorum, and all determinations of the Committee shall be made by a majority of its members.  Any determination of the Committee under the Plan may be made without notice or meeting of the Committee by a writing signed by a majority of the Committee members. 4.          Eligibility.  The "Participants" in the Plan will be such key employees, including part-time employees, advisers, consultants and directors whether or not they are employees, of the Company or of any of its present or future subsidiaries (as defined in Section 10) as may be selected from time to time by the Board in its discretion.              No incentive option shall be granted to a Participant who is not an "employee" as defined in the provisions of the Code or regulations thereunder applicable to incentive options.  No incentive option shall be granted to a Participant who at the time of grant owns, directly or indirectly through application or the attribution rules of Section 424(d) of the Code, stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of its subsidiaries (a "Ten-Percent Shareholder") unless (i) the option price at the time it is granted is at least 110% of the fair market value of the stock subject to the option, and (ii) the period of the option does not exceed five years from the date of grant. 5.          Grant of Awards.  Subject to the express provisions of the Plan, the Board shall have the sole authority and discretion (a) to determine which Participants will be granted awards; (b) to grant awards consisting of options or stock appreciation rights ("SARs"), or both to Participants; (c) to determine whether the options granted to any Participants shall be incentive options or non-incentive options; (d) to determine the time or times when awards will be granted and the number of shares of common stock to be subject to each award; (e) to determine the option price of the shares subject to each option in accordance with Section 6(a) hereof and the value of the shares subject to each SAR on the exercise date of such SAR in accordance with Section 6(d) hereof, and the method of payment of such price; (f) to determine the time or times when each award becomes exercisable and the duration of the exercise period; (g) to impose additional conditions or restrictions on any award, such conditions or restrictions, if any, to be set forth in the award form or other instrument evidencing the award; (h) to prescribe the form or forms of any instruments evidencing any awards granted under the Plan and of any other instruments required under the Plan and to make changes in such forms from time to time; (i) to determine the price, vesting schedule and other attributes of awards granted to Participants working abroad; and (j) to adopt, amend and rescind rules and regulations for the administration of the Plan and the awards and for its own acts and proceedings.  Subject to Section 12 hereof, the Board shall also have the authority, in its sole discretion, both generally and in particular instances, to waive compliance by a Participant with any obligation to be performed by him under an award, to waive any condition or provision of an award, and to amend or cancel any award (and if an award is cancelled, to grant a new award on such terms as the Board shall specify) except that the Board may not take any action with respect to an outstanding award that would adversely affect the rights of the Participant under such award without such Participant's consent.  Nothing in the preceding sentence shall be construed as limiting the power of the Board to make adjustments required by Section 8(c) hereof.              No award shall be granted on or after February 20, 2002 but awards previously granted may extend beyond that date. 6.          Terms and Conditions of Awards. a.          Exercise Price of Options.  The purchase price per share for shares issuable upon exercise of options shall be determined by the Board but in the case of incentive options shall not be less than 100% (110% in the case of an incentive option granted to a Ten-Percent Shareholder) of the fair market value of the stock on the date of grant; nor shall the option price be less, in the case of an original issue of authorized stock, than par value per share.  For this purpose, "fair market value" will be determined as set forth in Section 10 hereof. b.          Period of Options.  An option shall be exercisable during such period or periods as the Board may specify.  The latest date on which an option may be exercised (the "Final Exercise Date") shall be the date which is ten years (five years, in the case of an incentive option granted to a Ten-Percent Shareholder) from the date the option was granted or such earlier date as may be specified by the Board at the time the option is granted. c.          Exercise of Options. (i)          Unless the Board at the time of grant or at any other time otherwise specifies in the case of a particular option or options, each option shall first become exercisable with respect to one-fifth of the shares covered by it upon the completion of one year from the date of the grant of the option (the "Initial Exercise Date"), and with respect to an additional one-fifth each succeeding year until the option becomes exercisable with respect to all of the shares covered by it. (ii)         In the case of options intended to be incentive options, any award forms or other instruments evidencing such options shall contain such provisions relating to exercise and other matters as are required of incentive options under the applicable provisions of the Code and Treasury Regulations, as from time to time in effect. (iii)        A person electing to exercise part or all of his options shall give written notice to the Company, as specified by the Board, of his election and of the number of shares he has elected to purchase, such notice to be accompanied by the instrument evidencing such option and any other documents required by the Board, and shall at the time of such exercise tender the purchase price of the shares he has elected to purchase.  If the notice of election to exercise is given by the executor or administrator of a deceased Participant, or by the person or persons to whom the option has been transferred by the Participant's will or the applicable laws of descent and distribution, the Company will be under no obligation to deliver shares pursuant to such exercise unless and until the Company is satisfied that the person or persons giving such notice is or are entitled to exercise the option. (iv)       In the case of an option that is not an incentive option, the Board shall have the right to require that the Participant exercising the option remit to the Company an amount sufficient to satisfy any federal, state, or local withholding tax requirements (or make other arrangements satisfactory to the Company with regard to such taxes) prior to the delivery of any common stock pursuant to the exercise of the option.  If permitted by the Board, either at the time of the grant of the option or the time of exercise, the Participant may elect, at such time and in such manner as the Board may prescribe, to satisfy such withholding obligation by (i) delivering to the Company common stock owned by such individual having a fair market value equal to such withholding obligation, or (ii) requesting that the Company withhold from the shares of common stock to be delivered upon exercise of the option a number of shares of common stock having a fair market value equal to such withholding obligation.   In the case of an incentive option, if at the time the option is exercised the Board determines that under applicable law and regulations the Company could be liable for the withholding of any federal, state or local tax with respect to a disposition of the common stock received upon exercise, the Board may require as a condition of exercise that the Participant exercising the option agree (i) to inform the Company promptly of any disposition (within the meaning of Section 424(c) of the Code and the regulations thereunder) of common stock received upon exercise, and (ii) to give such security as the Board deems adequate to meet the potential liability of the Company for the withholding of tax, and to augment such security from time to time in any amount reasonably deemed necessary by the Board to preserve the adequacy of such security. d.          Stock Appreciation Rights.  The Board in its discretion may grant SARs either in tandem with or independent of options awarded under the Plan.  Except as hereinafter provided, each SAR will entitle the Participant to receive upon exercise, with respect to each share of common stock to which the SAR relates, the excess of (i) the share's value on the date of exercise, over (ii) the share's fair market value on the date it was granted.  For purposes of clause (i), "value" shall mean fair market value; provided, that the Board may adjust such value to take into account dividends on the stock and may also grant SARs that provide, in such limited circumstances following a change in control of the Company (as determined by the Board) as the Board may specify, that "value" for purposes of clause (i) is to be determined by reference to a specified value (which may include an average of values) for the common stock during a period immediately preceding the change in control, all as determined by the Board.  The amount payable to a Participant upon exercise of an SAR shall be paid either in cash or in shares of common stock, as the Board determines.  Each SAR shall be exercisable during such period or periods and on such terms as the Board may specify.  No SAR shall be exercisable after the date which is ten years from the date of grant. e.          Payment for and Delivery of Shares.  Shares which are subject to options shall be issued only upon receipt by the Company of full payment of the purchase price for the shares as to which the award is exercised.  The purchase price shall be payable by the option holder to the Company either (i) in cash or by check, bank draft or money order payable to the order of the Company; or (ii) if so permitted by the Board (which in the case of an incentive option, shall specify such method of payment at the time of grant), (A) through the delivery of shares of common stock (duly owned by the option holder and for which the option holder has good title free and clear of any liens and encumbrances and which, in the case of common stock acquired from the Company, shall have been held for at least six months) having a fair market value on the last business day preceding the date of exercise equal to the purchase price or (B) by delivery of a promissory note of the option holder to the Company, such note to be payable on such terms as are specified by the Board or (C) by delivery of an unconditional and irrevocable undertaking by a broker to deliver promptly to the Company sufficient funds to pay the exercise price; or (iii) by a combination of the permissible forms of payment as provided in (i) and (ii) above; provided, that if the common stock delivered upon exercise of the option is an original issue of authorized common stock, at least so much of the exercise price as represents the par value of such common stock shall be paid other than with a personal check or promissory note of the person exercising the option.              The Company shall not be obligated to deliver any shares unless and until, in the opinion of the Company's counsel, all applicable federal and state laws and regulations have been complied with, nor, if the outstanding common stock is at the time listed on any securities exchange, unless and until the shares to be delivered have been listed (or authorized to be added to the list upon official notice of issuance) upon such exchange, nor unless and until all other legal matters in connection with the issuance and delivery of shares have been approved by the Company's counsel.  Without limiting the generality of the foregoing, the Company may require from the person exercising an option such investment representation or such agreement, if any, as counsel for the Company may consider necessary in order to comply with the Securities Act of 1933, as amended, and may require that such person agree that any sale of the shares will be made only on a national securities exchange or in such other manner as is permitted by the Board and that he will notify the Company before he makes any disposition of the shares whether by sale, gift or otherwise.              A Participant shall have the rights of a shareholder only as to shares actually acquired by him under the Plan. f.           Nontransferability of Awards.  No award may be sold, assigned or otherwise transferred or disposed of in any manner whatsoever other than by will or by the laws of descent and distribution, and during the Participant's lifetime the award may be exercised only by him. g.          Forfeiture of Awards upon Termination of Employment.  If a Participant’s (other than a non-employee director’s) employment or service with the Company and its subsidiaries terminates for any reason other than death, the portion of any award held by the Participant that was not exercisable immediately prior to such termination of employment or service shall immediately expire and except as the Board may otherwise determine, in its sole discretion, the remaining portion, if any, of the award shall continue to be exercisable for a period of ninety (90) days immediately following the date of termination of the Participant’s employment or other service with the Company and its subsidiaries.  Notwithstanding the foregoing, if the Participant was terminated for cause all awards held by the Participant immediately prior to such termination, whether or not then exercisable, shall immediately expire.2  For purposes of this Section 6(g), employment shall not be considered terminated (i) in the case of sick leave or other bona fide leave of absence approved for purposes of the Plan by the Board, so long as the Participant's right to reemployment is guaranteed either by statute or by contract, (ii) in the case of a transfer of employment between the Company and a subsidiary or between subsidiaries, or to the employment of a corporation (or a parent or subsidiary corporation of such corporation) issuing or assuming an option in a transaction to which Section 424(a) of the Code applies, or (iii) in the case of a transfer of employment between the Company and its wholly-owned subsidiary Data Translation, Inc. (formerly Data Translation II, Inc.) ("DTI") and subsequent distribution  of the stock of such subsidiary to the Company's stockholders (the "Distribution"); provided, that this clause (iii) shall apply only in the case of Participants whose transfer of employment to DTI occurs in connection with the Distribution; and further provided, that in the case of any such Participant, post-Distribution service for DTI shall be treated for purposes of this paragraph as service for the Company and any post-Distribution termination of employment with DTI shall be treated for purposes of this paragraph as a termination of employment with the Company and its subsidiaries.  The Company may require that any Participant described in clause (iii) above provide, prior to any post-Distribution exercise of an award hereunder by such Participant and as a condition thereto, evidence satisfactory to the Company as to the period of such Participant's employment with DTI. -------------------------------------------------------------------------------- 2  The preceding two sentences were adopted by amendment dated January 19, 1998 and are effective as to awards granted, regranted or amended on or after such date, except as the Board may otherwise determine; provided, that any incentive option granted prior to such date that is amended on or after such date shall not be subject to such amendment without the consent of the Participant holding the option if application of such amendment would cause the option (as amended) to fail to qualify as an incentive stock option.  With respect to all awards which are not subject to the foregoing amendment, the following provision shall apply: "If a Participant's (other than a non-employee director's) employment or service with the Company and its subsidiaries terminates for any reason other than death, all awards held by the Participant shall terminate unless the Board determines, in its sole discretion, that such awards as were exercisable immediately prior to termination shall continue to be exercisable for a period of time after termination shall continue to be exercisable for a period of time after termination (but in no event beyond the Final Exercise Date). If the Board determines that a post-termination exercise period for exercisable awards is appropriate, such awards shall terminate and be forfeited after completion of such period to the extent not previously exercised, expired or terminated."   h.          Death.  If a Participant dies at a time when he is entitled to exercise an option, then at any time or times within one year after his death (or such further period as the Board may allow) such option may be exercised, as to all or any of the shares which the Participant was entitled to purchase immediately prior to his death, by his executor or administrator or the person or persons to whom the option is transferred by will or the applicable laws of descent and distribution, and except as so exercised such option will expire at the end of such period.  In no event, however, may any option be exercised after the Final Exercise Date. i.           Confidentiality Agreement.  Each Employee, including employees of DTI who received options while employees of the Company, shall execute, prior to or contemporaneously with the grant of any option to such Participant hereunder, the Company's then standard form of agreement relating to confidentiality, inventions and the like. 7.          Replacement Awards.  The Company may grant awards under the Plan on terms differing from those provided in Section 6, where such awards are granted in substitution for awards held by employees of another corporation who concurrently become employees of the Company or a subsidiary as the result of a merger or consolidation of that corporation with the Company or a subsidiary, or the acquisition by the Company or a subsidiary of property or stock of that corporation.  The Board may direct that the substitute awards be granted on such terms and conditions as the Board considers appropriate in the circumstances.  Such awards will be in addition to those which may be granted under the Plan and will not be counted as granted under the Plan. 8.          Shares Subject to Plan. a.          Number of Shares and Stock to be Delivered.  Shares delivered pursuant to this Plan shall in the discretion of the Board be authorized but unissued shares of common stock or previously issued stock acquired by the Company.  Subject to adjustment as described below and exclusive of the shares that are subject to the options provided for in Section 13, the aggregate number of shares which may be delivered under this Plan shall not exceed 4,200,000 shares of common stock of the Company. b.          Limitations on Grants to Individuals.   Subject to adjustment as described below and exclusive of the shares that are subject to the options provided for in Section 13, the aggregate number of shares for which options may be granted under this Plan to any individual in any calendar year shall not exceed 500,000 shares of common stock of the Company. c.          Changes in Stock.  In the event of a stock dividend, stock split or combination of shares, recapitalization, merger in which the Company is the surviving corporation or other change in the Company's capital stock, the number and kind of shares of stock or securities of the Company to be subject to the Plan and to options then outstanding or to be granted thereunder, the maximum number of shares or securities which may be delivered under the Plan, the option price and other relevant provisions shall be appropriately adjusted by the Board, whose determination shall be binding on all persons.  In the event of a consolidation or merger in which the Company is not the surviving corporation or which results in the acquisition of substantially all the Company's outstanding stock by a single person or entity, or in the event of the sale or transfer of substantially all the Company's assets, all outstanding awards shall thereupon terminate, provided that at least twenty days prior to the effective date of any such merger, consolidation or sale of assets, all outstanding awards shall become exercisable immediately prior to consummation of such merger, consolidation or sale of assets, unless the Board shall have arranged for the surviving or acquiring corporation or an affiliate of that corporation to assume the awards or to grant to the Participants replacement awards having equivalent terms and conditions as determined by the Board including, in the case of incentive options, terms and conditions that satisfy the requirements of Section 424(a) of the Code.              The Board may also adjust the number of shares subject to outstanding awards granted under Sections 5 or 6 hereof, the exercise price of outstanding options and the terms of outstanding options to take into consideration material changes in accounting practices or principles, consolidations or mergers (except those described in the immediately preceding paragraph), acquisitions or dispositions of stock or property or any other event if it is determined by the Board that such adjustment is appropriate to avoid distortion in the operation of the Plan, including without limitation, the special option adjustments made in connection with the Distribution and described in Section 14 herein. 9.          Employment Rights.  Neither the adoption of the Plan nor the grant of awards shall confer upon any Participant any right to continued employment with the Company or a subsidiary or affect in any way the right of the Company to terminate the employment of a Participant at any time.  Except as specifically provided by the Board, in its sole discretion, in any particular case, the loss of existing or potential profit in awards granted under this Plan shall not constitute an element of damages in the event of termination of the relationship of a Participant even if the termination is in violation of an obligation of the Company to the Participant by contract or otherwise. 10.        Definitions. a.          For purposes of the Plan a subsidiary is any corporation (i) in which the Company owns, directly or indirectly, stock possessing 50% or more of the total combined voting power of all classes of stock, or (ii) over which the Company has effective operating control; provided, however, that no corporation shall be deemed a subsidiary for the purpose of any provisions applicable to incentive options, and no incentive options shall be granted to employees of such corporation, unless in each case, such corporation shall constitute a subsidiary as defined in clause (i) above.  For special rules relating to DTI, see Section 14, below. b.          The fair market value of the common stock shall be determined in accordance with the applicable provisions of the Code or regulations issued thereunder, or in the absence of any such provisions or regulations, shall be deemed to be the last sale price at which such common stock is traded on the date in question as reported in the Wall Street Journal; or, if the Wall Street Journal is not published at the date in question or does not list the common stock, then in such other appropriate newspaper of general circulation as the Board may prescribe; or, if there is no sale of the common stock on the date in question or the last price at which the common stock traded is not listed, then the mean between the bid and asked price at the close of the market on such day. 11.        Indemnification of Board.  In addition to and without affecting such other rights of indemnification as they may have as members of the Board or otherwise, each member of the Board shall be indemnified by the Company to the extent legally possible against reasonable expenses, including attorneys' fees, actually and reasonably incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which he may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any option granted thereunder, and against all judgments, fines and amounts paid by him in settlement thereof; provided that such payment of amounts so indemnified is first approved by a majority of the members of the Board who are not parties to such action, suit or proceeding, or by independent legal counsel selected by the Company, in either case on the basis of a determination that such member acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company; and except that no indemnification shall be made in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such Board member is liable for negligence or misconduct in his duties; and provided, further that the Board member shall in writing offer the Company the opportunity, at its own expense, to handle and defend the same. 12.        Amendments.  The Board may at any time discontinue granting awards under the Plan.  The Board may at any time or times amend the Plan or amend any outstanding award or awards for the purpose of satisfying the requirements of Section 422 of the Code or of any changes in applicable laws or regulations, to comply with any applicable laws and requirements of foreign jurisdictions or for any other purpose that may at the time be permitted by law, provided that no such amendment will adversely affect the rights of any Participant (without his consent) under any award theretofore granted. 13.        Non-Employee Directors.  Notwithstanding anything to the contrary contained elsewhere herein: a.          Eligible Directors and Grant.  Each director of the Company who is not a full-time employee of the Company or any of its subsidiaries and is a director on April 8, 1992 shall be automatically granted on such date non-incentive stock options covering 10,000 shares of common stock and each non-employee director who is initially elected after April 8, 1992 and prior to February 20, 2002 shall be granted on the date of such election non-incentive stock options covering 10,000 shares of common stock (notwithstanding the two-for-one split of the common stock effected on July 31, 1995), all such options to be exercisable with respect to one-fifth of the covered shares one year from the date of grant and with respect to an additional one-fifth each succeeding year. b.          Terms of Options.  The Final Exercise Date of options granted pursuant to Section 13(a) hereof shall be 10 years from the date of grant.  If a director's service with the Company terminates for any reason other than death, in lieu of the provisions of Section 6(g) hereof, all options held by the director that are exercisable on the date of termination shall continue to be exercisable for a period of six months, but shall terminate immediately if the director was removed for cause or resigned under circumstances which in the opinion of the Board of Directors casts such discredit on the Company or him as to justify termination of his options.  After completion of said six-month period, such options shall terminate to the extent not previously exercised, expired or terminated.  All options held by a director that are not exercisable on the date such director's service with the Company terminates shall immediately terminate.  The purchase price for shares of common stock issuable upon the exercise of options granted pursuant to Section 13(a) hereof shall be the fair market value of the common stock at the close of business on the date the option is granted, determined in accordance with Section 10(b) hereof; provided, however, that in no event shall the exercise price be less than par value per share. 14.        Special Option Adjustments.  Notwithstanding any other provision of the Plan, each option outstanding under the Plan immediately prior to the Distribution (an "affected option") shall be adjusted in accordance with Section 8.7 of the Distribution Agreement between the Company and DTI dated as of November 19, 1996 (the "Distribution Agreement"). Except as otherwise provided herein, the adjusted option shall have substantially the same terms as prior to the Distribution.  To the extent any such adjustment shall be treated as an option grant for purposes of Section 8.7 of such Agreement, it shall be made in accordance with the terms of said Section 8.7 and without regard to the option-grant rules and limitations set forth in this Plan.

Exhibit 10.1   EMPLOYMENT AGREEMENT                   THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of February 1, 2001 (the "Effective Date"), by and between MULTIPLE ZONES, INC., a Washington corporation ("the Company"), and SCOTT KOERNER ("Employer").                   The parties agree as follows:                   1.                Employment.                                   1.1                Title and Duties.  Company hereby employs Employee, and Employee hereby accepts such employment, on the terms and conditions set forth herein. Employee is employed as Executive Vice president and Chief Operating Officer, reporting to the President and Chief Executive Officer ("CEO") or such other officer as the Company's Board of Directors (the "Board") shall direct from time to time. At all times, Employee shall be subject to the direction of the Board. Employee shall have the duties and responsibilities assigned by the CEO or the Board on the Effective Date and as may be assigned from time to time. Employee shall perform faithfully and diligently all duties assigned to Employee.                                   1.2                Full-time and Best Efforts.  Employee will expend Employee's best efforts on behalf of the Company, and will abide by all policies and decisions made by the Company, as well as all applicable federal, state and local laws, regulations or ordinances. Employee will act in the best interests of the Company at all times and will devote Employee's full business time and efforts to the performance of the Employee's assigned duties to the Company.                   2.                Compensation.                                   2.1                Base Salary.  As compensation for Employee's performance of Employee's duties hereunder, the Company shall pay to Employee an initial Base Salary of Two Hundred Seventy-Five Thousand Dollars ($275,000) per year, payable in accordance with the normal payroll practices of the Company, less any amounts that the Company is required by applicable federal, state or local law to withhold there from on account of employment, income or other taxes. In the event that either party for any reason, terminates Employee's employment under this Agreement, Employee will earn the Base Salary prorated to the date of termination.                                   2.2                Management Incentive Plan Participation.  Employee shall be entitled to participate in the Company's Management Incentive Plan, as it may be amended or terminated from time to time, in the sole discretion of the Board.                                   2.3                Stock Option Award.  Subject to the Board's approval, the Company shall grant to Employee's a nonqualified stock option to purchase up to 60,000 shares of the Company's Common Stock, under the Company's 1993 Stock Incentive Plan (the "Plan") at an exercise price equal to the fair market value of that stock on the date of grant. The option will be subject to the terms and conditions of the Plan and standard form of stock option agreement, which Employee will be required to sign as a condition of receiving the option.                                   2.4                Performance and Salary Review.  The Board or its Compensation Committee shall periodically review the performances of Employee on no less than an annual basis. The Board will make any adjustments to salary and other compensation in its sole and absolute discretion.                   3.                Benefits.                                   3.1                Customary Fringe Benefits.  Employee will be eligible for all customary and usual fringe benefits generally available to employees of the Company, subject tot he terms and conditions of the Company's plan documents. Company reserves the right to change or eliminate the fringe benefits on a prospective basis, at any time, effective upon notice to Employee.                                   3.2                Vacation.  Employee will be entitled to accrue vacation in accordance with the Company's vacation policy, but in no event will Employee's vacation accrued be less than four (4) weeks per year. Employee agrees to take vacation at mutually agreeable times.                   4.                Business Expenses.  Company will reimburse Employee for all reasonable out-of-pocket expenses incurred in the performance of Employee's duties on behalf of the Company. To obtain reimbursement, expenses must be submitted promptly with appropriate supporting documentation in accordance with the Company's policies.                   5.                Terms.                                   5.1                Initial Term.  The employment relationship formed pursuant to this Agreement shall be for an initial term commencing on the Effective Date and continuing for a period of three (3) years following such date (the "Initial Term"), unless sooner terminated in accordance with the other provisions of this Agreement.                                   5.2                Renewal.  On completion of the Initial Term specified in subsection 5.1 above, this Agreement will expire unless the parties agree in advance to renew this Agreement for a subsequent one-year term. In the event that the parties do not agree to renew this Agreement pursuant to this Section 5.2, this Agreement will expire at the end of the current term.                   6.                Termination of Employee's Employment.                                   6.1                Termination for Cause by the Company.  Although the Company anticipates a mutually rewarding employment relationship with Employee, the Company may terminate Employee's employment immediately at any time for Cause. For purposes of this Agreement, "Cause" is defined as: (a) Employee's willful neglect of duties as determined in the sole and exclusive discretion of the Board; (b) Employee's failure or inability to perform the essential functions of the position, with or without reasonable accommodation, due to a mental or physical disability, where such inability continues for a period or periods aggregating thirty (30) calendar days in any 12-month period; (c) Employee's conviction or entry of a plea or nolo contendere for fraud, embezzlement, misappropriation, or any felony or any other act of moral turpitude; (d) acts or omissions constituting gross negligence, recklessness or willful misconduct on the part of the Employee with respect to Employee's obligations or otherwise relating to the business of the Company; (e) Employee's death; (f) Employee's material breach of this Agreement or the Company's Employee Innovations and Proprietary Rights Assignments Agreement, following written notice and a 10-day opportunity to cure. In the event that Employee's employment is terminated in accordance with this subsection 6.1, Employee shall be entitled to receive only the Base Salary then in effect, prorated to the date of termination and any benefits and expense reimbursements to which Employee is entitled by virtue of his prior employment by Company (collectively, the "Standard Entitlement"). All other Company obligations to Employee pursuant to this Agreement will become automatically terminated and completely extinguished. Employee will not be entitled to receive the Severance Payment described in Section 6.2 below or any part thereof.                                   6.2                Termination Without Cause by Company/Severance.  The Company may terminate Employee's employment under this Agreement without Cause at any time upon written notice to Employee. In the event of such termination, Employee will receive the Standard Entitlements (as defined in Section 6.1 hereof), and a "Severance Payment" equivalent to one (1) year of Employee's Base Salary then in effect on the date of termination, payable in accordance with the Company's regular payroll cycle, provided that the Employee: (a) complies the all surviving provisions of this Agreement as specified in subparagraph 15.9 below; and (b) executes a full and general release, releasing all claims, known or unknown, that Employee may have against Company arising out of or related to Employee's employment or termination of employment with the Company. All other Company obligations to Employee pursuant to this Agreement will be automatically terminated and completely extinguished.                                   6.3                Voluntary Resignation by Employee Without Reason.  Employee may voluntarily resign Employee's position with Company for any reason or no reason on ninety (90) days' advance written notice to the Company. In the event of Employee's resignation under such circumstances, Employee will be entitled to receive the Standard Entitlements, including salary and benefits for the ninety (90) day notice period, but no other salary or benefits for the remaining months of the current term, if any. All other Company obligations to Employee pursuant to this Agreement will become automatically terminated and completely extinguished. In addition, Employee will not be entitled to receive the Severance Payment described in subsection 6.2 above.                                   6.4                Termination Upon a Change in Control.                                                   (a)                Severance Package.  If Employee's employment is terminated by the Company within eighteen (18) months after a Change in Control (as that term is defined below), other than for Cause (as defined in subsection 6.1 above) or employee resigns for Good Reason (as defined below) during such period, Employee (i) shall be entitled to receive the Severance Package described in subsection 6.2 above, provided Employee complies with all the conditions described in subsection 6.2 above, (ii) all options or other rights to acquire Common Stock or other equity securities of the company or any successor corporation then held by Employee shall immediately and automatically vest and become exercisable in full as to all such Common Stock and other equity securities subject thereto, (c) all restrictions with respect to outstanding shares of Common Stock and other equity securities under any plans, agreements, or other documents evidencing the options and other rights or pursuant to which the options and other rights were granted (other than restrictions on transfer under federal and applicable state securities laws), including, but not limited to contractual restrictions on transfer, rights of repurchase or first refusal in favor of the Company or any successor corporation and restrictions on certificates of such Common Stock and other equity securities (other than restrictions on certificates designed to ensure compliance with federal and applicable state securities laws) shall automatically terminate, and (c) such options and other rights shall remain exercisable until a period of eighteen (18) months has elapsed following the Change in Control or until the respective dates provided for exercise of such options or other rights under any plans, agreements, or other documents by which they are evidenced, whichever is later, notwithstanding any term or provision to the contrary in any plans, agreement, or other documents evidencing the options and other rights or pursuant to which the options and other rights were granted.                                                   (b)                280G.  If, due to the benefits provided under subsection 6.4(a) above, Employee is subject to any excise tax due to characterization of any amounts payable under subsection 6.4(a) as excess parachute payments pursuant to Section 4999 of the Internal Revenue code of 1986, as amended (the "Code"), Employee may elect, in Employee's sole discretion, to reduce the amounts payable under subsection 6.4(a) in order to avoid any "excess parachute payment" under Section 280G(b)(1) of the Code.                                                   (c)                Change of Control.  A Change of Control is defined as any one of the following occurrences:                                                                   (i)                Any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), other than a trustee or other fiduciary holding securities of the Company under an employee benefit plan of the company, becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of the securities of the Company representing 50% or more of (A) the outstanding shares of common stock of the Company or (B) the combined voting power of the Company's then-outstanding securities; or                                                                   (ii)                the sale or disposition of all or substantially all of the Company's assets (or any transaction having similar effect is consummated); or                                                                   (iii)                the Company is party to a merger or consolidation that results in the holders of voting securities of the Company outstanding immediately prior thereto failing to continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or                                                                   (iv)                the dissolution or liquidation of the Company.                                                   (d)                Good Reason.  "Good Reason" shall be limited to the happening within a period of eighteen (18) month following a Change in Control of one of the following without Employee's express written consent:                                                                   (i)                A material reduction in the level of Employee's responsibilities for the Company in comparison to the level thereof at the time of the Change of Control;                                                                   (ii)                The assignment to Employee of a job title that is not of comparable prestige and status within the industry as Employee's job title at the time of the Change of Control;                                                                   (iii)                The assignment to Employee of any duties inconsistent with Employee's position with the Company at the time of the Change of Control, other than pursuant to Employee's promotion by the Company;                                                                   (iv)                A material reduction in Employee's salary level;                                                                   (v)                A material reduction in the overall level of employee benefits or perquisites available to Employee at the time of the Change of Control or Employee's right to participate therein, unless such reduction is nondiscriminatory as to Employee;                                                                   (vi)                the Company's requiring Employee to be based anywhere more than fifty (50) miles from the business location to which Employee normally reported for work at the time of the Change of Control, other than for required travel in connection with the business of the Company not significantly greater than Employee's business travel obligations at the time of the Change of Control; or                                                                   (vii)                Any of the foregoing events and conditions occurring prior to the Change of Control which Employee reasonably demonstrates was at the request of a third party or otherwise arose in connection with or in anticipation of the Change of Control.                                   6.5                Termination of Employment Upon Nonrenewal.  In the event that either party decides not to renew this Agreement for a subsequent one (1) year term in accordance with subparagraph 5.2 above, the Agreement will expire, Employee's employment with the Company will terminate and Employee will only be entitled to Employee's Base Salary paid through the last day of the current term. All other Company obligations to Employee pursuant to this Agreement will become automatically terminated and completely extinguished. Employee will not be entitled to the Severance Payment described in Section 6.2 above.                   7.                Key Man Insurance.  Company shall have the right to secure, in its own name or otherwise, and at its own expense, life, disability, accident or other insurance covering Employee, and Employee shall have no right, title or interest in or to such insurance. Employee shall assist Company in procuring such insurance by submitting to reasonable examination and signing such applications and other instruments as may be required by the insurance carriers to which application is made for any such insurance.                   8.                No Conflict of Interest.  During the term of Employee's employment with Company and during any period employee is receiving payment from the Company. Employee must not engage in any work, paid or unpaid, that creates an actual or potential conflict of interest with Company. Such work shall include, but is not limited to, directly or indirectly competing with Company in any way, or acting as an officer, director, employee, consultant, stockholder, volunteer, lender, or agent of any business enterprise of the same nature as, or which is in direct competition with, the business in which Company is now engaged or in which Company becomes engaged during the term of Employee's employment with Company, as may be determined by the Board in its sole discretion. If the Board believes such a conflict exists during the term of this Agreement, the Board may ask Employee to choose to discontinue the other work or resign employment with Company. If the Board reasonably believes such a conflict exists during any period in which Employee is receiving payments from the Company, the Board may ask Employee to choose to discontinue such work or forfeit the remaining severance payments. In addition, Employee agrees not to refer any client or potential client of the Company to competitors of Company, without obtaining Company's prior written consent, during the term of the Employee's employment and during any period in which Employee is receiving payments from the Company pursuant to this Agreement.                   9.                Confidentiality and Proprietary Information.  Employee agrees to read, sign, and abide by the Company's Employee Innovations and Proprietary Rights Assignment Agreement, which is provided with this Agreement and incorporated herein by reference.                   10.                Post-Termination Non-Competition.                                   10.1                Consideration For Promise To Refrain From Competing.  Employee agrees that Employee's services are special and unique, that the Company's disclosure of confidential, proprietary information and specialized training and knowledge to Employee, and that Employee's level of compensation and benefits and post-termination severance, as applicable, are partly in consideration of and conditioned upon Employee not competing with the Company. Employee acknowledges that such consideration for Employee's services under this Agreement is adequate consideration for Employee's promises contained within this section10.                                   10.2                Promise To Refrain From Competing.  Employee understands the Company's need for Employee's promise not to compete with the Company is based on the following: (a) the Company has expended, and will continue to expend, substantial time, money and effort in developing its proprietary information; (b) Employee will in the course of Employee's employment develop, be personally entrusted with and exposed to such proprietary information; (c) both during and after the term of Employee's employment, the Company will be engaged in the highly competitive industry of directly marketing computer products and technologies; (d) the Company provides products and services nationally and may provide products and services internationally in the future; and (e) the Company will suffer great loss and irreparable harm if Employee were to enter into competition with the Company. Therefore, in exchange for the consideration described in subsection 10.1 above, Employee agrees that for the period of one (1) year following the date Employee ceases to render services to the Company. Employee will not either directly or indirectly, whether as a owner, director, officer, manager, consultant, agent or employee: (i) work for a competitor, which is defined to include any company directly or indirectly engaged, or known to Employee to be preparing to engage in the direct marketing of computer products, or engaged in any business that is directly competitive with any business the Company is engaged, or is known to Employee to be preparing to engage, at the time the Employee's employment with the company terminates, other than the Company, in the United States ("Restricted Business"); or (ii) make or hold any investment in any Restricted Business in the United States, whether such investment be by way of loan, purchase of stock or otherwise, provided that there shall be excluded from the foregoing the ownership of not more than 1% of the listed or traded stock of any publicly held corporation. For purposes of this section 10, the term "the Company" shall mean and include the Company, any subsidiary or affiliate of the Company, any successor to the business of the Company (by merger, consolidation, sale of assets or stock or otherwise) and any other corporation or entity of which Employee may serve as a director, officer or employee at the request of the Company or any successor of the Company. Restricted Business' include, but are not limited to, CDW Computer Centers, Inc., PC Connection, Inc., Insight Enterprises, Inc., IdeaMall, Inc, and MicroWarehouse.                                   10.3                Reasonableness of Restrictions.  Employee represents and agrees that the restriction on competition, as to time, geographic area, and scope of activity, required by this section 10 are reasonable, do not impose a greater restraint than is necessary to protect the goodwill and business interests of the company, and are not unduly burdensome to Employee. Employee expressly acknowledges that the Company competes on a nationwide basis and that the geographical scope of these limitations is reasonable and necessary for the protection of the Company's trade secrets and other confidential and proprietary information. Employee further agrees that these restrictions mallow Employee an adequate number and variety of employment alternatives, based on Employee's varied skills and abilities. Employee represents that Employee is willing and able to compete in other employment not prohibited by this Agreement.                                   10.4                Reformation if Necessary.  In the event a court of competent jurisdiction determines a that the geographic area, duration, or scope of activity of any restriction under this section 10 and is subsections is unenforceable, the restrictions under this section and its subsections shall not be terminated but shall be reformed and modified to the extent required to render them valid and enforceable. Employee further agrees that the court may reform this Agreement to extend the one-year period of this covenant not to compete by any amount of time equal to any period in which Employee is in breach of this covenant.                   11.                Non-Solicitation.                                   11.1                Nonsolicitation of Customers or Prospects.  Employee acknowledges that information about the Company's customers is confidential and constitutes trade secrets. Accordingly, Employee agrees that during the term of this Agreement and for a period of one (1) year after the termination of this Agreement, Employee will not, either directly or indirectly, separately or in association with others, interfere with, impair, disrupt or damage the Company's relationship with any of its customers or customer prospects by soliciting or encouraging others to solicit any of them for the purpose of diverting or taking away business from the Company.                                   11.2                Nonsolicitation of the Company’s Employees.  Employee agrees that during the term of this Agreement and for a period of one (1) year after the termination of this Agreement, Employee will not, either directly or indirectly, separately or in association with others, interfere with, impair, disrupt or damage the Company’s business by soliciting, encouraging or recruiting any of the Company’s employees or causing others to solicit or encourage or recruit and of the Company’s employees to discontinue their employment with the Company.                   12.                Nondisparagement.  Upon termination of Employee’s employment relationship hereunder, the Company and Employee agree that, unless otherwise legally required to do so, they will each at all times thereafter refrain from discussing the circumstances relating to such termination and from disparaging, or describing in a derogatory light, the performance, capabilities, services, business practices, or ethics of the other (or of the officers, directors or controlling shareholders of the other.) This provision does not apply to statements made by Employee to Employee’s immediate family or attorneys, or to statements made by either party in legal proceedings in conjunction with legal actions to pursue rights and/or remedies under this Agreement.                   13.                Right To Injunction Costs Of Enforcement.  Employee acknowledges that the Company will suffer immediate and irreparable harm that will not be compensable by damages alone in the event Employee repudiates or breaches Section 9, 10, 11 or 12 or threatens or attempts to do so. In the event of any such breach or any threatened or attempted breach, Employee agrees that the Company, in addition to and not in limitation of any other rights, remedies or damages available to it at law or in equity, shall be entitled to obtain temporary, preliminary and permanent injunctions to prevent or restrain any such breach, and the Company shall not be required to post a bond as a condition for the granting of such relief.                   14.                Agreement to Arbitrate.  To the fullest extent permitted by law, Employee and Company agree to arbitrate any controversy, claim or dispute between them arising out of or in any way related to this Agreement, the employment relationship between Company and Employee and any disputes upon termination of employment, including but not limited to breach of contract, tort, discrimination, harassment, wrongful termination, demotion, discipline, failure to accommodate, family and medical leave, compensation or benefits claims, constitutional claims; and any claims for violation of any local, state or federal law, statute, regulation or ordinance or common law. Claims for workers’ compensation, unemployment insurance benefits and Company’s right to obtain injunctive relief pursuant to Section 13 above are excluded. For the purpose of this agreement to arbitrate, references to “Company” include all parent, subsidiary or related entities and their employees, supervisors, officers, directors, agents, pension or benefit plans, pension or benefit plan sponsors, fiduciaries, administrators, affiliates and all successors and assigns of any of them, and this agreement shall apply to them to the extent Employee’s claims arise out of or relate to their actions on behalf of Company.                                   14.1                Consideration.  The mutual promise by Company and Employee to arbitrate any and all disputes between them (except for those referenced above) rather than litigate them before the courts or other bodies, provides the consideration for this agreement to arbitrate.                                   14.2                Initiation of Arbitration.  Either party may exercise the right to arbitrate by providing the other party with written notice of any and all claims forming the basis of such right in sufficient detail to inform the other party of the substance of such claims. In no event shall the request for arbitration be made after the date when institution of legal or equitable proceedings based on such claims would be barred by the applicable statute of limitations.                                   14.3                Arbitration Procedure.  The arbitration will be conducted in Seattle, Washington by a single neutral arbitrator and in accordance with the then current rules for resolution of employment disputes of the American Arbitration Association (“AAA”). The parties are entitled to representation by an attorney or other representative of their choosing. The arbitrator shall have the power to enter any award that could be entered by a judge of the trial court of the State of Washington, and only such power, and shall follow the law. In the event the arbitrator does not follow the law, the arbitrator will have exceeded the scope of his or her authority and the parties may, at their option, file a motion to vacate the award in court. The parties agree to abide by and perform any award rendered by the arbitrator. Judgment on the award may be entered in any court having jurisdiction thereof.                                   14.4                Costs of Arbitration. Each party shall bear one half the cost of the arbitration filing and hearing fees, and the cost of the arbitrator.   15.                General Provisions.                                   15.1                Assignment.  The rights and obligations of the Company under this this Agreement shall inure to the benefit of, and be binding upon, the successors and assigns of the Company. Employee shall not be entitled to assign any of Employee’s rights or obligations under this Agreement.                                   15.2                Waiver.  Either party’s failure to enforce any provision of this Agreement shall not in any way be constructed as a waiver of any such provision, or prevent that party thereafter from enforcing each and every other provision of this Agreement.                                   15.3                Severability.  In the event any provision of this Agreement is found to be enforceable by an arbitrator or court of competent jurisdiction, such provision shall be deemed modified to the extent necessary to allow enforceability of the provision as so limited, it being intended that the parties shall receive the benefit contemplated herein to the fullest extent permitted by law. If a deemed modification is not satisfactory in the judgment of such arbitrator or court, the unenforceable provision shall be deemed deleted, and the validity and enforceability of the remaining provisions shall not be affected thereby.                                 15.4                Interpretation: Construction.  The headings set fourth in this Agreement are for convenience only and shall not be used in the interpreting this Agreement. Legal counsel representing Company has drafted this Agreement, but Employee has participated in the negotiation of its terms. Furthermore, Employee acknowledges that Employee has had an opportunity to review and revise the Agreement and have it reviewed by legal counsel, if desired, and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement.                                   15.5                Employee’s Likeness.  Company shall have the right but not the obligation to use the Employee’s name or likeness for any publicity or advertising purpose during the term of Employee’s employment with Company.                                   15.6                Governing Law.  This Agreement will be governed by and construed in accordance with the laws of the United States and the State of Washington. Each party consents to the jurisdiction and venue of the state of federal courts in Seattle, Washington, if applicable, in any action, suit, or proceeding arising out of or relating to this Agreement.                                   15.7                Attorneys’ Fees.  The prevailing party in any action to enforce its rights under this Agreement shall be entitled to recover from the other party its reasonable attorneys’ fees and costs, including and costs incurred on appeal.                                   15.8                Notices.  Any notice required or permitted by this Agreement shall be in writing and shall be delivered as follows with notice deemed given as indicated:  (a) by personal delivery when delivered personally; (b) by overnight courier upon written verification of receipt; (c) by telecopy or facsimile transmission upon acknowledgement of receipt of electronic transmission; or (d) five (5) days following deposits in the U.S. Mail, certified or registered mail, postage prepaid and return receipt requested. Notice shall be sent to the addresses set forth below, or such other address as either party may specify in writing.     If to the Company, to: Multiple Zones, Inc. 707 South Grady Way Renton, Washington 98055-3233     If to Employee, to: Scott Koerner [                  ]                                   15.9                Survival.  Sections 8 (“No Conflict of Interest”), 9 (“Confidentiality and Proprietary Information”), 10 (“Post-Termination Non-Competition”), 11 (“Nonsolicitation”), 12 (“Nondisparagement”), 15 (“General Provisions”) and 16 (“Entire Agreement”) of this Agreement shall survive Employee’s employment by Company.                   16.                Entire Agreement.  This Agreement, including the Company’s Employee Innovations and Proprietary Rights Assignment Agreement incorporated herein by reference and the Plan and related option documents described in Subsection 2.3, constitutes the entire agreement between the parties relating to this subject matter and supersedes all prior or simultaneous representations, discussions, negotiations, and agreements, whether written or oral. This Agreement may be amended or modified only with the written consent of Employee and the Board. No oral waiver, amendment or modification will be effective under any circumstances whatsoever.   THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT, AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN, WHEREFORE, THE PARTIES HAVE EXECUTED AND MADE THIS AGREEMENT EFFECTIVE AS OF THE DATE SET FORTH ABOVE.   “The Company” MULTIPLE ZONES, INC.         By   /s/  Firoz H. Lalji     Firoz H. Lalji, President and CEO       “Employee”    /s/  Scott Koerner   SCOTT KOERNER    

  March 19, 2001 Greg Coleman Dear Greg: On behalf of Yahoo! Inc., I am pleased to offer you the position of Executive Vice President, North American Operations reporting to Jeff Mallett, President and COO.  Your primary responsibilities, the positions which will report to you, and the committee with respect to which you will be a member are described in the attached Position Plan Summary.  Your starting salary will be $62,500 per month ($750,000.00 annually), paid semi-monthly and subject to increase during an annual review. You will be eligible for an annual bonus of up to $750,000.00 based upon achieving the annual revenue goals for our North American business;  provided, however, you will be entitled to a minimum bonus for 2001 of $525,000 (70% of target). Additionally, you will be eligible to participate in the regular Yahoo! health insurance benefits and other employee benefit plans established by the company generally for its employees.  (In addition to our standard two weeks of vacation in year one, you are eligible to take one additional week with pay.) You will receive a sign-on bonus in the amount of $1,250,000.00 if you start your employment on or before April 20, 2001 and we are able to announce your decision to join on or before April 11, 2001.  This will be payable in the first regular payroll period 30 days after your employment start date and is subject to applicable tax withholding.  An amount equal to $250,000 of this bonus, prorated for service completed, will become due and payable to the Company on your last day of employment if you voluntarily choose to leave the Company for any reason during the first year of employment, other than as a result of (a) a material breach of this agreement by the Company,  or (b)  a change in   the position to which you report  if, as a result of such change, you directly report to a position that does not in turn report directly to the Chief Executive Officer or if the scope of your responsibilities or your title is diminished  .  As a part of the Yahoo! team, we strongly believe that ownership of the Company by our employees is an important factor to our success.  Therefore, as part of your compensation, management has recommended that the Board of Directors grant you an option to purchase 300,000 shares of Yahoo! Inc.’s Common Stock under Yahoo! Inc.’s 1995 Stock Option Plan. We have every expectation that this grant will be officially approved and priced within two weeks of your start date.  The exercise price for this option will be the fair market value of Yahoo! Common Stock on the date of grant as determined by the Board of Directors. Options under the Yahoo! plan vest as to 1/4 of the shares after one year of employment, and in equal monthly installments over the 36 following months. You have indicated that you will not move your family to the Bay Area until sometime in the summer, 2002.  At that time, assuming we both feel good about your performance and continued potential, we will provide the following relocation assistance: A.      Home Sale/Home Purchase Assistance: We will pay all the required, non-recurring closing costs on the sale of your current home through our “market value sale” program.  We will also pay closing costs on the purchase of a new home in the Bay Area equal to 2% of the purchase price up to a cap of $40,000.00. B.       Shipment of household goods (not to exceed $30,000.00). C.      Family travel to destination (reimbursement up to $7,500.00). D.      A mortgage subsidy of no less than 3/2/1 to help offset any increase in mortgage payments in the first three years following your move.  (This program pays 3 percentage points of interest in year one, 2 points in year two and 1 point in the third year  while providing you the ability to declare the full interest  payment as a tax write-off.) In the meantime, the Company will provide you with a two bedroom furnished Corporate Apartment in the Bay Area for up to 15 months. If you voluntarily choose to leave the company for any reason, other than a material breach of this agreement by the Company, during the first twelve months following your relocation, a prorated portion of the monies given to you for relocation expenses will become due and payable to the Company on your last day of employment (based on 1/12th for each month your termination precedes 12 months of Yahoo! Inc. service), and by your signature below you agree that such amount shall be deducted from any compensation payable to you at that time. As an employee of Yahoo!, it is likely that you will become knowledgeable about confidential and or proprietary information related to the operations, products and services of the company and its clients.  To protect the interests of both the company and its clients, all employees are required to read and sign a PROPRIETARY INFORMATION AND ASSIGNMENT OF INVENTIONS AGREEMENT prior to beginning employment.  A copy of this agreement is enclosed.  Please sign it and return it along with your signed copy of this letter. Please understand that this letter does not constitute a contract of employment for any specific period of time, but will create an “employment at will” relationship that may be terminated at any time by you or Yahoo!, with or without cause. Your signature at the end of this letter confirms that no promises or agreements that are contrary to our at-will relationship have been committed to you during any of your pre-employment discussions with Yahoo!, and that this letter and the attached Position Plan Summary contain our complete agreement regarding the terms and conditions of your employment. You will be paid your full year bonus of $750,000.00 in lieu of severance in the unlikely event that your employment is terminated during the first twelve months of employment so long as (a), in the event of a termination initiated by the Company, such termination is not related to serious misconduct and (b), in the event of a termination initiated by you, there is either (i)  a material breach of this agreement by the Company, or (ii) a change in the  position to which you report if, as a result of such change, you directly report to a position that does not in turn report directly to the Chief Executive Officer or if the scope of your responsibilities or your title is reduced. Our signature on this letter also confirms our mutual agreement to binding arbitration, as defined under the California Arbitration Act, under the rules of the American Arbitration Association, should there be any dispute related to the termination of our employment relationship or the terms of your employment relationship with Yahoo!. Please understand that other than the relocation benefits outlined above, the terms and conditions outlined in this letter apply to your first year of employment with Yahoo only.  To accept this offer, please sign this letter in the space provided below and return it and a signed Proprietary Agreement to Kai Swavely in the envelope provided no later than March 16, 2001. A second copy of each document has been provided for you to keep for your records.  In order for Yahoo! to comply with the Immigration Reform and Control Act, we ask that you bring appropriate verification of authorization to work in the United States with you on your first day of employment. We look forward to your joining us and hope that you find your employment with Yahoo! enjoyable and professionally rewarding. Very truly yours, /s/ KIRK FROGGATT -------------------------------------------------------------------------------- Kirk Froggatt Vice President, Human Resources I accept this offer of employment with Yahoo! Inc. and agree to the terms and conditions outlined in this letter. /s/  GREGORY COLEMAN --------------------------------------------------------------------------------   3/19/01 -------------------------------------------------------------------------------- Signature   Date             -------------------------------------------------------------------------------- Planned Start Date     (Contingent upon completion of a satisfactory background investigation.)  

AMENDED AND RESTATED EMPLOYMENT AGREEMENT (Michael S. Rupe)              This Employment Agreement (the "Agreement") by and between F.Y.I. Incorporated, a Delaware corporation (the "Company"), and Michael S. Rupe ("Employee") is hereby entered into effective as of May 18, 2001.  This Agreement hereby supersedes any other employment agreements or understandings, written or oral, between the Company and Employee. R E C I T A L S              The following statements are true and correct:              As of the date of this Agreement, the Company is engaged primarily in the business of providing document and information management outsourcing solutions.              Employee is employed hereunder by the Company in a confidential relationship wherein Employee, in the course of his employment with the Company, has and will continue to become familiar with and aware of information as to the Company's customers, specific manner of doing business, including the processes, techniques and trade secrets utilized by the Company, and future plans with respect thereto, all of which has been and will be established and maintained at great expense to the Company; this information is a trade secret and constitutes the valuable goodwill of the Company.              Therefore, in consideration of the mutual promises, terms, covenants and conditions set forth herein and the performance of each, it is hereby agreed as follows: A G R E E M E N T S              1.          Employment and Duties.              (a)         The Company hereby employs Employee as Division President of Enabling Technology and Services.  As such, Employee shall have responsibilities, duties and authority reasonably accorded to and expected of a Division President and will report directly to the Company’s Chief Operating Officer.  Employee hereby accepts this employment upon the terms and conditions herein contained and, subject to paragraph 1(b), agrees to devote his working time, attention and efforts to promote and further the business of the Company.              (b)        Employee shall not, during the term of his employment hereunder, be engaged in any other business activity pursued for gain, profit or other pecuniary advantage except to the extent that such activity (i) does not interfere with Employee's duties and responsibilities hereunder and (ii) does not violate paragraph 3 hereof.  The foregoing limitations shall not be construed as prohibiting Employee from (A) serving on the boards of directors of other companies or (B) making personal investments in such form or manner as will neither require his services, other than to a minimal extent, in the operation or affairs of the companies or enterprises in which such investments are made nor violate the terms of paragraph 3 hereof.                2.          Compensation.  For all services rendered by Employee, the Company shall compensate Employee as follows:              (a)         Base Salary.  The base salary payable to Employee shall be $275,000 per year (effective January 1, 2001), payable on a regular basis in accordance with the Company's standard payroll procedures but not less than bi-weekly.  On at least an annual basis the Board of Directors (the “Board”) will review Employee’s performance and make increases to such base salary if, in its discretion, any such increase is warranted.              (b)        Incentive Bonus Plan.  Beginning for the year 2001, Employee shall be eligible for a bonus opportunity of up to 75% of his annual base salary in accordance with the Company’s Incentive Bonus Plan as modified from time to time, payable in cash and/or equity of the Company (at the Company’s discretion).  The bonus payment and the Company's targeted performance shall be determined and approved by the Board or the compensation committee thereof.  For 2001, Employee has already been awarded Warrant No. 62 as payment for any 2001 bonus opportunity.              (c)         Executive Perquisites, Benefits and Other Compensation.  Employee shall be entitled to receive additional benefits and compensation from the Company in such form and to such extent as specified below:              (i)          Payment of all premiums for coverage for Employee and his dependent family members under health, hospitalization, disability, dental, life and other insurance plans that the Company may have in effect from time to time, and not less favorable than the benefits provided to other Company executives.              (ii)         Reimbursement for all business travel and other out-of-pocket expenses reasonably incurred by Employee in the performance of his services pursuant to this Agreement.  All reimbursable expenses shall be appropriately documented in reasonable detail by Employee upon submission of any request for reimbursement, and in a format and manner consistent with the Company's expense reporting policy.              (iii)        Four (4) weeks paid vacation for each year during the period of employment or such greater amount as may be afforded officers and key employees generally under the Company's policies in effect from time to time (prorated for any year in which Employee is employed for less than the full year).              (iv)       An automobile allowance in the amount of $1,000 per month (increased from $500 per month effective March 2001).              (v)        The Company shall provide Employee with other executive perquisites as may be available to or deemed appropriate for Employee by the Board and participation in all other Company-wide employee benefits as available from time to time, which will include participation in the Company's Incentive Compensation Plan.                (vi)       Participation in the Company’s 401(k) Plan and Non-Qualified Plan.              (vii)      The Company shall, to the extent it has not already, reimburse Employee for reasonably incurred and documented out of pocket relocation expenses for Employee’s move to Dallas, not to exceed $70,000 in the aggregate without prior written approval; provided, that Employee shall promptly repay the Company for a prorated portion of such reimbursement to the extent the Employee is employed by the Company for less than two years (unless such employment is terminated before such two years, or this Agreement is not extended through such two years, by the Company without cause).              (viii)     The Company shall reimburse Employee up to $6,000 per year for expenditures on health, insurance, financial planning or tax planning benefits (or similar benefits at the discretion of the Company) or club dues selected by Employee.              3.          Non-Competition Agreement.              (a)         Subject to Section 3(a) and Section 12, Employee will not, during the period of his employment by or with the Company, and for a period of two (2) years immediately following the termination of his employment under this Agreement, for any reason whatsoever, directly or indirectly, for himself or on behalf of or in conjunction with any other person, company, partnership, corporation, business or entity of whatever nature:              (i)          engage, as an officer, director, shareholder, owner, partner, joint venturer, or in a managerial capacity, whether as an employee, independent contractor, consultant or advisor, or as a sales representative, in any business selling any products or services in direct competition with the Company, within 100 miles of (i) the principal executive offices of the Company or (ii) any place to which the Company provides products or services or in which the Company (including the subsidiaries thereof) is in the process of initiating business operations during the term of this covenant (the "Territory");              (ii)         call upon, hire, attempt to hire, contact or solicit with respect to hiring (for Employee or on behalf of another) any person who is, at that time, or who has been within one (1) year prior to that time, an employee of the Company (including the subsidiaries thereof) in a managerial or sales capacity, provided that Employee shall be permitted to call upon and hire any member of his immediate family;              (iii)        call upon, solicit, divert or take away or attempt to call upon, solicit, divert or take away any person or entity which is, at that time, or which has been, within one (1) year prior to that time, a customer of the Company (including the subsidiaries thereof) for the purpose of soliciting or selling products or services in direct competition with the Company;              (iv)       call upon any prospective acquisition candidate, on Employee's own behalf or on behalf of any competitor, with which candidate the Company (including the subsidiaries thereof) entered into substantive discussions or for which candidate the Company made an acquisition analysis, for the purpose of acquiring such entity; or                (v)        disclose customers, whether current or proposed, of the Company (or the subsidiaries thereof) to any person, firm, partnership, corporation or business for any reason or purpose whatsoever.              Notwithstanding the above, the foregoing covenant shall not be deemed to prohibit Employee from acquiring as an investment not more than three percent (3%) of the capital stock of a competing business, whose stock is traded on a national securities exchange or over-the-counter.              (b)        Because of the difficulty of measuring economic losses to the Company as a result of a breach of the foregoing covenant, and because of the immediate and irreparable damage that could be caused to the Company for which it would have no other adequate remedy, Employee agrees that the foregoing covenant may be enforced by the Company in the event of breach by him by injunctions and restraining orders without the necessity of posting any bond therefor.              (c)         In the course of Employee’s employment with the Company, Employee will become exposed to certain of the Company’s confidential information and business relationships, which the above covenants are designed to protect.  It is agreed by the parties that the foregoing covenants in this paragraph 3 impose a reasonable restraint on Employee in light of the activities and business of the Company (including the Company's subsidiaries) on the date of the execution of this Agreement and the current plans of the Company (including the Company's subsidiaries); but it is also the intent of the Company and Employee that such covenants be construed and enforced in accordance with the changing activities, business and locations of the Company (including the Company's subsidiaries) throughout the term of this covenant, whether before or after the date of termination of the employment of Employee, subject to the following paragraph.  For example, if, during the Term of this Agreement, the Company (including the Company's subsidiaries) engages in new and different activities, enters a new business or established new locations for its current activities or business in addition to or other than the activities or business enumerated under the Recitals above or the locations currently established therefor, then Employee will be precluded from soliciting the customers or employees of such new activities or business or from such new location and from directly competing with such new business within 100 miles of its then-established operating location(s) through the term of this covenant.                            It is further agreed by the parties hereto that, in the event that Employee shall cease to be employed hereunder, and shall enter into a business or pursue other activities not in competition with the Company (including the Company's subsidiaries), or similar activities or business in locations the operation of which, under such circumstances, does not violate clause (i) of this paragraph 3, and in any event such new business, activities or location are not in violation of this paragraph 3 or of Employee's obligations under this paragraph 3, if any, Employee shall not be chargeable with a violation of this paragraph 3 if the Company (including the Company's subsidiaries) shall thereafter enter the same, similar or a competitive (i) business, (ii) course of activities or (iii) location, as applicable.                (d)        The covenants in this paragraph 3 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant.  Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent that the court deems reasonable, and the Agreement shall thereby be reformed to such extent.              (e)         All of the covenants in this paragraph 3 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of Employee against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenants.  It is specifically agreed that the period of two (2) years following Employee’s employment set forth at the beginning of this paragraph 3, during which the agreements and covenants of Employee made in this paragraph 3 shall be effective, shall be computed by excluding from such computation any time during which Employee is in violation of any provision of this paragraph 3.              4.          Place of Performance.              (a)         Employee’s place of employment is the Company’s headquarters in Dallas, Texas.  Employee understands that he may be requested by the Board to relocate from his present residence to another geographic location in order to more efficiently carry out his duties and responsibilities under this Agreement or as part of a promotion or other increase in duties and responsibilities.  In the event that Employee is requested to relocate and agrees to do so, the Company will pay all relocation costs to move Employee, his immediate family and their personal property and effects.  Such costs may include, by way of example, but are not limited to, pre-move visits to search for a new residence, investigate schools or for other purposes; temporary lodging and living costs prior to moving into a new permanent residence; duplicate home carrying costs; all closing costs on the sale of Employee's present residence and on the purchase of a comparable residence in the new location; and added income taxes that Employee may incur, as a result of any payment hereunder, to the extent any relocation costs are not deductible for tax purposes.  The general intent of the foregoing is that Employee shall not personally bear any out-of-pocket cost as a result of the relocation, with an understanding that Employee will use his best efforts to incur only those costs which are reasonable and necessary to effect a smooth, efficient and orderly relocation with minimal disruption to the business affairs of the Company and the personal life of Employee and his family.              (b)        Notwithstanding the above, if Employee is requested by the Board to relocate and Employee refuses, such refusal shall not constitute "good cause" for termination of this Agreement under the terms of paragraph 5(c).              5.          Term; Termination; Rights on Termination.  The term of this Agreement shall begin on the date hereof and continue through December 31, 2002 (the "Term").  This Agreement and Employee's employment may be terminated earlier in any one of the following ways:                (a)         Death.  The death of Employee shall immediately terminate the Agreement with no severance compensation due to Employee's estate.              (b)        Disability.  If, as a result of incapacity due to physical or mental illness or injury, Employee shall have been absent from his full-time duties hereunder for four (4) consecutive months, then thirty (30) days after receiving written notice (which notice may occur before or after the end of such four (4) month period, but which shall not be effective earlier than the last day of such four (4) month period), the Company may terminate Employee's employment hereunder provided Employee is unable to resume his full-time duties at the conclusion of such notice period.  Also, Employee may terminate his employment hereunder if his health should become impaired to an extent that makes the continued performance of his duties hereunder hazardous to his physical or mental health or his life, provided that Employee shall have furnished the Company with a written statement from a qualified doctor to such effect and provided, further, that, at the Company's request made within thirty (30) days of the date of such written statement, Employee shall submit to an examination by a doctor selected by the Company who is reasonably acceptable to Employee or Employee's doctor and such doctor shall have concurred in the conclusion of Employee's doctor.  In the event this Agreement is terminated as a result of Employee's disability, Employee shall receive from the Company, in a lump-sum payment due within ten (10) days of the effective date of termination, the base salary, at the rate then in effect, for one (1) year.              (c)         Good Cause.  The Company may terminate the Agreement ten (10) days after written notice to Employee for good cause, which shall be: (1) Employee's material and irreparable breach of this Agreement; (2) Employee's gross negligence in the performance or intentional nonperformance (continuing for ten (10) days after receipt of the written notice) of any of Employee's material duties and responsibilities hereunder; (3) Employee's dishonesty, fraud or misconduct with respect to the business or affairs of the Company which materially and adversely affects the operations or reputation of the Company; (4) Employee's conviction of a felony crime; or (5) chronic alcohol abuse or illegal drug abuse by Employee.  In the event of a termination for good cause, as enumerated above, Employee shall have no right to any severance compensation.              (d)        Without Cause.  At any time after the commencement of employment, the Company may, without cause, terminate this Agreement and Employee's employment, effective thirty (30) days after written notice is provided to the Employee.  Should Employee be terminated by the Company without cause, Employee shall receive from the Company, in a lump-sum payment due on the effective date of termination, one (1) times the base salary at the rate then in effect, as severance pay.  Further, any termination without cause by the Company shall operate to shorten the period set forth in paragraph 3(a) and during which the terms of paragraph 3 apply to one (1) year from the date of termination of employment.               (e)        Termination by Employee for Good Reason.  Employee may terminate his employment hereunder for "Good Reason."  As used herein, "Good Reason" shall mean the continuance of any of the following after ten (10) days' prior written notice by Employee to the Company, specifying the basis for such Employee's having Good Reason to terminate this Agreement:                (i)          the assignment to Employee of any duties materially and adversely inconsistent with Employee's position as specified in paragraph 1 hereof (or such other position to which he may be promoted), including status, offices, responsibilities or persons to whom Employee reports as contemplated under paragraph 1 of this Agreement, or any other action by the Company which results in a material and adverse change in such position, status, offices, titles or responsibilities;              (ii)         Employee's removal from, or failure to be reappointed or reelected to, Employee's position under this Agreement during the term of this Agreement (though this provision shall not entitle Employee to any extension or renewal of the Term of this Agreement), except as contemplated by paragraphs 5(a), (b), (c) and (e); or              (iii)        any other material breach of this Agreement by the Company that is not cured within the ten (10) day time period set forth in paragraph 5(f) above, including the failure to pay Employee on a timely basis the amounts to which he is entitled under this Agreement. In the event of any termination by the Employee for Good Reason, as determined by a court of competent jurisdiction or pursuant to the provisions of paragraph 16 below, the Company shall pay all amounts and damages (which damages shall not include payment of salary for the then unexpired Term in light of the Severance Pay set forth below), to which Employee may be entitled as a result of such breach, including interest thereon and all reasonable legal fees and expenses and other costs incurred by Employee to enforce his rights hereunder.  In addition, Employee shall be entitled to receive from the Company, in a lump-sum payment due on the effective date of termination, one (1) times the base salary at the rate then in effect, as severance pay.  Further, none of the provisions of paragraph 3 shall apply in the event this Agreement is terminated by Employee for Good Reason. (f) Termination by Employee Without Good Reason.  If Employee resigns or otherwise terminates his employment without Good Reason pursuant to paragraph 5(f), Employee shall receive no severance compensation.     (g) Change of Control.  Refer to paragraph 12, below. Upon termination of this Agreement for any reason provided in clauses (a) through (g) above, Employee shall be entitled to receive all compensation earned and all benefits vested and reimbursements due through the effective date of termination.  Additional compensation subsequent to termination, if any, will be due and payable to Employee only to the extent and in the manner expressly provided above or in paragraph 16.  All other rights and obligations of the Company and Employee under this Agreement shall cease as of the effective date of termination, except that the Company's obligations under paragraph 9 herein and Employee's obligations under paragraphs 3, 6, 7, 8, 9 and 10 herein shall survive such termination in accordance with their terms.                6.          Return of Company Property.  All records, designs, patents, business plans, financial statements, manuals, memoranda, lists and other property delivered to or compiled by Employee by or on behalf of the Company (including the Company’s subsidiaries) or its representatives, vendors or customers which pertain to the business of the Company (including the Company’s subsidiaries) shall be and remain the property of the Company and be subject at all times to its discretion and control.  Likewise, all correspondence, reports, records, charts, advertising materials and other similar data pertaining to the business, activities or future plans of the Company (including the Company’s subsidiaries) that is collected by Employee shall be delivered promptly to the Company without request by it upon termination of Employee's employment.              7.          Inventions.  Employee shall disclose promptly to the Company any and all significant conceptions and ideas for inventions, improvements and valuable discoveries, whether patentable or not, which are conceived or made by Employee, solely or jointly with another, during the period of employment or within one (1) year thereafter, and which are directly related to the business or activities of the Company (including the Company’s subsidiaries) and which Employee conceives as a result of his employment by the Company.  Employee hereby assigns and agrees to assign all his interests therein to the Company or its nominee.  Whenever requested to do so by the Company, Employee shall execute any and all applications, assignments or other instruments that the Company shall deem necessary to apply for and obtain letters patent of the United States or any foreign country or to otherwise protect the Company's interest therein.              8.          Trade Secrets.  Employee agrees that he will not, during or after the term of this Agreement with the Company, disclose the specific terms of the Company's (including the Company’s subsidiaries) relationships or agreements with its significant vendors or customers or any other significant and material trade secret of the Company (including the Company’s subsidiaries), whether in existence or proposed, to any person, firm, partnership, corporation or business for any reason or purpose whatsoever, except as is disclosed in the ordinary course of business.              9.          Indemnification.  In the event Employee is made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by the Company against Employee), by reason of the fact that he is or was performing services under this Agreement, then the Company shall indemnify Employee against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement, as actually and reasonably incurred by Employee in connection therewith.  In the event that both Employee and the Company are made a party to the same third-party action, complaint, suit or proceeding, the Company agrees to engage competent legal representation, and Employee agrees to use the same representation, provided that if counsel selected by the Company shall have a conflict of interest that prevents such counsel from representing Employee, Employee may engage separate counsel and the Company shall pay all attorneys' fees of such separate counsel.  Further, while Employee is expected at all times to use his best efforts to faithfully discharge his duties under this Agreement, Employee cannot be held liable to the Company for errors or omissions made in good faith where Employee has not exhibited gross, willful and wanton negligence and misconduct or performed criminal and fraudulent acts which materially damage the business of the Company.                10.        No Prior Agreements.  Employee hereby represents and warrants to the Company that the execution of this Agreement by Employee and his employment by the Company and the performance of his duties hereunder will not violate or be a breach of any agreement with a former employer, client or any other person or entity.  Further, Employee agrees to indemnify the Company for any claim, including, but not limited to, attorneys' fees and expenses of investigation, by any such third party that such third party may now have or may hereafter come to have against the Company based upon or arising out of any non-competition agreement, invention or secrecy agreement between Employee and such third party which was in existence as of the date of this Agreement.              11.        Assignment; Binding Effect.  Employee understands that he has been selected for employment by the Company on the basis of his personal qualifications, experience and skills.  Employee agrees, therefore, he cannot assign all or any portion of his performance under this Agreement and the Company agrees not to assign all or any portion of its obligations under this Agreement (other than to a successor as a result of a Change in Control).  Subject to the preceding two (2) sentences and the express provisions of paragraph 12 below, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective heirs, legal representatives, successors and assigns.              12.        Change in Control.              (a)         Unless he elects to terminate this Agreement pursuant to (c) below, Employee understands and acknowledges that the Company may be merged or consolidated with or into another entity and that such entity shall automatically succeed to the rights and obligations of the Company hereunder.              (b)        In the event of a pending Change in Control wherein the Employee has not received written notice at least fifteen (15) business days prior to the anticipated closing date of the transaction giving rise to the Change in Control from the successor to all or a substantial portion of the Company's business and/or assets that such successor is willing as of the closing to assume and agree to perform the Company's obligations under this Agreement in the same manner and to the same extent that the Company is hereby required to perform, such Change in Control shall be deemed to be a termination of this Agreement by the Company and the amount of the lump-sum severance payment due to Employee shall be 2 times Employee’s annual salary immediately prior to the Change in Control and the non-competition provisions of paragraph 3 shall not apply whatsoever.  Payment shall be made either at closing of the transaction if notice is served at least five (5) days before closing or within ten (10) days of Employee’s written notice.              (c)         In any Change in Control situation in which Employee has received written notice from the successor to the Company that such pending successor is willing to assume the Company's obligations hereunder or Employee receives notice after (or within fifteen (15) business days prior to) the Change in Control that Employee is being terminated, Employee may nonetheless, at his sole discretion, elect to terminate this Agreement by providing written notice to the Company at any time prior to closing of the transaction and up to two (2) years after the closing of the transaction giving rise to the Change in Control.  In such case, the amount of the lump-sum severance payment due to Employee shall be 2 times Employee’s annual salary in effect immediately prior to the Change in Control and the non-competition provisions of paragraph 3 shall all apply.  Payment shall be made either at closing if notice is served at least five (5) days before closing or within ten (10) days of written notice by Employee.                (d)        For purposes of applying paragraph 5 under the circumstances described in (b) and (c) above, the effective date of termination will be the later of the closing date of the transaction giving rise to the Change in Control or Employee’s notice as described above, and all compensation, reimbursements and lump-sum payments due Employee must be paid in full by the Company at such time.  Further, Employee will be given sufficient time in order to comply with then Securities and Exchange Commission’s regulations to elect whether to exercise and sell all or any of his vested options to purchase Common Stock of the Company, including any options with accelerated vesting under the provisions of the Company's 1995 Stock Option Plan, as amended (and as modified by the related option agreement/certificate in accordance with such Plan) or any warrants, such that he may convert such options or warrants to shares of Common Stock of the Company at or prior to the closing of the transaction giving rise to the Change in Control, if he so desires.              (e)         A "Change in Control" shall be deemed to have occurred if:              (i)          any person, other than the Company or an employee benefit plan of the Company, acquires directly or indirectly the Beneficial Ownership (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended) of any voting security of the Company and immediately after such acquisition such Person is, directly or indirectly, the Beneficial Owner of voting securities representing 30% or more of the total voting power of all of the then-outstanding voting securities of the Company;              (ii)         the individuals (A) who, as of the closing date of the Company's initial public offering, constitute the Board of Directors of the Company (the "Original Directors") or (B) who thereafter are elected to the Board of Directors of the Company and whose election, or nomination for election, to the Board of Directors of the Company was approved by a vote of at least two-thirds (2/3) of the Original Directors then still in office (such directors becoming "Additional Original Directors" immediately following their election) or (C) who are elected to the Board of Directors of the Company and whose election, or nomination for election, to the Board of Directors of the Company was approved by a vote of at least two-thirds (2/3) of the Original Directors and Additional Original Directors then still in office (such directors also becoming "Additional Original Directors" immediately following their election), cease for any reason to constitute a majority of the members of the Board of Directors of the Company;              (iii) the stockholders of the Company shall approve a merger, consolidation, recapitalization, or reorganization of the Company, a reverse stock split of outstanding voting securities of the Company, or consummation of any such transaction if stockholder approval is not sought or obtained, other than any such transaction which would result in at least 75% of the total voting power represented by the voting securities of the surviving entity outstanding immediately after such transaction being Beneficially Owned by holders of at least 75% of the outstanding voting securities of the Company immediately prior to the transaction, with the voting power of each such continuing holder relative to other such continuing holders not substantially altered in the transaction; or                (iv)       the stockholders of the Company shall approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or a substantial portion of the Company's assets (i.e., 50% or more of the total assets of the Company).              (f)         If any portion of the severance benefits, Change in Control benefits or any other payment under this Agreement, or under any other agreement with, or plan of the Company, including but not limited to stock options, warrants and other long-term incentives (in the aggregate “Total Payments”) would be subject to the excise tax imposed by Section 4999 of the Code, as amended (or any similar tax that may hereafter be imposed) or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then Employee shall be entitled to receive from the Company an additional payment (the “Gross-up Payment”) in an amount such that the net amount of Total Payments and Gross-up Payment retained by the Employee, after the calculation and deduction of all Excise Tax on the Total Payments and all federal, state and local income tax, employment tax and Excise Tax on the Gross-up Payment, shall be equal to the Total Payments.              For purposes of this paragraph Employee’s applicable Federal, state and local taxes shall be computed at the maximum marginal rates, taking into account the effect of any loss of personal exemptions resulting from receipt of the Gross-Up Payment.              All determinations required to be made under this paragraph 12, including whether a Gross-Up Payment is required under this paragraph, and the assumptions to be used in determining the Gross-Up Payment, shall be made by the Company’s current independent accounting firm, or such other firm as the Company may designate in writing prior to a Change in Control (the “Accounting Firm”), which shall provide detailed supporting calculations both to the Company and Employee within twenty business days of the receipt of notice from Employee that there will likely be a Change in Control, or such earlier time as is requested by the Company.  In the event that the Accounting Firm is serving as accountant or auditor for the party effecting the Change in Control or is otherwise unavailable, Employee (together with all other employees with comparable appointment rights in their respective employment agreements such that all such employees may collectively select a single accounting firm) may appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder).  All fees and expenses of the Accounting Firm with respect to such determinations described above shall be borne solely by the Company.                Employee agrees (unless requested otherwise by the Company) to use reasonable efforts to contest in good faith any subsequent determination by the Internal Revenue Service that Employee owes an amount of Excise Tax greater than the amount determined pursuant to this paragraph; provided, that Employee shall be entitled to reimbursement by the Company (on an after tax basis) of all fees and expenses reasonably incurred by Employee in contesting such determination.  In the event the Internal Revenue Service or any court of competent jurisdiction determines that Employee owes an amount of Excise Tax that is greater than the amount previously taken into account and paid under this Agreement (such additional Excise Tax being the “Additional Excise Tax”), the Company shall promptly pay to Employee the amount of such shortfall.  In the case of any payment that the Company is required to make to Employee pursuant to the preceding sentence (a “Later Payment”), the Company shall also pay to Employee an additional amount such that after payment by Employee of all of Employee’s applicable Federal, state and local taxes, including any interest and penalties assessed by any taxing authority, on the Later Payment, Employee will retain from the Later Payment an amount equal to the Additional Excise Tax, which Employee shall use to pay the Additional Excise Tax.              13.        Complete Agreement.  This Agreement is not a promise of future employment.  Employee has no oral representations, understandings or agreements with the Company or any of its officers, directors or representatives covering the same subject matter as this Agreement.  This written Agreement is the final, complete and exclusive statement and expression of the agreement between the Company and Employee and of all the terms of this Agreement, and it cannot be varied, contradicted or supplemented and may only be amended by a written agreement executed by each of the parties hereto.              14.        Notice.  Whenever any notice is required hereunder, it shall be given in writing addressed as follows: To the Company: F.Y.I. Incorporated   3232 McKinney Avenue   Suite 1000   Dallas, Texas 75204   Attn:  President     with a copy to: F.Y.I. Incorporated   3232 McKinney Avenue   Suite 1000   Dallas, Texas 75204   Attn:  General Counsel     with a copy to: Locke Liddell & Sapp LLP   2200 Ross Avenue   Suite 2200   Dallas, Texas 75201   Attn:  Charles C. Reeder, Esq.     To Employee: Michael S. Rupe   4569 Belfort Place   Dallas, Texas 75205 Notice shall be deemed given and effective three (3) days after the deposit in the U.S. mail of a writing addressed as above and sent first class mail, certified, return receipt requested, or when actually received.  Either party may change the address for notice by notifying the other party of such change in accordance with this paragraph 14.              15.        Severability; Headings.  If any portion of this Agreement is held invalid or inoperative, the other portions of this Agreement shall be deemed valid and operative and, so far as is reasonable and possible, effect shall be given to the intent manifested by the portion held invalid or inoperative.  The paragraph headings herein are for reference purposes only and are not intended in any way to describe, interpret, define or limit the extent or intent of the Agreement or of any part hereof.              16.        Arbitration.  Any unresolved dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three (3) arbitrators in Dallas, Texas, in accordance with the rules of the American Arbitration Association then in effect.  The arbitrators shall not have the authority to add to, detract from, or modify any provision hereof nor to award punitive damages to any injured party.  The arbitrators shall have the authority to order back-pay, severance compensation, vesting of options (or cash compensation in lieu of vesting of options), reimbursement of costs, including those incurred to enforce this Agreement, and interest thereon in the event the arbitrators determine that Employee was terminated without disability or good cause, as defined in paragraphs 5(b) and 5(c), respectively, or that the Company has otherwise materially breached this Agreement.  A decision by a majority of the arbitration panel shall be final and binding.  Judgment may be entered on the arbitrators' award in any court having jurisdiction.  The costs of any arbitration proceeding shall be borne by the party or parties not prevailing in such proceeding determined by the arbitrators.              17.        Governing Law.  This Agreement shall in all respects be construed according to the laws of the State of Delaware. [Balance of sheet intentionally left blank]     EMPLOYEE:       --------------------------------------------------------------------------------   Michael S. Rupe               F.Y.I. INCORPORATED           By:   --------------------------------------------------------------------------------   Title:  

Exhibit 10.3 FIRST AMENDMENT TO MASTER LOAN AND SECURITY AGREEMENT              THIS FIRST AMENDMENT TO MASTER LOAN AND SECURITY AGREEMENT (the “Amendment”), dated as of May 15, 2001, by and between Eligix, Inc. (the “Borrower” or “Eligix”), a Delaware corporation, having its principal place of business and chief executive office at 200 Boston Avenue, Medford, Massachusetts, 02139, and TRANSAMERICA BUSINESS CREDIT CORPORATION (the “Lender”), a Delaware corporation, having its principal office at Riverway II, West Office Tower, 9399 West Higgins Road, Rosemont, Illinois, 60018. W I T N E S S E T H:              WHEREAS, the Borrower and the Lender are parties to the Master Loan and Security Agreement, dated as of July 28, 1999 (as amended, the “Loan Agreement”; capitalized terms used herein shall have the meanings assigned to such terms in the Loan Agreement unless otherwise defined herein);              WHEREAS, Eligix and BioTransplant, Inc., a Delaware corporation (“BioTransplant”), have agreed to merge; and              WHEREAS, the parties hereto desire to amend the Loan Agreement in the manner set forth herein.              NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the Borrower and Lender hereby agree as follows:              1.          Amendment to Loan Agreement.  Effective as of the date this Amendment is fully executed by the Lender and Borrower hereof, and subject to the satisfaction by the Borrower of conditions as determined by Lender, the Loan Agreement is hereby amended to add BioTransplant as a joint and several borrower and party to the Loan Agreement (hereafter, Eligix, and BioTransplant shall collectively be referred to as “Borrower”).              2.          Representations and Warranties of Eligix.                            (a)         Sine July 28, 1999, there has occurred no development, event or change that has had or could reasonably be expected to have a Material Adverse Effect.                            (b)        No Default or Event of Default has occurred and is continuing.                            (c)         The representations and warranties of Eligix contained in Section 4 of the Loan Agreement are true and correct in all material respects on the date hereof as though made on and as of the date hereof, except to the extent that such representation and warranties expressly relate solely to an earlier date (in which case such representations and warranties were true and correct on and as of such earlier date).                            (d)        This Amendment constitutes the legal, valid and binding obligation of Eligix, enforceable against Eligix in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency and other laws affecting creditors’ rights generally and by general principles of equity.              3.          Representations and Warranties of BioTransplant.  This Amendment constitutes the legal, valid and binding obligation of BioTransplant, enforceable against BioTransplant in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency and other laws affecting creditors’ rights generally and by general principles of equity.              4.          Conditions to Amendment.  The obligation of the Lender to consummate this Amendment is subject to the Lenders’ receipt of the following, in form and substance satisfactory to the Lender and its counsel:              (i)          a certificate of the Secretary or an Assistant Secretary of BioTransplant (“Secretary’s Certificate”) certifying: (a)         that attached to the Secretary’s Certificate is a true, complete, and accurate copy of the resolutions of the Board of Directors of BioTransplant (or a unanimous consent of directors in lieu thereof) authorizing the execution, delivery, and performance of the Loan Agreement, the other Loan Documents, and the transactions contemplated hereby and thereby, and that such resolutions have not been amended or modified since the date of such certification and are in full force and effect; (b)        the incumbency, names, and true signatures of the officers of BioTransplant authorized to sign the Loan Documents to which it is a party; and (c)         that attached to the Secretary’s Certificate is a true and correct copy of the Articles or Certificate of Incorporation of the Company, as amended, which Articles or Certificate of Incorporation have not been further modified, repealed or rescinded and are in full force and effect;              (ii)         such other agreements and instruments as the Lender deems necessary in its reasonable discretion in connection with the transactions contemplated hereby.              5.          Miscellaneous.                            (a)         Except as expressly amended herein, all of the terms and provisions of the Loan Agreement and the other Loan Documents are ratified and confirmed in all respects and shall remain in full force and effect.                            (b)        Upon the effectiveness of this Amendment, all references in the Loan Documents to the Loan Agreement shall mean the Loan Agreement as amended by this Amendment and all references in the Loan Agreement to the “this Agreement”, “hereof”, “herein”, or similar terms, shall mean and refer to the Loan Agreement as amended by this Amendment.                            (c)         The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as an amendment to or waiver of any right, power or remedy of the Lender under any of the Loan Documents, or constitute an amendment or waiver of any provision of any of the Loan Documents.                            (d)        This Amendment may be executed by the parties hereto individually or in combination, in one or more counterparts, each of which shall be an original and all of which shall constitute one and the same agreement.  This Amendment may be executed and delivered by telecopier with the same force and effect as if the same were a fully executed and delivered original manual counterpart.                            (e)         This Amendment shall constitute a Loan Document.              6.          GOVERNING LAW.  THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS AMENDMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES THEREOF. Signature page to follow. Signature page to Amendment.              IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective duly authorized officers as of the date first above written.   BORROWER       ELIGIX, INC.       By: /s/ James R. Fitzgerald     --------------------------------------------------------------------------------     Name:  James R. Fitzgerald     Title:  Senior Vice President   Hereunto Duly Authorized         BORROWER       BIOTRANSPLANT INCORPORATED       By: /s/ Richard V. Capasso     --------------------------------------------------------------------------------     Name:  Richard V. Capasso     Title:  Vice President Finance   Hereunto Duly Authorized         LENDER       TRANSAMERICA BUSINESS CREDIT CORPORATION       By: /s/ Allen M. Sailer     --------------------------------------------------------------------------------     Name:  Allen M. Sailer     Title:  Vice President   Hereunto Duly Authorized  

Exhibit 10 WESTVACO CORPORATION DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE OUTSIDE DIRECTORS Article I Purpose and General Provisions Section 1.1 Purpose of Plan. The purpose of the Plan is to provide members of the Company's Board of Directors who are not employed by the Company with an opportunity to defer compensation and either have their deferred compensation receive the same return as an equivalent investment in Company stock, or, in the alternative, a fixed rate of return. Section 1.2 Definitions. The following terms shall have the meanings set forth below for purposes of the Plan. Account : a bookkeeping account for a Participant representing the Eligible Compensation that the Participant has elected to defer under the Plan, as adjusted to reflect earnings, losses, contributions and distributions in accordance with Articles III and IV of the Plan. Administration Committee : the Benefit Plans Administration Committee of the Company, or any successor thereto designated by the Chief Executive Officer of the Company to serve as the body charged with serving as such under the Plan. Beneficiary : in the case of any Participant who dies, the person or persons named on the most recent Beneficiary Election Form filed and not revoked by the Participant, in each case, in accordance with procedures established by the Administration Committee or, if no such procedures have been established or the Participant has not properly filed any Beneficiary Election Form, the Participant's estate. Company : Westvaco Corporation, a Delaware corporation. Contributions : Deferred Compensation. Deferral Election : an election by an Eligible Director to defer Eligible Compensation. Deferred Compensation : an amount of Eligible Compensation that an Eligible Director elects to defer under the Plan in accordance with the provision of the Plan. Distribution Deferred Election : an election by a Participant of the time(s) and manner in which he or she wishes to receive distributions from his or her Account. Distribution Year : defined in Section 4.2. Eligible Compensation : with respect to any Eligible Director 100% of the Eligible Director's Compensation from the Company for service on the Company's Board of Directors or a Committee of the Board of Directors. Election Form : a form effecting a Beneficiary Election (a "Beneficiary Election Form,"), a form effecting a Deferral Election (a " Deferral Election Form"), a form effecting a Distribution Election (a "Distribution Election Form"), or a form effecting an Investment Election (an "Investment Election Form"), or a single form combining all of such elections. Eligible Director : any member of the Company's Board of Directors who is not employed by the Company or any of its subsidiaries or affiliates. Finance Committee : the Benefit Plans Finance Committee of the Company, or any successor thereto designated by the Chief Executive Officer of the Company to serve as the body charged with serving as such under the Plan. Investment Election: an election by an Eligible Director to have Contributions invested in an Investment Fund as defined in Section 3.3(a) phantom Company stock or receive a fixed rate of return. Participant : an Eligible Director who has elected to defer Eligible Compensation under the Plan or to whose Account Company Contributions have been credited and who has a positive balance in his or her Account. Plan : the Westvaco Deferred Compensation Plan for Non-Employee Directors, as set forth herein. Plan Year : generally, the calendar year; provided, that the first Plan Year shall be the period from October 1, 2001 through December 31, 2001. Termination Distribution : a distribution from a Participant's Account following the Participant's Termination of Membership on the Company's Board of Directors. Termination of Board Membership : with respect to any Participant, the date on which the Participant ceases, for any reason, to be a member of the Company's Board of Directors. Section 1.3 Administration. The Administration Committee shall be responsible for administering the Plan in all other respects, including establishing rules and regulations for the operation of the Plan, preparing, distributing, collecting and administering Election Forms, and interpreting the Plan and all associated documentation (including without limitation Election Forms). The Administration Committee may delegate any or all of their respective responsibilities to one or more of their members or to appropriate employees of the Company. Section 1.4 Unfunded  Plan. The Plan is intended to be an unfunded plan providing deferred compensation. Participants are and shall at all times be general creditors of the Company with respect to their Account balances. If the Finance Committee or the Company chooses to set aside funds in a trust or otherwise for the payment of Account balances under the Plan, such funds shall at all times be subject to the claims of the creditors of the Company in the event of its bankruptcy or insolvency. Section 1.5 Non-Transferability. None of the rights of Participants under the Plan or with respect to their Accounts shall be transferable, except as specifically provided in Section 4.3 in the event of a Participant's death. Article II Deferral Elections Section 2.1 Eligible Compensation. All Eligible Directors shall be provided with the opportunity to elect to defer of their retainer or meeting fees, or both their retainer and meeting fees, which make up their Eligible Compensation. Section 2.2 Deferral Election Forms. Deferral Election Forms shall be in such form, and shall be filed and revoked in such manner as the Administration Committee shall from time to time determine. Section 2.3 Time for Filing Deferral Election Forms. Individuals who are Eligible Directors as of September 1, 2001 may file Deferral Elections to defer Eligible Compensation that is earned during the initial Plan Year not later than September 1, 2001. An individual who becomes an Eligible Director after September 1, 2001 may file an initial Deferral Election within 30 days after becoming an Eligible Director, but such Deferral Election may only apply to Eligible Compensation earned after it is filed. Subsequent Deferral Elections to defer Eligible Compensation may be filed during the month of December of any calendar year. Once filed, a Deferral Election with respect to Eligible Compensation shall be effective for the Plan Year following the Plan Year during which it is filed (or in the case of a Deferral Election with respect to the initial Plan Year, for the initial Plan Year) and all subsequent Plan Years, until the Plan Year after the Plan Year (if any) during which the Participant files a new Deferral Election or revokes such Deferral Election. Article III Accounts and Investments Section 3.1 Establishment and Maintenance of Account. The Administration Committee shall cause the Company to establish and maintain an Account for each Participant. A Participant's Account shall be credited and debited from time to time as provided in Section 3.2, adjusted for investment experience, from time to time as provided in Section 3.3, and debited for amounts distributed in accordance with Article IV. Section 3.2 Contributions to Accounts. Elective Deferrals. A Participant's Account shall be credited from time to time with his or her Deferred Compensation, within 10 business day after the day on which such Deferred Compensation would otherwise be paid to him or her. Section 3.3 Earnings and Losses on Accounts. Investment Elections . At the election of a Participant, Contributions shall be deemed to hold an interest in an imaginary investment fund (the "Investment Fund") which (i) mirrors an investment fund in the Westvaco Employee Stock Ownership Plan for Salaried Employees that invests in Westvaco common stock or (ii) reflects a fixed income investment fund selected by the Administration Committee from among the choices offered in the Westvaco Savings and Investment Plan for Salaried Employees. Adjustment of Accounts . The Administrative Committee shall cause Participants' Accounts to be adjusted upwards or downwards, at such intervals as it may from time to time determine, to reflect the net investment return (whether positive or negative) of the particular Investment Fund elected; provided, that no Account may at any time have a balance less than zero. Section 3.4 Reports. The Administration Committee shall provide, or cause to be provided, to each Participant at regular intervals, but at least annually, a statement of his or her Account balance and the activity therein since the date of the last such statement. Article IV Distributions Section 4.1 Termination of Board Membership. The balance in the Participant's Account shall be paid, or begin to be paid, on the earliest practicable date following the end of the calendar quarter in which the Participant terminates Board Membership for any reason. Termination Distributions shall be made either in a single lump sum, or, if so elected by the Participant on a Distribution Election Form, in equal installments over a specified period. Section 4.2 Distribution Election Form. Participants shall be afforded the opportunity to file a Distribution Election Form specifying the time and manner in which their Accounts will normally be distributed, subject to the provisions of this Article IV. The Administration Committee shall establish the procedures for such elections. A Participant may elect to receive all or any portion of his or her Account in a lump sum or a series of monthly payments commencing any time after Termination of Board Membership and extending no later than 10 years after Termination of Board Membership. A Distribution Election Form must be submitted six months prior to the Termination of Board Membership which is irrevocable during such six month period. Section 4.3 Death. Notwithstanding any other provision of the Plan, upon the death of a Participant, the remaining balance in the Participant's Account shall be distributed in a single lump sum to the Participant's Beneficiary or Beneficiaries, as soon as reasonably practicable. Article V Amendment and Termination of Plan The Plan may be amended or terminated at any time by resolution of the Board of Directors of the Company; provided, that no such amendment or termination may reduce the balance of any Participant's Account, change the requirements for vesting of any unvested portion of any Participant's Account, or change the timing of distributions from any Participant's Account, without consent of the affected Participant.

Exhibit A   SCHEDULE OF PARTNERS, ALLOCATION OF PARTNERSHIP UNITS, PERCENTAGE INTERESTS AND THE AGREED UPON VALUE OF NON-CASH CAPITAL CONTRIBUTIONS   Date Admitted   Name and address of partners   Value of non-cash capital contribution   Partnership units issued   Approx. Percentage Interests   Federal ID #                           2/12/1997   Golf Legends Ltd., Inc.  1500 Legends Drive Myrtle Beach, SC  29578   $ 30,647,030   1,532,352       57-0886834                           4/2/2001   Legends (conversion)       (294,613 )                                 7/31/2001   Redemption at disposition   $ (14,852,868 ) (1,237,739 )         7/31/2001   Residual Value   $ (15,794,162 )                                         Legends Total   $ -   -     0.00 %                             2/12/1997   Seaside Resorts Ltd., Inc. 1500 Legends Drive Myrtle Beach, SC 29578   $ 16,129,118   806,456       57-0729308                           7/31/2001   Redemption at disposition   (9,677,472 ) (806,456 )         7/31/2001   Residual Value   (6,451,646 )                                         Seaside Resorts Ltd., Inc. Total   $ -   -   0.00 %                             2/12/1997   Heritage Golf Club, Ltd., Inc. 1500 Legends Drive Myrtle Beach, SC 29578       $ 16,031,230   801,561       57-0818596                               1/6/1999   Heritage (conversion)       (11,700 )                                 7/31/2001   Redemption at disposition   (9,478,332 ) (789,861 )         7/31/2001   Residual Value   (6,552,898 )                                         Heritage Golf Club, Ltd., Inc. Total   $  -   -   0.00 %                             2/12/1997   Legends of Virginia L.C. 1500 Legends Drive Myrtle Beach, SC 29578    $ 11,963,738   598,187       57-1003883                           4/2/2001   Legends (conversion)       (598,187 )                                 7/31/2001   Residual Value   $ (11,963,738 )                                         Legends of Virginia Total   $ -   -   0.00 %                             2/12/1997   Northgate 16055 Northgate Forest Drive Houston, TX 77068   $ 3,797,071   189,854       76-0527250                               5/20/1998   Northgate (redemption)   $ (158,969 ) (5,000 )                                 1/6/1999   Northgate (conversion   $ -   (30,000 )                                 3/2/2001   Northgate (conversion)       (60,581 )                                     Northgate Total   $ 3,638,102   94,273   1.17 %       Date Admitted   Name and address of partners   Value of non-cash capital contribution   Partnership units issued   Approx. Percentage Interests   Federal ID #                           2/12/1997   Olde Atlanta Golf Club Limited Partnership c/o The Crescent Company 1580 S. Milwaukee Ave., Suite 101 Libertyville, IL 60048   $ 1,444,926   72,246       36-3834881                           4/13/1998   Olde Atlanta (redemption)   $ (62,837.60 ) (2,000 )                                 5/20/1998   Olde Atlanta (redemption)   $ (64,017.60 ) (2,000 )                                 8/21/1998   Olde Atlanta (redemption)   $ (52,387.50 ) (1,500 )                                 12/10/1998   Olde Atlanta (redemption)   $ (30,166.11 ) (1,150 )                                 1/20/1999   Olde Atlanta (redemption)   $ (66,078.50 ) (2,500 )                                 4/6/1999   Olde Atlanta (conversion)   $ -   (2,000 )                                 5/1/1999   Olde Atlanta (recapitalization)   $ 683,967   30,826                                   5/27/1999   Olde Atlanta (conversion))       (2,000 )                                 7/15/1999   Olde Atlanta (conversion)       (3,500 )                                 1/10/2000   Olde Atlanta (conversion)       (3,300 )                                 1/26/2000   Olde Atlanta (conversion)       (4,100 )                                 4/28/2000   Olde Atlanta (correction from 3/24/99)       2,000                                   8/14/2000   Olde Atlanta (conversion)       (10,600 )                                 7/9/2001   Redemption at disposition   (757,036.50 ) (70,422 )         7/9/2001   Residual Value   (1,096,369.48 )                                         Olde Atlanta Total   $ -   -   0.00 %                             2/12/1997   Bright's Creek Development Co. LLC 104 Cotton Creek Drive Gulf Shores, AL  36542    $ 2,119,005   105,950           63-1120089                           5/1/2001   Redemption at disposition   (1,271,400 ) (105,950 )                                 5/1/2001   Residual Value   (847,605 )                                         Woodlands Total   $ -   -   0.00 %                             10/31/1996   David Dick Joseph 14 North Adger's Wharf Charleston, SC 29401   -   12,500   0.00 % ###-##-####                           12/14/1999   David Dick Joseph (conversion)       (12,500 )                                         -   -           2/4/1997   W. Bradley Blair, II 14 North Adger's Wharf Charleston, SC 29401   $ -   12,500   0.15 % ###-##-####     Date Admitted   Name and address of partners   Value of non-cash capital contribution   Partnership units issued   Approx. Percentage Interests   Federal ID #                           2/4/1997   James Hoppenrath 422 1/2 Marguerite Ave. Corona Del Mar CA 92625   $ -   3,750   0.00 % ###-##-####                           1/6/2000   James Hoppenrath (conversion)       (3,750 )                 $ -   -                                   6/20/1997   Golf Host Resorts, Inc. c/o Starwood Capital Group, LP Three Pickwick Plaza, Suite 250 Greenwich, CT  06830   $ -   274,039         0.00 % 84-0631130                           3/3/2000   Golf Host (conversion)       (274,039 )                     -                                   9/2/1997   John J. Rainieri, Sr. Betty Rainieri 4350 Mayfair Road Uniontown, OH 44685   $ 3,198,168   114,237       ###-##-#### ###-##-####                           1/4/2001   Redemption at disposition   $ (910,632 ) (75,886 )                                 5/16/2001   Redemption at disposition   $ (460,212 ) (38,351 )         5/16/2001   Residual Value   $ (1,827,324 )                                         Rainieri Total-   $ -   0   0.00 %                             9/2/1997   Raintree Country Club, Inc. 4350 Mayfair Road Uniontown, OH 44685   $ 204,138   7,292   0.00 % 34-1736212                               1/4/2001   Raintree (redemption at disposition)   $ (87,504 ) (7,292 )                                 1/4/2001   Residual Value (Value at Issue – Value at Redemption)   $ (116,634 )                                         Raintree Country Club, Inc. Total   $ -   -   0.00 %                             9/30/1997   Eagle Watch Golf Club, Limited Partnership c/o E. Neal Trogdon  The Crescent Company  1580 South Milwaukee Avenue, Suite 101 Libertyville, IL 60048   $ 1,890,682   70,158       36-3903287                           11/2/1998   Eagle Watch (redemption)   $ (64,199.00 ) (2,150 )                                 5/21/1999   Eagle Watch  (conversion)       (1,250 )                                 4/28/2000   Eagle Watch (correction from 3/24/99)       (2,000 )                                 7/9/2001   Redemption at disposition   $ (696,148.50 ) (64,758 )         7/9/2001   Residual Value   $ (1,130,334.50 )                                         Eagle Watch Total   $ -   -   0.00 %         Date Admitted   Name and address of partners   Value of non-cash capital contribution   Partnership units issued   Approx. Percentage Interests   Federal ID #                           10/17/1997   Properties of the Country, Inc. 908 N. 2nd Street East Louisburg, KS 66053   $ 500,000   19,231       48-1157265                           3/16/2001   Redemption at disposition   (230,772 ) (19,231 )                                 3/16/2001   Residual Value   (269,228 )                                         Properties of the Country, Inc. Total   $ -   -   0.00 %                             11/25/1997   Granite Golf Corporation 1510 N. Hayden Road, Suite 7 Scottsdale, AZ 85260   $ 650,000   24,424       86-0926890                           7/2/1999   Granite Golf (redemption)   (200,257 ) (8,393 )                                 7/27/1999   Granite Golf  (redemption)   (237,935 ) (10,354 )                                 8/13/1999   Granite Golf  (redemption)   (125,746 ) (5,677 )                                 8/13/1999   Residual Value (Value at Issue - Value at Redemption)   (86,062 ) -   0.00 %             $ -   -                                   12/19/1997   Stonehenge Golf Development, LLC 90 Mallet Hill Road Columbia, SC  29223   $ 4,500,000   169,811       56-2027442                           1/10/2000   Stonehenge Golf (conversion)       (50,000 )                                 6/20/2000   Stonehenge Golf (conversion)       (25,471 )                                         $ 4,500,000   94,340   1.17 %                             1/16/1998   Mystic Creek Golf Club, Limited Partnership 32605 West 12 Mile Road Suite 350 Farmington Hills, MI 48334   $ 1,500,000   52,724   0.65 % 38-3187304                           2/1/1998   Okeechobee Championship Golf, Inc. 2100 Emerald Dunes Drive West Palm Beach, FL 33411   $ 6,138,369   227,347 (1) 0.11 % 65-0115196                           9/7/2001   Redemption at disposition   (2,289,924 ) (218,088 )                                 9/7/2001   Residual Value (Value at Issue - Value at Redemption)   (3,598,452 )                                         Okeechobee Championship Golf, Inc. Total   $ 249,993   9,259             -------------------------------------------------------------------------------- (1)           Includes 218,088 Class A Common Units issued with a valuation of $5,888,376 and 9,259 Class B Common OP Units issued with a valuation of $249,993     Date Admitted   Name and address of partners   Value of non-cash capital contribution   Partnership units issued   Approx. Percentage Interests   FEDERAL ID #                           5/22/1998   Eagle Ridge Lease Company LLC 16100 N. Greenway-Hayden Loop Scottsdale, AZ 85260   $ 1,198,750   35,794   0.44 % 52-2099405                           5/28/1998   Golf Classic Resorts, LLC 536 South Avenue Glencoe, IL  60022   $ 879,995   26,357   0.00 % 85-0453484                           11/26/1999   Golf Classic Resorts (redemption)   $ (199,633 ) (11,577 )                                 12/31/1999   Golf Classic Resorts (redemption)   $ (34,517 ) (2,060 )                                 2/7/2000   Golf Classic Resorts (redemption)   $ (221,408 ) (12,720 )                                 2/7/2000   Residual Value (Value at Issue - Value at Redemption)   $ (424,437 )                                             -   -                                   8/28/1998   Osage National Golf Club LLC 900 Hickory Street St. Louis, MO 63104   $ 3,451,068   124,700       43-1735431                           6/30/1999   Osage (Redemption)   $ (1,393,382 ) (58,576 )                                 6/20/2000   Osage (Redemption)   $ (1,055,101 ) (66,124 )                                 6/20/2000   Residual Value (Value at Issue - Value at Redemption)   $ (1,002,585 )                                             -   -   0.00 %                             12/14/1998   Brentwood  Golf & Country Club, Inc. 4801 Faircourt, West Bloomfield, MI  48322 PO Box 386, Union Lake, MI 48387   $ 650,000   24,482   0.00 % 38-3148750                           6/20/2000   Brentwood (Redemption)   $ (390,645 ) (24,482 )                                 6/20/2000   Residual Value   $ (259,355 )                     -   -                                   12/22/1998   Gutta-Percha Golf, Inc. 365 W. California Blvd.  Suite 2 Pasadena, CA  91105   $ 870,000   32,986   0.00 % 95-4493507                           9/5/2000   Palm Desert (Redemption)   $ (460,785 ) (32,986 )                                 9/5/2000   Residual Value   $ (409,215 )                                             $ -   -                                   2/4/1997   GTA LP, Inc. 14 North Adger's Wharf Charleston, SC 29401   $ -   7,761,550   96.09 % 58-2290326                           2/4/1997   GTA GP, Inc. 14 North Adger's Wharf Charleston, SC 29401   $ -   16,553   0.20 % 58-2290217                           Total Common OP Units       8,076,993   100.00 %                                 SERIES A PREFERRED OP UNITS 4/2/1999   GTA LP, Inc. 14 North Adger's Wharf Charleston, SC 29401   20,000,000   800,000   100 %                             SERIES B PREFERRED OP UNITS   5/11/1999   Metamora Golf Operating Company, L.L.C.  c/o Total Golf, Inc. 1303 W. Commerce Drive Milford, MI  48380   295,003   10,169       38-3462287                           9/25/2000   Redemption at Disposition   (295,003 ) (10,169 )                                         -   -   0.00 %                             SERIES C PREFERRED OP UNITS   7/28/1999   Burning Embers Corporation 801Aaron Smith Drive Bridgeport, WV  26330   1,350,000   48,949       55-0720833                           6/20/2001   Redemption (foreclosure on collateral)   (1,350,000 ) (48,949 )                                         -   -   0.00 %                                

Exhibit (10)(w)* to Report on Form 10-K for Fiscal Year Ended June 30, 2001 by Parker-Hannifin Corporation     Parker-Hannifin Corporation Non-Employee Directors Stock Option Plan.       *Numbered in accordance with Item 601 of Regulation S-K. PARKER-HANNIFIN CORPORATION NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN ADOPTED: AUGUST 15, 1996         1.         Purpose. The purpose of the Parker-Hannifin Corporation Non-Employee Directors Stock Option Plan (the "Plan") is to attract, retain and compensate highly qualified individuals who are not current employees of Parker-Hannifin Corporation (the "Company") as members of the Board of Directors and to enable them to increase their ownership of shares of common stock, $.50 par value, of the Company ("Common Stock"). The Plan will be beneficial to the Company and its shareholders since it will allow these directors to have a greater personal financial stake in the Company through the ownership of Common Stock, in addition to underscoring their common interest and identification with stockholders in increasing the value of Common Stock.         2.         Shares Subject to Plan. The total number of shares of Common Stock with respect to which options may be granted under the Plan shall not exceed 250,000 (as adjusted pursuant to Section 7 hereof). Shares issued upon exercise of options granted under the Plan may be either authorized and unissued shares, treasury shares, or any combination thereof. In the event that any option granted under the Plan shall terminate, expire or, with the consent of the optionee, be cancelled as to any shares of Common Stock, without having been exercised in full, new options may be granted with respect to such shares without again being charged against the maximum share limitations set forth above in this Section 2.         3.         Administration. The Plan shall be administered by the Compensation and Management Development Committee of the Board of Directors, or any successor Committee (the "Committee"), which shall be appointed by the Board of Directors of the Company and shall consist of such number of directors, not less than two, as shall be determined by the Board of Directors, who shall serve at the pleasure of the Board of Directors, and each of whom shall be "non-employee directors" within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934, or any successor provision at the time in effect. Vacancies occurring in the membership of the Committee shall be filled by appointment by the Board of Directors. If for any reason the Committee is unable to perform its functions and duties under the Plan, the Board of Directors may perform any such functions and duties.         The Committee, from time to time, may adopt rules and regulations for carrying out the provisions and purposes of the Plan. The interpretation and construction by the Committee of any provisions of, and the determination of any questions arising under, the Plan, any such rule or regulation, or any agreement evidencing options under the Plan, shall be final, binding and conclusive on all persons interested in the Plan. The Secretary of the Company shall be authorized to implement the Plan in accordance with its terms and to take such actions of a ministerial nature as shall be necessary to effectuate the intent and purposes hereof. The validity, construction and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Ohio without regard to its conflicts of law principles.         4.         Eligibility. All members of the Company's Board who are not current or retired employees of the Company or any of its subsidiaries at the time of option award ("Non-Employee Directors") are eligible to participate in the Plan.         5.         Types of Options. All options granted under the Plan shall be non-statutory options not intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). Each option granted under the Plan shall provide that such option will not be treated as an "incentive stock option," as that term is defined in Section 422 of the Code. The Committee, in its sole discretion, shall determine the terms of the options granted hereunder, including, without limitation, the time or times when options shall be granted, the number of shares to be covered by each option so granted, the time or times when such options shall become exercisable, the transferability of such options and the expiration date of such options.         6.         Terms and Conditions of Options. All options approved by the Committee under the Plan shall be evidenced by stock option agreements in writing (hereinafter referenced to as "Option Agreements"), in such form as the Committee may from time to time approve, executed on behalf of the Company by the Chairman of the Board or President of the Company. Each Option Agreement shall be subject to the Plan, and, in addition to such other terms and conditions as the Committee may deem desirable, shall provide in substance as follows:                    (a) Purchase Price. The purchase price per share of Common Stock for which each option is exercisable shall be equal to 100% of the fair market value of a share of Common Stock ("Fair Market Value") as of the date such option is granted. Such Fair Market Value shall be the last sale price of Common Stock on the date next preceding such date as reported on the New York Stock Exchange Composite Tape or, in the event that no sale shall have taken place on the New York Stock Exchange on such next preceding day, the last sale price of Common Stock on the next preceding day on which there was a sale as reported on the New York Stock Exchange Composite Tape, or if the Common Stock is no longer traded on the New York Stock Exchange, the fair market value on such date as determined by the Committee in accordance with applicable law and regulations. The option price shall be subject to adjustment as provided in Section 7 hereof.               (b) Manner of Exercise. Each Option Agreement shall provide that any option therein granted shall be exercisable only by giving in each case written notice of exercise, accompanied by full payment of the purchase price either (i) in cash (including check, bank draft or money order, or wire or other transfer of funds, or advice of credit to the Company); (ii) in shares of Common Stock with a Fair Market Value equal to the purchase price of a combination of cash and shares of Common Stock which in the aggregate are equal in value to such purchase price; or (iii) from the proceeds of a sale through a broker on the date of exercise of some or all of the shares of Common Stock to which the exercise relates. -2-         7.         Adjustment upon Changes in Stock. The Committee shall make or provide for such adjustments in the option price and in the number or kind of shares or other securities covered by outstanding options as the Committee in its sole discretion, exercised in good faith, shall determine is equitably required to prevent dilution or enlargement of rights of optionees that would otherwise result from (a) any stock dividend, stock split, combination of shares, issuance of rights or warrants to purchase stock, recapitalization or other changes in the capital structure of the Company, (b) any merger, consolidation, reorganization or partial or complete liquidation, or (c) any other corporate transaction or event having an effect similar to any of the foregoing. The Committee also shall make or provide for such adjustments in the number or kind of shares of the Company's Common Stock or other securities which may be acquired pursuant to options granted under this Plan and the number of such securities to be awarded to each optionee as the Committee in its sole discretion, exercised in good faith, shall determine is appropriate to reflect any transaction or event described in the preceding sentence. The determination of the Committee as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive.         8.         Fractional Shares. No fractional shares shall be issued pursuant to options granted hereunder, the any fractional share resulting from an adjustment pursuant to Section 7 hereof shall be eliminated.         9.         Government Regulations. The Plan, the grant and exercise of options hereunder, and the Company's obligation to sell and deliver shares of Common Stock pursuant to any such exercise, shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any regulatory or government agency as shall be required. The Company shall not be required to issue or deliver any certificate or certificates for shares of its Common Stock prior to (a) the admission of such shares to listing on any stock exchange or national market system on which the stock shall then be listed or quoted and (b) the completion of any registration or other qualification of such shares under any state or federal law or rulings or regulations of any government body, which the Company shall, in its sole discretion, determine to be necessary or advisable.         10.       Term of the Plan. The period during which option grants shall be made under the Plan shall terminate within 10 years from the effective date. Termination of the Plan, however, shall not affect outstanding options which have been granted prior to such termination, and all unexpired options shall continue in full force and operation after termination of the Plan, except as they shall lapse or terminate by their own terms and conditions, and the terms of the Plan shall continue to apply to such options.         11.        Amendment, Suspension or Termination of the Plan. The Committee at any time and from time to time may suspend or terminate the Plan or revise or amend the Plan in any respect whatsoever. No action may, without the consent of a participant, reduce the participant's rights under any previously granted and outstanding option.         12.        No Right to Continue as Director. Neither the Plan, nor the granting of an option nor any other action taken pursuant to the Plan, shall constitute or be evidence of any agreement or -3- understanding, express or implied, that a director has a right to continue as a director for any period of time, or at any particular rate of compensation. -4-

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.42 SENIOR VICE PRESIDENT OF OPERATIONS 2001 INCENTIVE PLAN     PURPOSE:  To reward the Senior Vice President of Operations for achievement of planned sales and planned controllable operating profit, less regional and operations department overhead costs.     PLAN YEAR:  The plan begins January 1, 2001 and ends on December 30, 2001.     INCENTIVE PAY:  The incentive pay pool is equal to a percentage of the Regional Managers' incentive payout, a percent of salary for achievement of minimum sales objectives, and a percent of salary for achievement of minimum controllable operating profit less regional and operations department overhead costs. See attached schedule.     ELIGIBILITY:  Employed by Fresh Choice on the date incentive checks are calculated.     BUDGET CHANGES DURING THE YEAR:  In the following situations, budgets may be revised to reflect the increased sales potential/change from which incentive pay is calculated: 1) the timing of remodels versus budget (completion dates a well as which stores are actually remodeled); and 2) adding new stores or closing existing stores.     Plan Intent:  The Company retains the discretion to revise or cancel the program at any time with or without notice. -------------------------------------------------------------------------------- QuickLinks SENIOR VICE PRESIDENT OF OPERATIONS 2001 INCENTIVE PLAN

LEASE This Lease is made and entered into this 1st day of August, 1999, by and between Eateries, Inc. "EATS" (together referred to as "Tenant"), and Great Places of Shawnee, L.L.C. "GPLLC"., an Oklahoma Limited Liability Company ("Landlord"). WITNESSETH In consideration of the mutual covenants and agreements contained in this Lease and the due and faithful performance of each and all the terms, covenants and conditions contained herein, Landlord and Tenant agree as follows: ARTICLE 1 Leased Premises Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the building, the parking lot, driveways, and other improvements, more particularly described on attached Exhibit "A," (the "Premises") located at 4845 N. Kickapoo, Shawnee, Oklaohma. ARTICLE 2 Term (A) Initial Term: This Lease shall be effective on October 1, 1999, the "Rent Commencement Date," and the initial term of this Lease shall extend to the date fifteen years from the Rent commencement Date ("Initial Term"), unless sooner terminated or extended as herein provided.  The term  "Lease Year" as used herein shall be defined as twelve months beginning on the Rent Commencement Date. Each successive Lease Year shall be that twelve-month period following the end of the first Lease Year. (B) Option to Extend: As part of the consideration  for the execution of this Lease by Tenant, and conditioned upon Tenant having performed all of its obligations hereunder, and provided Tenant is not at the time of exercise of any such option to extend in default hereunder, Landlord hereby grants to Tenant one option to extend the Initial Term for a period of five years, upon the same terms and conditions, with rent at the rate as paid in the last year of the initial fifteen year term at the then fair market value of similar space or $20 per square foot whichever is greater. If Tenant elects to exercise the option to extend this Lease, it shall notify Landlord of its intention in writing not less than six months before the expiration of the Initial Term. Except as otherwise specifically stated in this Lease, the term of this Lease shall include the Initial Term and any extension, renewal or holdover thereof. ARTICLE 3 Use (A) The Premises shall be used only for the purposes of a casual theme full service restaurant. In connection therewith, Tenant shall be in compliance at all times with all applicable statutes and ordinances. (B) Tenant shall, during the term of this Lease, operate its business on the Premises with reasonable due diligence and efficiency in a first-class and professional manner; provided, however, that this provision shall not apply if the Premises should be closed and the business of Tenant therein be temporarily shut down on account of strikes, lockouts, acts of God, repairing, cleaning, decorating or remodeling or causes beyond the control of Tenant; and provided, however, that this shall in no way affect Tenant's other obligations under this Lease, including but not limited to the payment of Rent. ARTICLE 4 Rent (A) Tenant agrees to pay to Landlord as rental payments "Rent"; $9,000 per month ($108,000 annually) plus 6% of gross revenues in excess of $1,800,000 (per annum) for years one (1) through five (5), $10,000 per month ($120,000 annually) plus 6% of gross revenues in excess of $2,000,000 (per annum) for years six (6) through year ten (10), $11,000 per month ($132,000 annually) plus 6% of gross revenues in excess of $2,200,000 (per annum) for years eleven (11) through year fifteen (15), or the year one rate increased by the cumulative increase in the CPI, whichever is greater, for years eleven (11) through year fifteen (15) . The monthly rental shall be paid in advance, without demand, on the first day of each calendar month during the term of this Lease prorated on a per diem basis for a fraction of any month. The prorated rent for the first fractional month of the Initial Term shall be paid on the execution of this Lease, if applicable. As used in this lease, the term "CPI" or "Consumer Price Index" shall mean the average for urban wage earnings and clerical workers, all items, sub-groups, and special groups of items as promulgated by the Bureau of Labor Statistics of the United States Department of Labor, using the year 1999 as a base of 100. In the event that the Consumer Price Index ceases to incorporate a significant number of items, or if a substantial change is made in the method of establishing the CPI, then the CPI shall be adjusted to the figure that would have resulted had no change occurred in the manner of computing the CPI. In the event that the CPI (or a successor or substitute index) is not available, a reliable governmental or other nonpartisan publication, evaluating the relevant information used in determining the CPI, shall be used in lieu of the CPI. Where required in this Lease, the cumulative increase in the CPI will be calculated by determining the percentage increase in the CPI during the period of time from the base year of 1999 through the year next previous to the year in which the rental amount is to be calculated. (B) All sums of money to be paid Landlord by Tenant under this lease will be considered Rent. Any payment of Rent made more than fifteen days after it is due will earn interest at the maximum rate allowed by law per annum ("Default Rate"). (C) Tenant and Landlord agree that Landlord has a right to audit the books and records pertaining to property, which must be kept in accordance with generally accepted accounting principles, and the Tenant further agrees to pay for all costs related to the audit if additional rents are found to be due as a result of such audit. ARTICLE 5 Indemnity - Insurance by Tenant (A) Tenant covenants with Landlord that Landlord shall not be liable for any damage or liability of any kind or for any damage or injury to persons or property during the term of this Lease from any cause whatsoever by reason of the use, occupancy and enjoyment of the Premises by Tenant or any person thereon or any person holding under Tenant, and Tenant hereby indemnifies and saves harmless Landlord from all liability whatsoever on account of any such damage or injury and from all liens, claims, and demands arising out of the use of the Premises; provided, however, that Tenant shall not be liable for damage or injury occasioned by reason of the negligent acts or omissions of Landlord, its agents, servants, employees or contractors and Landlord agrees to hold Tenant harmless therefrom, including attorneys fees and costs of defense. (B) Tenant further covenants and agrees that it will carry and maintain, during the entire term hereof, at Tenant's sole cost and expense as Rent, the following types of insurance, in the amount specified and in the form hereinafter provided for:         (1) Public Liability and Property Damage:  During the term of this Lease, Tenant shall procure and maintain in full force and effect, at its sole cost, bodily injury and property damage liability insurance with coverage limits of not less than $2,000,000.00 combined, and $500,000.00 each occurrence, insuring against any and all liability of the insured with respect to the Premises or arising out of the maintenance, use or occupancy thereof. All such bodily injury liability insurance and property damage liability insurance may be provided under umbrella-type policies maintained by Tenant.         (2) Fire and Extended Coverage Insurance:  Tenant agrees that it will, during the term hereof, at its sole expense, keep in full force and effect upon the Premises fire insurance with Special Extended Coverage written by a responsible insurance company authorized to do business in the state where the Premises are located in an amount not less than one hundred percent of the replacement cost of the Restaurant, including furniture, fixtures, equipment and any alterations or additions to the Premises whether owned by Tenant or Landlord. All fire and extended coverage insurance which Tenant is obligated to maintain shall be for the benefit of Landlord and Tenant. In the case of loss or damage by fire or other risks insured against, such insurance proceeds shall be paid to and become the property of Landlord, except that Tenant shall be entitled to the replacement cost of Tenant's Property as defined in Article 10 hereof.         (3) Policy Form:  All policies of insurance provided for herein shall be issued by insurance companies with general policyholder's rating of not less than A and a financial rating of not less than class XII as rated in the most current available Best's Insurance Reports, and shall be qualified to do business in the state in which the Premises are located. All such policies shall be issued in the name of Tenant and shall name Landlord as an additional insured  thereunder, which policies shall be for the mutual and joint benefit and protection of Landlord and Tenant to the extent of their respective interests in the Premises. Certificates of such insurance shall be delivered to Landlord. As often as any such policy shall expire or terminate, renewal or additional policies shall be procured and maintained by Tenant in like manner and to like extent. All policies of insurance shall contain a provision that the company writing said policy will give to Landlord twenty days' notice in writing in advance of any cancellation or lapse or the effective date of any reduction in the amounts of insurance.         (4) Mutual Waiver of Subrogation:  Landlord and Tenant hereby grant to each other, on behalf of any insurer providing fire and all-risk coverage to either of them covering the Premises or contents of the Premises, a mutual waiver of any right of subrogation any such insurer of one party may acquire against the other by virtue of payments of any loss under such insurance, such a waiver to be effective so long as each is empowered to grant such waiver under the terms of its insurance policy or policies involved without payment of additional premium. Each party will notify the other in the event of cancellation of such provision, and such waiver shall stand mutually terminated as of the date either Landlord or Tenant ceases to be so empowered. ARTICLE 6 Taxes (A) Tenant agrees to pay as Rent during the term of this Lease, before any fine, penalty, interest or cost may be added thereto, or becomes due or is imposed by operation of law for the nonpayment thereof, all taxes, assessments or impositions, license and permit fees and other governmental charges, general or special, ordinary or extraordinary, unforeseen and foreseen, of any kind and nature whatsoever, levied and assessed upon the Premises and personal property therein. Upon request Tenant shall provide Landlord with copies of tax receipts or similar evidence of Tenant's payments thereof or if requested by Landlord, shall deliver to Landlord a check made payable to the taxing authority within seven days after Landlord's request but in no event more than thirty days before such payment is due. Taxes for the first fractional year of the Lease Term and for the last year of the term hereof shall be prorated between Landlord and Tenant so that Tenant shall be responsible for the payment of only those taxes accruing during the term of this Lease. With respect to any assessments which may be levied against or upon the Premises or which under the laws then in force may be evidenced by improvements or other bonds, or may be paid in annual installments, only the amount of such annual installment (with appropriate proration for any partial year) and statutory interest shall be included within the computation of the annual taxes and assessments levied against the premises. (B) Nothing herein contained shall require Tenant to pay income taxes assessed against Landlord, or any capital levy, corporation franchise, excess profits, estate, succession, inheritance or transfer taxes of Landlord. (C) Landlord agrees that Tenant retains the right, at Tenant's sole cost and expense, to contest the legality or validity of any of the taxes, assessments, levies or other public charges to be paid by Tenant which are not being contested by Landlord, and in the event of any such contest, the failure on the part of Tenant to pay any such tax, assessment, levy or charge promptly when the same becomes due and payable shall not constitute a default hereunder, and Tenant upon final determination of such contest, shall immediately pay and discharge any judgment rendered against it, together with all costs and charges incidental thereto. (D) Tenant shall also pay when due any sales, use, transaction, rent, excise or other taxes levied or imposed upon, or measured by, amounts payable by Tenant to Landlord under this Lease other than income taxes imposed upon Landlord. ARTICLE 7 Triple-net Lease This Lease is a "Triple-net Lease" and requires the Tenant to pay or reimburse Landlord, should Landlord advance such costs and expenses, all costs associated with the premises including but not limited to, all utilities, insurance, taxes, and repairs and maintenance as described in Articles 5, 6, and 13 of this Lease respectively. ARTICLE 8 Changes, alterations and Additions/Compliance with Laws (A) Tenant shall have the right at any time and from time to time during the term of this Lease to make non-structural changes, alterations and additions to the interior of the Premises; provided, however, that Tenant shall make no changes or alterations costing more than $100,000.00 in any twelve month period without first obtaining the written consent of Landlord, which consent shall not be unreasonably withheld or delayed, nor shall such changes materially diminish the value of the Premises. (B) No such change, alteration or addition shall be undertaken or commenced until Tenant shall have procured and paid for all required permits and licenses of all governmental authorities having jurisdiction. (C) All work done in connection with any change, alteration or addition shall be done with reasonable diligence, in good workmanlike manner and in compliance with all applicable laws and regulations of all governmental authorities having jurisdiction. The cost of any such change, alteration or addition shall be paid or discharged by Tenant so that the Premises at all times shall be free of any and all liens resulting  therefrom, and Tenant's all-risk coverage for the Premises shall be accordingly increased to cover such modifications. ARTICLE 9 Mechanic's Liens (A) Tenant shall pay or cause to be paid all costs for work done by it or caused to be done by it on the Premises, and Tenant shall keep the Premises free and clear of all mechanic's liens and other liens due to work done for Tenant or persons claiming under Tenant. Tenant shall indemnify and save Landlord harmless from all liability, loss, damage, costs, attorneys' fees and all other expenses on account of claims of lien of laborers or  materialmen or others for work performed or material or supplies furnished for Tenant or persons claiming under Tenant and Landlord shall have a similar obligation to Tenant for work or material furnished to Landlord. (B) Within thirty days after the filing of any mechanic's lien or claim of lien, Tenant shall either:                         1. have discharged the lien from the Premises by payment or by recording a sufficient bond as provided by law, or                         2. have purchased and delivered to Landlord a title insurance policy insuring Landlord against the lien. If a final judgment establishing the validity or existence of a claim or lien for any amount is entered, Tenant shall pay and satisfy the same immediately. (C) If Tenant shall fail to comply with the requirements of subparagraph (B) above, Landlord shall have the right, but not the obligation, to pay the lien or claim of lien, regardless  of any dispute over its validity, and the amounts so paid, together with reasonable attorneys' fees and any other costs or expenses incurred in connection with the lien, shall be immediately due and payable from Tenant to Landlord. (D) Should any lien claims be filed against the Premises or any action affecting the title to the Premises be commenced, the party receiving notice of such lien or action shall forthwith give the other party written notice thereof. (E) All references herein to "Lien" or "mechanic's lien" shall refer only to a mechanic's lien or claim of lien which states that work has been completed on the Premises and payment has not been forthcoming, and shall not include any statutory notice of record which are for the sole purpose of stating that work has commenced on the Premises. ARTICLE 10 Signs Tenant shall be allowed to affix and maintain building signs and free standing monument signs on the Premises with Landlord's written approval as approved from time to time by any requisite governmental agency. ARTICLE 11 Fixtures and Personal Property All of Tenant's personal property within the Premises, including furniture, furnishings, and equipment and except property installed or attached to the Premises at Tenant's expense, (collectively "Tenant's Property"), shall remain the property of Tenant, and Tenant shall have the right to remove any and all of Tenant's Property at any time during or upon the termination of the term hereof for purposes of replacement or otherwise. Tenant shall maintain adequate equipment to conduct the business permitted in Article 3 and to conform with regulatory requirements concerning equipment. Tenant shall promptly repair any damage occasioned to the Premises by reason of the removal of Tenant's Property. Any of Tenant's property not removed from the Premises before thirty days after the expiration of the initial term will become the property of Landlord, who may dispose of it as Landlord sees fit, but Tenant will pay storage and disposition costs thereof. As required by Landlord, Tenant will remove any fixtures installed by Tenant at the expiration of the Initial Term as the same may be extended, promptly repairing any damage caused by such removal. All remaining fixtures will become Landlord's property. ARTICLE 12 Assigning, Mortgaging, Subletting (A) Tenant shall not assign, transfer, mortgage, pledge, hypothecate or encumber this Lease or Tenant's interest in and to the Premises or any part thereof or sublet all or any portion of the Premises without first procuring the written consent of Landlord, which consent shall not be unreasonably withheld or delayed, provided that Tenant shall continue to remain liable to Landlord under this Lease. Any attempted transfer, assignment or subletting without the written consent of Landlord shall be void and confer no rights upon any third person. (B) Each transfer, assignment or subletting to which there has been consent shall be by an instrument in writing in a form and substance satisfactory in Landlord's reasonable judgment. The transferee, assignee or sublessee shall agree in writing for the benefit of Landlord herein to assume, to be bound by and to perform the terms, covenants and conditions of this Lease to be done, kept and performed by Tenant. (C) Notwithstanding the foregoing, Tenant shall have the right, subject to lease requirements and only with Landlord's consent, to assign or transfer this Lease or sublet the Premises or any part thereof to a successor corporation of Tenant, to any corporation into which or with which Tenant merges or consolidates, or to any parent, subsidiary or affiliated corporation, including any corporation which controls or is under the control of Tenant, or to any franchisee of Tenant or of any corporation affiliated with Tenant; provided that any such assignee or subtenant shall deliver to Landlord a copy of a document satisfactory in Landlord's reasonable judgment under which such assignee or subtenant agrees to assume and perform all of the terms and conditions of this Lease on  Tenant's part to be performed from and after the effective date of the assignment or sublease, and further provided that Tenant shall guarantee the financial performance of the assignee under this Lease. ARTICLE 13 Repairs and Maintenance (A) Subject to the provisions of Article 14, Tenant shall at its own cost and expense, as Rent, keep and maintain the Premises, including the parking area and all grounds surrounding the building on the Premises in good and sanitary order, condition and repair, and make all necessary repairs and replacements to the Premises, including the parking areas and such grounds, including but not limited to roof, pipes, heating, air conditioning and ventilation systems, plumbing system, windowglass, windows, ceilings, interior walls, floors, skylights, doors, cabinets, draperies, carpeting and other floorcoverings, electrical wiring, light fixtures and switches and all other fixtures and all the appliances and appurtenances and all landscaping, lawn maintenance and watering systems belonging thereto. All maintenance, repairs, and replacements shall be done in a first-class manner at least equal in quality to the original work. In the event Tenant shall default in performing maintenance, repairs or replacements, Landlord may (but shall not be so required) perform such maintenance, repairs or replacements for Tenant's account, and the expenses thereof shall constitute and be immediately due and payable as additional rent. (B) Landlord shall not be obligated to make any repairs, replacements, alterations, additions or improvements in or to the Premises or grounds of the Premises except for any material damage caused by the negligence of Landlord or its agents, servants, employees or contractors. Tenant may, after having given thirty days prior written notice to Landlord, repair any such damage caused by the negligence of Landlord or its agents, servants, employees or contractors, so long as Landlord is not diligently pursuing such repair. ARTICLE 14 Reconstruction (A) In the event the Premises shall be destroyed by fire or any other perils, Tenant shall: 1. Within a period of sixty days thereafter, commence repair, reconstruction and restoration of the Premises and prosecute the same diligently to complete in accordance with plans prepared by Tenant and approved by Landlord, which approval shall not be unreasonable withheld or delayed, in which event this Lease shall continue in full force and effect and for such purpose Landlord shall make available to Tenant the proceeds of all insurance received by Landlord with respect to such destruction, or 2. In the event more than 33 1/3 percent of the then replacement value of the Premises is destroyed within the last three years of the Initial Term or during the last three years of any extended term, either Landlord or Tenant (provided it is not then in default hereunder) may at its option elect to terminate this Lease by giving written notice of such termination to the other party within thirty days after such destruction, in which event this Lease shall terminate upon the giving of such notice, and all insurance proceeds attributable to the Premises (except for that portion attributable to Tenant's Property) shall be payable to Landlord and neither party shall thereafter have any further rights or obligations hereunder. (B) Upon any termination of this Lease under any of the provisions of this Article, the parties shall be released thereby without further obligations to the other party coincident with the surrender of possession of the Premises to Landlord except for items which have theretofore accrued and remain unpaid. ARTICLE 15 Bankruptcy - Insolvency Tenant agrees that in the event all or substantially all of Tenant's assets are placed in the hands of a receiver or trustee, and such receivership or trusteeship continues for period of ninety days, or should Tenant make an assignment for the benefit of creditors or be finally adjudicated a bankrupt, or should Tenant institute any proceedings under the Bankruptcy Code as the same now exists or under any amendment thereof which may hereafter be enacted, or under any other act relating to the subject of bankruptcy wherein Tenant seeks to be adjudicated a bankrupt, or to be discharged of its debt, or to effect a plan of liquidation, composition or reorganization, or should any involuntary proceeding not be removed within one hundred twenty days thereafter, then this Lease or any interest in and to the Premises shall not become an asset in any and all rights or remedies of Landlord hereunder or by law provided, it shall be lawful for Landlord to declare the term hereof ended and to reenter the Premises and take possession thereof and remove all persons therefrom, and Tenant shall have no further claim thereon or hereunder. ARTICLE 16 Defaults/Remedies Tenant's Default; Landlord's Remedies and Lien (A) Tenant's Default. This Lease is made upon the condition that Tenant shall punctually and faithfully perform all of the covenants, conditions and agreements to be performed by Tenant as set forth in this Lease. The following shall each be deemed to be an event of default (an "Event of Default"):         (a) The failure of Tenant to pay the Rent, or any installment thereof, if such failure continues for ten (10) days after such payment is due, without the necessity of Landlord giving Tenant notice of any such failure, which notice Tenant hereby waives:         (b) Repetition or continuation of any failure to timely pay any Rent, where such failure shall continue or be repeated for two (2) consecutive months, or more than four (4) times in any period of twelve (12) consecutive months (As used in this subsection (b) "timely" shall mean when due, without regard to any grace period as provided in subsection (a) above);         ( c ) The failure of Tenant to observe or perform any of the covenants, terms or conditions set forth in Article 13 relating to assignments, mortgaging, and subletting) or when such failure continues for a period of fifteen (15) days, without the necessity of Landlord giving Tenant notice of any such failure, which notice Tenant hereby waives;         (d) The failure of Tenant to observe or perform any other covenant, term or condition set forth in this Lease when said failure continues for a period of fifteen (15) days after written notice thereof from Landlord to Tenant, or if such failure cannot reasonably be cured within fifteen (15) days, when said failure continues for a period of  sixty (60) days after written notice thereof from Landlord to Tenant provided that Tenant commences to cure said failure within such fifteen (15) day period and continues diligently to pursue the curing of the same until completed.         (e) The commencement of levy, execution, attachment or other process of law upon, on or against the estate created in Tenant hereby; the appointment of a liquidator, receiver, custodian, sequestrator, conservator, examiner, trustee or other similar officer for Tenant, and the continuation of such appointment for a period of thirty (30) days, or the insolvency of Tenant or any assignment by Tenant for the benefit of creditors;         (f) The commencement of a case by or against Tenant under any insolvency, bankruptcy, creditor adjustment or debtor rehabilitation laws, whether state or federal, or the determination by Tenant to request relief under any insolvency proceeding, including any insolvency bankruptcy, creditor adjustment or debtor rehabilitation laws, whether state or federal. Such commencement or determination by Tenant shall terminate the estate created in Tenant hereby and neither this Lease nor the Premises shall become an asset in any such proceeding;         (g) Tenant's failure to pay when due and payable, all taxes, assessments and government charges imposed upon it or which it is required to withhold and pay over, without the necessity of Landlord giving Tenant notice of any such failure, which notice Tenant hereby waives;         (h) The enactment of any rent control law or ordinance which requires reductions in any Rent payable hereunder or which prohibits, or  reduces the amount of, any increase of Rent provided for in this Lease; and         ( i ) The repetition of any failure to observe or perform any one or more of the covenants, terms or conditions hereof (whether or not any such failure is specified in subsections (a) through (i) above) more than four (4) times, in the aggregate, in any period of twelve (12) consecutive months, without regard to any required notice and/or grace period which may be provided herein. Notwithstanding the foregoing, Landlord shall not be required to give Tenant any notice or period to cure any failure or other circumstance described above before exercising Landlord's remedies hereunder if Landlord in good faith reasonable believes that emergency action is necessary to prevent loss of or injury to persons or property or to prevent the incurrence of a cost or expense which Landlord reasonable believes Tenant W ill be unable or unwilling to pay. In such event Landlord may exercise such remedies and take such other action as it deems reasonable appropriate and shall promptly thereafter give Tenant notice thereof. (B) No Waiver: Remedies.  Landlord's failure to insist upon strict performance of any covenant, term or condition of this Lease or to exercise any right or remedy shall not be deemed (i) a waiver of any default or breach hereunder so long as the same shall continue to exist, or (ii) a waiver or relinquishment for the future of such performance, right or remedy. Upon an Event of Default above, have the following remedies in addition to all other rights and remedies specified elsewhere in this Lease and which may now or hereafter provided by law or equity, to which Landlord may resort cumulatively, successively or in the alternative: Landlord may decline to retake possession of the Leased Premises and may sue for the Rent as such Rent becomes due or sue for the present value of the Rent to accrue under this Lease and other damages or remedies to which Landlord may be entitled. Landlord may elect to retake possession of the Leased Premises and, without initially  reletting the Leased Premises, sue for damages in an amount equal to the present value of the Rent to accrue under this Lease and other damages or remedies to which Landlord may be entitled. Landlord may retake possession of the Premises,  relet the Premises and sue for damages. During the period of time that Landlord is trying to  relet the Premises, Tenant will be liable for damages in an amount equal to the full Rent. Landlord may sue from time to time for the Rent and/or damages which accrue under this Lease, or may sue for the present value of the total Rent and /or damages which will be due or which may be sustained throughout the remaining term in accordance with the measure of damages set forth below. The election to sue either periodically or for the total amount shall be at the sole option and discretion of Landlord. In any action brought by Landlord to recover Rent and/or damages, Tenant waives to the fullest extent permitted by law any applicable statute of limitations. Landlord may elect to seek declaratory relief, specific performance and/or injunctive relief (prohibitive or mandatory) with respect to any covenant, term or condition set forth in this Lease. Landlord may terminate this Lease, re-enter the Property and take possession thereof, remove all persons and property therefrom, and sue for damages, in which event Tenant shall have no further claim or right hereunder. (C) Provisions Regarding Landlord's Remedies. The following provisions shall apply with respect to Landlord's remedies: Landlord's re-entry or taking of possession of the Leased Premises shall not be construed as an election to terminate this Lease unless Landlord gives written notice of such termination. Notwithstanding any reletting without termination, Landlord may, at any time after a  reletting and subject to the provisions herein, elect to deem this Lease terminated for any then uncured default. Any re-entry or taking of possession by Landlord shall not affect or diminish the ongoing obligation or liability of Tenant for all Rent and other obligations due and owing under this Lease. Re-entry by the Landlord will not obligate the Landlord to mitigate damages by  reletting, unless otherwise provided by applicable law. Wherever in this Lease Landlord has reserved or is granted the right of re-entry into the Premises, the use of such word is not intended, nor shall it be construed to be limited to its technical legal meaning. If Landlord re-enters, it may take possession of the Premises, remove all persons and property from the Premises and store such property at Tenant's expense or resort to legal process without being deemed guilty of trespass or becoming liable for any loss or damage occasioned thereby. Tenant agrees that if Landlord stores such property, Landlord shall have a lien thereon pursuant to 42 Okla. Stat. 91. Landlord may relet the Premises or any part thereof for such term or terms (which may extend beyond the Term), and at such rentals and upon such other terms and conditions as Landlord in its sole discretion deems advisable and such reletting shall not in any way relieve Tenant from the obligations and liabilities under this Lease. Any and all amounts received upon such reletting and all rentals received by Landlord therefrom shall be applied first to any indebtedness owed by Tenant to Landlord other than Rent due hereunder, then to pay any cost and expense of reletting, including brokers' and attorneys' fees and costs of alterations and repairs, then to the Rent due hereunder. If there is any residue, it shall be applied (i) to any other damages incurred by Landlord as a result of Tenant's default, or (ii) if this Lease is not terminated, to any deficiencies between the rentals received and the Rent that may become due hereunder. In such latter event, any funds due Tenant shall be paid at the expiration of the Term. It is understood that said funds shall not draw interest while held by Landlord as security for Tenant's obligations hereunder. To the extent permitted by law, Tenant waives any right of redemption, re-entry or  repossession and any defense of merger. Landlord may pursue one or more remedies against Tenant and need not elect its remedy until such time as findings of fact have been made by a judge or jury, whichever is applicable, in a trial court of competent jurisdiction. The covenant to pay Rent and other amounts hereunder and to perform all obligations hereunder are independent covenants from the other terms and provisions of this Lease and Tenant shall have no right to hold back, offset or fail to pay any such amounts for any  alleged default by Landlord or for any other reason whatsoever. After any default under this Lease, Landlord may accept any partial payment of the sums then due under this Lease without prejudice to its rights to collect the balance of the sums then due and without prejudice to any other right or remedy Landlord may have. (D) Damages Upon Termination. If Landlord elects to terminate this Lease, Landlord may recover from Tenant the following damages, in addition to its other remedies:         (i) Any unpaid Rent which has been earned as of the time of such termination, including interest thereon at the Default Rate; plus         (ii) The amount by which any unpaid Rent which would have been earned after termination through the date of judgment exceeds the greater of (A) the amount of rent that Tenant proves could have been reasonably obtained by Landlord upon a  reletting of the Leased Premises for such period, or (B) the amount of rent actually received by Landlord for such period, together with interest thereon at the Default Rate; plus         (iii) The amount by which the Rent which would have accrued for the balance of the Term after the date of judgment exceeds the amount of rent that tenant proves could be reasonably obtained by Landlord for such period, reduced to present value at the Default Rate; plus         (iv) Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result  therefrom including, without limitation, the cost of repairing the Premises, the cost of reletting the Premises (including, without limitation, the cost of remodeling and brokers' fees), and reasonable attorneys' fees; plus         (v) At Landlord's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable state law. Damages shall be due and payable from the date of termination. (E) Landlord's Self-Help. In addition to Landlord's rights of self-help set forth elsewhere in this Lease, if Tenant at any time fails to perform any of its obligations under this Lease in a manner reasonable satisfactory to Landlord, Landlord shall have the right, but not the obligation, upon giving Tenant at least three (3) days' prior notice of its election to do so (but in the event of any emergency, no prior notice shall be required), to perform such obligations on behalf of and for the account of Tenant and to take all such action to perform such obligations. In such event, Tenant shall reimburse Landlord on demand the costs and expenses incurred by Landlord in connection therewith as additional Rent, with interest thereon from the dates) such costs and expenses are incurred until paid at the Default Rate. The performance by Landlord of any such obligation shall not constitute a waiver of any default by Tenant or a release of  Tenant therefrom. (F) Landlord's Agents. In exercising any rights hereunder or taking any actions provided for herein, Landlord may act through its employees, agents or independent contractors as authorized by Landlord. (G) Landlord's Lien. Tenant hereby grants to Landlord a lien and security interest on all property of Tenant now or hereafter placed in or upon Premises including, but not limited to, all fixtures, machinery, equipment, furnishings and other articles of personal property now or hereafter placed in or upon the Leased Premises by or on behalf of Tenant, and all proceeds of the sale or other disposition of such property (collectively, the "Collateral") and such property shall be and remain subject to such lien and security interest of Landlord to secure the payment of all Rent and other sums agreed to be paid by Tenant herein. Said lien and security interest shall be in addition to and cumulative of any Landlord's lien provided by law. This Lease shall constitute a security agreement under the Oklahoma Uniform Commercial Code (the "UCC") so that Landlord shall have and may enforce a security interest in the Collateral. Tenant agrees to execute as  debtor, such financing statements and continuation statements and any further documents as Landlord may now or hereafter reasonably request in order that such security interests) may be and remain perfected pursuant to the UCC. Landlord may at its election at any time file a copy of this Lease as a financing statement. Landlord, as secured party, shall be entitled to all of the rights and remedies afforded a secured party under the UCC, which rights and remedies shall be in addition to and cumulative of any Landlord's liens and rights provided by law or by the other terms and provisions of this Lease. ARTICLE 17 Condemnation If any portion of the Premises is taken by appropriation for public use under right of eminent domain, or if a voluntary conveyance is made to the condemning authority in lieu of eminent domain proceedings, Landlord and Tenant agree that their respective rights shall be governed as follows: (A) In the event that a taking occurs which, in the reasonable judgment of Landlord does not substantially impair Tenant's use of the Premises, Landlord shall be entitled to retain the entire proceeds from the eminent domain proceeding (except for any portion attributable to Tenant's Property as defined in Article 12 hereof or damage to or interruption of Tenant's business), but it shall be obligated to repair or restore the Premises required by any alteration or damage resulting from such taking, and Rent will not abate. (B) In the event a taking occurs which, in the reasonable judgment of Landlord substantially impairs Tenant's use of the Premises, Tenant shall have the right to terminate this Lease upon thirty days notice to Landlord but notice shall be given no later than the date title vests in the condemning authority. In no event shall Tenant have any claim against Landlord for any portion of the award paid by the condemning authority, whether for the fee or the leasehold, as a result of such taking or conveyance under threat of condemnation, and Tenant does hereby assign to Landlord all of Tenant's right, title and interest in and to any and all amounts so paid or awarded except for any award made specifically to Tenant by the condemning authority for loss or interruption of Tenant's business or Tenant's Property as defined in Article 11 hereof or for the cost of moving all of the same, or for the unamortized cost of Tenant's leasehold improvements paid for by Tenant and depreciated on a straight-line basis over the term of this Lease. ARTICLE 18 Quiet Enjoyment - Covenants Tenant, upon payment of all Rent and observing and keeping all the covenants, agreements and conditions of this Lease on its part to be kept, shall quietly have and enjoy the Premises during the term of this Lease, without hindrance or molestation by anyone claiming by, from, through or under Landlord, subject and subordinate, however, to the exceptions, reservations and conditions of this Lease. ARTICLE 19 Notices and Payment of Rent Whenever in this Lease it shall be required or permitted that notice or demand be given or served by either party to this Lease to or on the other parry, such notice or demand shall be given or served by personal delivery or by certified or registered mail, return receipt requested, postage prepaid, addressed as follows: TO LANDLORD:  Great Places of Shawnee, L.L.C. 2001 Cambridge Way Edmond, Oklahoma 73013 WITH COPY TO:  James D. Kallstrom 1200 Bank of Oklahoma Plaza, 201 Robert S. Kerr Ave  Oklahoma City, Oklahoma 73102 TO TENANT:  Eateries, Inc. 1220 S. Santa Fe Edmond, Oklahoma 73003 WITH COPY TO:  Tom Golden                    Hall, Estill, Gable, Golden & Nelson                    320 S. Boston Avenue, Suite 400                    Tulsa, Oklahoma 74103-3708; Every notice, demand, request or communication hereunder which is given by personal delivery shall be deemed given as of the date and time of such personal delivery, and every notice, demand, request or communication hereunder sent by mail in the manner described above shall be deemed to have been given or served upon mailing. All rent and other payments shall be either delivered or sent by first-class mail and paid by Tenant to Landlord at the address above provided. Either party may change its address by giving written notice to the other parties in the manner described in this Article. ARTICLE 20 Obligations of Successors The parties hereto agree that all the provisions hereof are to be construed as covenants and agreements as though the words importing such covenants and agreements were used in each separate paragraph hereof, and that all of the provisions hereof shall bind and inure to the benefits of the parties hereto and their respective legal representatives, successors and assigns. ARTICLE 21 Force Majeure Any prevention, delay or stoppage due to strikes, lockouts, labor disputes, acts of God, inability to obtain labor or materials or reasonable substitutes therefor, governmental restrictions, governmental regulations, governmental controls, judicial orders, enemy or hostile governmental action, civil commotion, fire or other casualty, and other causes beyond the reasonable control of the party obligated to perform, shall excuse the performance by such party for a period equal to any such prevention, delay or stoppage, except the obligations imposed with regard to Minimum Annual Rental and other charges to be paid by Tenant pursuant to this Lease. It is expressly agreed that any other time limit provision contained in this Lease shall be extended for the same period of time lost by causes hereinabove set forth. ARTICLE 22 Holding Over It is hereby agreed that in the event of Tenant holding over after termination of this Lease with the consent of Landlord, the tenancy thereafter shall be from month to month in the absence of a written agreement to the contrary, and such month-to-month tenancy shall be terminable on thirty days written notice given by either Landlord or Tenant. During such month-to-month tenancy, Tenant shall pay to Landlord rent equal to 125 percent of the monthly payment of Minimum Annual Rental paid in the previous lease year. ARTICLE 23 Estoppel Certificates / Subordination / Non-Disturbance At any time and from time to time, Landlord on at least seven days prior notice by tenant, and Tenant, on at least seven days prior request by landlord, will deliver to the party making such request a statement in writing certifying that this Lease is unmodified and in full force and effect (or if there shall have been modifications, that the same is in full force and effect as modified and stating the modifications), any other statements typically found in such  estoppel certificates which Landlord or Tenant may reasonably request and the date to which the rent and any other deposits or charges have been paid and stating whether or not to the best knowledge of the party executing such certificate, the party requesting such statement is in default in the performance of any covenant, agreement or condition contained in this Lease and, if so, specifying each such default of which the executing party may have knowledge. This Lease Agreement shall be subordinate to any mortgage or other hypothecation for security now or in the  future placed on the real property of which the Premises are a part, and to all advances made on such security, and on all renewals, modifications, consolidations, replacements, and extensions of such mortgage or other hypothecation. In spite of such subordination, Tenant's right to quiet possession of the Premises shall not be disturbed if Tenant is not in default and so long as Tenant shall pay the rent and observe and perform all of the provisions of this Lease Agreement, unless this Lease Agreement is otherwise terminated pursuant to its terms. Tenant also agrees to execute any documents required to effectuate such subordination, and failure to do so within ten (10) days after written demand, does make, constitute, and irrevocably appoint Landlord as Tenant's attorney-in-fact, and in Tenant's name, place, and stead, to do so. Upon a foreclosure of any mortgage or execution of any deed in lieu of foreclosure, or declaration of Landlord's default under any hypothecation for security and demand by Landlord's successor, Tenant shall attorn to and recognize such successor as Landlord under this Lease Agreement. ARTICLE 24 Memorandum of Lease Landlord and Tenant agree that this Lease shall not be recorded but that a Memorandum of Lease describing the Premises and stating the term of this Lease, Tenant's rights of renewal and the addresses of Landlord and Tenant may be executed if desired by either party, and the same may thereafter be recorded by either Landlord or Tenant. The form of Memorandum is attached hereto as Exhibit "B". ARTICLE 25 Representations and Warranties The Landlord makes no representations or warranties regarding the condition and/or fitness for a particular use of the Premises or personal property located on the Premises. Tenant has inspected the Premises and such personal property, and accepts the Premises and all such property in "as is condition." Tenant further agrees to make whatever improvements or alterations at it's own expense to the Premises that would be required to operate in compliance with all Federal and state regulatory requirements. Landlord makes no representations or warranties concerning the ADA or any environmental issues. ARTICLE 26 Waiver No waiver of any condition or any legal right or remedy shall be implied by the failure to declare a forfeiture or for any other reason, and no waiver of any condition or covenant shall be valid unless it is in writing and signed by the waiving party. No waiver by either party of any covenant or condition herein shall constitute a waiver of any further breach or continuance of the same condition or covenant or any other condition or covenant. IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease on the day and year first above written. LANDLORD: GREAT PLACES OF SHAWNEE, L.L.C. By:_______________________________ James Burke , Managing Member TENANT:  EATERIES, 1NC. By:_______________________________ Vincent F. Orza, Jr. President State of Oklahoma    )                                   ) ss: County of Oklahoma ) This instrument, was acknowledged before me on August 1, 1999, by James Burke, as Managing Member of Great Places of Shawnee, L.L.C., an Oklahoma limited liability company, on behalf of said limited liability company, as Landlord. Notary Public My Commission Expires: Seal State of Oklahoma  )                                 ) ss: County of Oklahoma ) This instrument was acknowledged before me on August 1, 1999, by Vincent F. Orza, Jr., as President of EATERIES, INC., an Oklahoma corporation, on behalf of said corporation as Tenant. Notary Public My Commission Expires. Seal

Exhibit 10.8 TRI-PARTY ENHANCED AOT AGREEMENT This Agreement is made by and among E-Loan, Inc., [*] ("Originator"), Wells Fargo Home Mortgage, Inc., [*] ("Direct Seller"), and the Federal Home Loan Mortgage Corporation, ("Freddie Mac") this 22nd day of May, 2001 (the "Agreement"). RECITALS (A) Originator and Freddie Mac desire to enter into a special Master Commitment (the "Originator MC") which contains certain terms and conditions pursuant to which Originator may originate Mortgages eligible for purchase by Freddie Mac ("Originator Mortgages"); (B) Originator and Direct Seller desire to enter into the Wells Fargo Funding Loan Purchase Agreement pursuant to which Direct Seller will purchase the Originator Mortgages from Originator and sell such Mortgages to Freddie Mac; (C) Direct Seller and Freddie Mac desire to enter into a special Master Commitment (the "Direct Seller MC") which contains certain terms and conditions pursuant to which Direct Seller shall sell the Originator Mortgages to Freddie Mac; (D) Originator desires to assign certain of its rights under the Originator MC to Direct Seller so that Direct Seller may incorporate the Required Spreads and other terms as necessary, into the Direct Seller MC and use the combined terms and conditions from both the Originator MC and the Direct Seller MC to sell the Originator Mortgages to Freddie Mac; and (E) Originator, Direct Seller and Freddie Mac are all willing to participate in Freddie Mac's Enhanced AOT offering subject to the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the premises, mutual promises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the parties hereto, the parties agree as follows: The Recitals are true and correct. Originator hereby assigns certain of its rights under the Originator MC to Direct Seller so that Direct Seller may incorporate the Required Spreads (and other terms as necessary) from the Originator MC into the Direct Seller MC and sell the Originator Mortgages to Freddie Mac under the Direct Seller MC and Direct Seller's Seller/Servicer number. Notwithstanding the immediately preceding sentence, Originator expressly reserves the right to agree to amendments to Originator's Purchase Documents, from time to time. Originator and Direct Seller also agree that this Agreement shall be incorporated into and become part of the Originator MC, or related Originator's Master Agreement, and Direct Seller's MC. Direct Seller hereby accepts such assignment from Originator and agrees that Direct Seller shall sell all Originator Mortgages it purchases from Originator to Freddie Mac under the Direct Seller MC, as supplemented by the Required Spreads (and other terms as necessary) incorporated from the Originator MC; Direct Seller acknowledges and agrees that Originator has reserved the right to agree to amendments to Originator's Purchase Documents, from time to time. Freddie Mac hereby gives its consent to the assignment by Originator to Direct Seller; provided that, (i) Originator and Direct Seller comply with all of the requirements of this Agreement and the applicable Purchase Documents, and (ii) Originator and Direct Seller acknowledge and agree that Freddie Mac reserves the right to revoke its consent to the assignment at any time and in its sole discretion. Originator and Direct Seller agree that Originator shall notify Direct Seller of any amendment to Originator's Purchase Documents prior to its execution of any amendment to Originator's Purchase Documents. Direct Seller acknowledges and agrees that, (i) Freddie Mac has no duty or obligation to notify Direct Seller of any amendment to Originator's Purchase Documents, (ii) Originator shall be Direct Seller's agent for purposes of receiving notice of any such amendment to Originator's Purchase Documents, (iii) Direct Seller shall be deemed to have notice of and be bound by any amendment to the Originator's Purchase Documents, and (iv) all Originator Mortgages delivered and sold by Direct Seller on or after the effective date of any such amendment shall comply with the Originator's Purchase Documents, as amended. With respect to any such amendment to the Originator's Purchase Documents, Originator represents and warrants that it has notified and, if required under the Wells Fargo Funding Loan Purchase Agreement, received approval of the terms and conditions of the amendment from Direct Seller. Without changing the Originator's duty to notify Direct Seller as set forth in the immediately preceding paragraph 6, Originator agrees that Freddie Mac may, as a courtesy to Direct Seller, but not as a duty or obligation, electronically transmit via the internet to Direct Seller's email address set forth below an unsigned copy of any such amendment to the Special Master Commitment(s) or Originator's other Purchase Documents. Freddie Mac shall not be responsible for the failure of any telecommunications company or cable company to properly, accurately and promptly transmit any such email. Direct Seller represents, warrants and covenants that (i) as of the Delivery Date and through and including the Settlement Date, Direct Seller shall be the sole owner of the Originator Mortgages delivered to Freddie Mac and (ii) all such Mortgages are free and clear of any and all security interests, claims and encumbrances of any other party including, but not limited to, the Originator. Direct Seller agrees that it shall, (i) as of the Settlement Date, convey and transfer to Freddie Mac all of Direct Seller's right, title and interest in the Originator Mortgages delivered to Freddie Mac, and (ii) on and after the Settlement Date, service the Originator Mortgages. Originator acknowledges and agrees that Originator has received from Direct Seller the reasonably equivalent value of and the fair consideration for the Originator Mortgages and Originator has no right, title or interest in the Originator Mortgages or the servicing rights to such Mortgages. Originator represents and warrants to Direct Seller and their successor and/or assign that all Originator Mortgages comply with all of Freddie Mac's requirements in Originator's Purchase Documents including, but not limited to, requirements regarding loan documentation, legal enforceability, first lien priority status, the Borrower's income and credit qualifications, the Borrower's source and amount of downpayment, the value and acceptability of the collateral and overall Mortgage eligibility. Originator represents and warrants to Direct Seller that, with respect to each mortgage sold to Direct Seller under the Wells Fargo Funding Loan Purchase Agreement, the Originator has provided Direct Seller with all data, information and detail necessary to process the delivery of the mortgage to Freddie Mac. Such data, information and detail shall include, but not be limited to, those items described in Chapter 17 of the Freddie Mac Single-Family Seller/Servicer Guide. Originator and Direct Seller acknowledge and agree that Freddie Mac's purchase of the Originator Mortgages from Direct Seller shall be in complete mliance upon Originator's representations and warranties in the immediately preceding paragraph 11. Originator agrees that Freddie Mac, as the assignee of Direct Seller, shall have the right to pursue its remedies under Originator's Purchase Documents directly against Originator. Furthermore, Originator agrees that Freddie Mac (i) is the intended beneficiary of Originator's representations and warranties under the Originator's Purchase Documents and this Agreement and (ii) shall not be required to first pursue any remedies for misrepresentation or breach of warranty against Direct Seller before pursuing its rights and remedies against Originator. Originator also agrees that Freddie Mac's rights as an intended beneficiary of Originator's representations and warranties shall vest on the Settlement Date. In the event Freddie Mac determines that any representation by Originator is untrue or that any of Originator's warranties have been breached, Freddie Mac will pursue its remedies under the Purchase Documents directly against Originator. Originator and Freddie Mac acknowledge and agree that Freddie Mac will not hold Direct Seller responsible for any misrepresentation or breach of warranty by Originator with respect to any Originator Mortgage regarding loan documentation, legal enforceability, first lien priority status, the Borrower's income and credit qualifications, the Borrower's source and amount of downpayment, the value and acceptability of the collateral or overall Mortgage eligibility. To accommodate Freddie Mac quality control reviews, Originator agrees to retain copies of the origination file of each Originator Mortgage for a period of 12 months after the Originator Mortgage's origination date, or the amount of time required by law or regulation, whichever is greater. Originator, Direct Seller and Freddie Mac agree that as of the Settlement Date: (i) Originator shall be solely responsible for all representations, warranties, covenants and requirements under the Originator's Purchase Documents with respect to loan documentation, legal enforceability, first lien priority status, the Borrower's income and credit qualifications, the Borrower's source and amount of downpayment, the value and acceptability of the collateral and the overall eligibility of each Originator Mortgage. Notwithstanding any provision of the Originator Purchase Documents to the contrary, Originator shall remain solely responsible for all such representations-,warranties, covenants and requirements until Freddie Mac specifically and expressly releases Originator in writing; (ii) Direct Seller shall be fully responsible for, (A) all representations, warranties, covenants and requirements regarding the delivery of Mortgage loan documents and loan data, Note endorsements, and mortgage file contents under the Direct Seller's Purchase Documents and (B) the representations, warranties and covenants made hereunder; and (iii) Direct Seller shall be fully responsible for, (A) all servicing representations, warranties, covenants and requirements under the Direct Seller's Purchase Documents and (B) the representations, warranties and covenants made hereunder. In the event of a transfer of servicing of any Originator Mortgages, (i) Originator shall continue to be fully and solely responsible for all representations, warranties, covenants and requirements under the Originator's Purchase Documents with respect to the loan documentation, legal enforceability, first lim priority status, the Borrower's income and credit qualifications, the Borrower's source and amount of downpayment, the value and acceptability of the collateral and the overall eligibility of each Originator Mortgage until Freddie Mac specifically and expressly releases Originator in writing, notwithstanding any provision of the Guide, Form 960, Form 981 or other Originator Purchase Documents to the contrary; and (ii) the servicing transferor shall be released from the servicing representations, warranties, covenants and requirements in accordance with Freddie Mac's Guide requirements. Notwithstanding anything contained in this Agreement or the Originator Purchase Documents to the contrary, the Servicer of the Originator Mortgages will always be solely responsible for providing Freddie Mac's Quality Control Department with mortgage loan files in accordance with the Guide requirements. The parties hereto agree that capitalized terms used in this Agreement and not otherwise defined herein shall have the meanings ascribed to them in the Freddie Mac Single-Family Seller/Servicer Guide, as amended and supplemented by Freddie Mac Sellers' and Servicers' Bulletins published prior to the date of the Master Agreement. References to chapters or sections of the Guide shall be deemed to be references to such chapters or sections as Enhanced by Freddie Mac Sellers' and Servicers' Bulletins. In the event that (i) Originator and Direct Seller fail to comply with the provisions of this Attachment, or (ii) there is a breach of warranty or a representation made under this Agreement or other applicable Purchase Documents is determined to be untrue, Freddie Mac may, at its option and in its sole discretion, exercise any of its remedies at law or under the applicable Purchase Documents, including, but not limited to, the right to terminate a parties Master Agreement and any Master Commitments issued thereunder upon written notice to the affected party. This Agreement will terminate upon the earlier of (i) 90 days from written notice to the parties by Freddie Mac, or (ii) the termination dates contained in the Originator's Master Agreement incorporating this Agreement. Notices shall be sent, faxed or electronically transmitted as follows: (a) To Originator: Mr. Steve Majerus Vice President E-Loan, Inc. 5875 Arnold Road Dublin, CA 94568 (b) To Direct Seller: Ms. Mary Blue Senior Vice President Wells Fargo Home Mortgage, Inc. 100 South 5th Street Minneapolis, MN 55402 (c) To Freddie Mac: Mr. Brian Swan Director of Customer Services Freddie Mac 333 West Wacker, Suite 2500 Chicago, IL 60606 Originator and Direct Seller agree that the terms of this Agreement are hereby deemed to be "confidential information" as described in Section 2.16 of the Guide and further agree to comply with the confidentiality requirements set forth therein. Originator and Direct Seller hereby indemnify and hold Freddie Mac harmless from and against any damages, liabilities, judgments, claims, counterclaims or defenses to which Freddie Mac may become subject, which arise out of or occur in connection this Agreement. IN WITNESS WHEREOF, Originator, Direct Seller and Freddie Mac have caused this Agreement to be executed by their duly authorized representatives as of the date first set forth above. FEDERAL HOME LOAN MORTGAGE CORPORATION By: /s/ Brian L. Swan Brian L. Swan Director of Customer Services   E-LOANS, INC.   By: /s/ Steven M. Majerus Type Name: V.P. Secondary Marketing Title: V.P. Secondary Marketing Date: 5/23/01     WELLS FARGO HOME MORTGAGE, INC.   By: /s/ Mary Blue Type Name: Mary Blue Title: Senior Vice President Date: June 15, 2001 --------------------------------------------------------------------------------

Exhibit 10-30 AMENDMENT NO. 1 to LONG-TERM EXECUTIVE INCENTIVE SHARE PLAN of ENERGY EAST CORPORATION             The Long-Term Executive Incentive Share Plan (the "Plan") of Energy East Corporation, is hereby amended as follows: 1. A new Article XVII of the Plan is hereby added, effective as of January 1, 2001, which reads in its entirety as follows: XVII.     Winding Down of Plan Notwithstanding anything to the contrary contained in this Plan, no new Performance Cycles shall commence on or after January 1, 2001, and no new initial grants of Performance Shares shall be made under the Plan on or after that date. All Performance Shares and Dividend Performance Shares in Participants' Performance Share Accounts for Performance Cycles which commenced prior to January 1, 2001 will continue to accrue Dividend Performance Shares in accordance with Article V hereof. 2. Article XV, Section B of the Plan is hereby amended, effective as of June 15, 2001, to read in its entirety as follows: B.     Additional Payments after a Change in Control. Notwithstanding anything contained herein to the contrary, if, following a Change in Control, the Plan continues in full force and effect for the remainder (if any) of Performance Cycles that began before and end after the Change in Control, a Participant shall be entitled to receive additional incentive award payments with respect to such Performance Cycles, equal to the excess of (i) the amounts determined in accordance with Articles IX and X hereof over (ii) the amounts previously paid with respect to such Performance Cycles pursuant to paragraph (iii) of Section A above. 3. Article XV, Section C of the Plan is hereby amended, effective as of June 15, 2001, to read in its entirety as follows: C.     Definition of a Change in Control. A "Change in Control" shall be deemed to have occurred if the conditions set forth in any of the following paragraphs shall have been satisfied: (i)  an acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of either (l) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); excluding, however, the following: (1) any acquisition directly from the Company, other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was itself acquired directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company, or (4) any acquisition pursuant to a transaction which complies with clauses (1), (2) and (3) of subsection (iii) of this definition; or (ii)  a change in the composition of the Board such that the individuals who, as of June 15, 2001, constitute the Board (such Board shall be hereinafter referred to as the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, for purposes of this Section C of Article XV, that any individual who becomes a member of the Board subsequent to June 15, 2001, whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least two-thirds of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be considered as though such individual were a member of the Incumbent Board, but, provided, further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so considered as a member of the Incumbent Board; or (iii)  consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company ("Corporate Transaction"); excluding, however, such a Corporate Transaction pursuant to which (1) all or substantially all of the individuals and entities who are the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 60% of, respectively, the outstanding shares of common stock, and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (2) no Person (other than the Company, any employee benefit plan (or related trust) of the Company or any entity controlled by the Company or such corporation resulting from such Corporate Transaction) will beneficially own, direct or indirectly, 25% or more of, respectively, the outstanding shares of common stock of the Company resulting from such Corporate Transaction or the combined voting power of the outstanding voting securities of such corporation entitled to vote generally in the election of directors except to the extent that such ownership existed prior to the Corporate Transaction, and (3) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction; or (iv)  the approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. For purposes of the definition of Change in Control in this Section C, "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. 4. Article XVI of the Plan is amended, effective as of June 15, 2001, to read in its entirety as follows: Plan Administration After a Change in Control Notwithstanding any other provisions of the Plan (including, without limitation, Articles III and XII hereof), neither the Board, nor the Committee shall be authorized to, and no termination, suspension, modification or amendment of the Plan shall be permitted to, amend or modify the terms and provisions (including, without limitation, the payment provisions) of any awards made to Participants in any way which adversely affects the rights of such Participants before such action is taken, if such action is taken (i) upon or after a Change in Control, or (ii) at the request of a third party that has taken steps reasonably calculated to effect a Change in Control.

QuickLinks -- Click here to rapidly navigate through this document CHANGE OF CONTROL SEVERANCE AGREEMENT     This Change of Control Severance Agreement (the "Agreement") is made and entered into effective as of May 7, 2001 (the "Effective Date"), by and between David L. Morash (the "Employee") and REMEC, Inc. (the "Company"). Certain capitalized terms used in this Agreement are defined in Section 1 below. R E C I T A L S     A. It is expected that the Company from time to time will consider the possibility of a Change of Control. The Board of Directors of the Company (the "Board") recognizes that such consideration can be a distraction to the Employee and can cause the Employee to consider alternative employment opportunities.     B. The Board believes that it is in the best interest of the Company and its Shareholders to provide the Employee with an incentive to continue his employment and to maximize the value of the Company upon a Change of Control for the benefit of it's shareholders.     C. In order to provide the Employee with enhanced financial security and sufficient encouragement to remain with the Company notwithstanding the possibility of a Change of Control, the Board believes that it is imperative to provide the Employee with certain severance benefits upon the Employee's termination of the employment following a Change of Control. AGREEMENT     In consideration of the mutual covenants herein contained and the continued employment of Employee by the Company, the parties agree as follows:     1.  Definition of Terms.  The following terms referred to in this Agreement shall have the following meanings:     (a)  Cause.  "Cause" shall mean (i) any act of personal dishonesty taken by the Employee in connection with his responsibilities as an employee which is intended to result in substantial personal enrichment of the Employee, (ii) Employee's conviction of a felony which the Board reasonably believes has had or will have a material detrimental effect on the Company's reputation or business, (iii) a willful act by the Employee which constitutes misconduct and is injurious to the Company, and (iv) continued willful violations by the Employee of the Employee's obligations to the Company after there has been delivered to the Employee a written demand for performance from the Company which describes the basis for the Company's belief that the Employee has not substantially performed his duties.     (b)  Change of Control.  "Change of Control" shall mean the occurrence of any of the following events: (i)the approval by shareholders of the Company of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior there to continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; (ii)any approval by the shareholders of the Company of a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets; 1 -------------------------------------------------------------------------------- (iii)any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becoming the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 50% or more of the total voting power represented by the Company's then outstanding voting securities; or (iv)a change in the composition of the Board, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of those directors who election or nomination was not connection with any transaction described in subsections (i), (ii) or (iii) or in connection with an actual or threatened proxy contest relating to the election of directors of the Company.     (c)  Involuntary Termination.  "Involuntary Termination" shall mean (i) without the Employee's express written consent, a significant reduction of the Employee's duties, position or responsibilities relative to the Employee's duties, position or responsibilities in effect immediately prior to such reduction, or the removal of the Employee from such position, duties and responsibilities, unless the Employee is provided with comparable duties, position and responsibilities, (ii) without the Employee's express written consent, a substantial reduction, without good business reasons, of the facilities and perquisites (including office space and location) available to the Employee immediately prior to such reduction; (iii) a reduction by the Company of the Employee's base salary or target bonus as in effect immediately prior to such reduction; (iv) a material reduction by the Company in the kind or level of employee benefits to which the Employee is entitled immediately prior to such reduction with the result that the Employee's overall benefits package is significantly reduced; (v) without the Employee's express written consent, the relocation of the Employee to a facility or location more than thirty-five (35) miles from his current location; (vi) any purported termination of the Employee by the Company which is not effected for Cause or for which the grounds relied upon are not valid; or (vii) the failure of the Company to obtain the assumption of this Agreement by any successors contemplated in Section 5 below.     2.  Term of Agreement.  This Agreement shall terminate upon the date that all obligations of the parties hereto under this Agreement have been satisfied.     3.  At-Will Employment.  The Company and the Employee acknowledge that the Employee's employment is and shall continue to be at-will, as defined under applicable law. If the Employee's employment terminates for any reason, the Employee shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Agreement, or as may otherwise be established under the company's then existing employee benefit plans or policies at the time of termination.     4.  Change of Control and Severance Benefits.       (a)  Termination Following A Change of Control.       (i)  Severance Payment.  If the Employee's employment with the Company terminates as a result of an Involuntary Termination within four (4) years after a Change of Control, then the Employee shall be entitled to receive a sum equal to twelve (12) months of his annualized base salary and targeted bonus, if any, (as in effect immediately prior to the Change of Control). Such severance payment shall be paid monthly in accordance with the Company's normal payroll practices. In addition, the Company shall continue to make available to the Employee and Employee's spouse and dependents covered under any group health plans or life insurance plans of the Company on the date of such termination of employment, all group 2 -------------------------------------------------------------------------------- health, life and other similar insurance plans in which Employee or such Covered Dependents participate on the date of the Employee's termination.     (ii)  Option Acceleration.  If the Employee's employment with the Company terminates as a result of an Involuntary Termination within four (4) years after a Change of Control, then all unvested options granted to the Employee by the Company prior to the Change of Control that are scheduled to vest within one (1) year from the date of such Involuntary Termination shall vest immediately upon such termination.     (iii)  Other Termination.  If the Employee's employment with the Company terminates other than as a result of an Involuntary Termination after a Change of Control, such as by the Company for Cause or by the Employee as a result of a voluntary resignation, then the Employee shall not be entitled to receive severance or other benefits hereunder, but may be eligible for those benefits (if any) as may then be established under the Company's then existing severance and benefits plans and policies at the time of such termination.     (b)  Accrued Wages and Vacation; Expenses.  Without regard to the reason for, or the timing of, Employee's termination of employment: (i) the Company shall pay the Employee any unpaid base salary due for periods prior to the date of termination; (ii) the Company shall pay the Employee all of the Employee's accrued and unused vacation through the date of termination; and (iii) following submission of proper expense reports by the Employee, the Company shall reimburse the Employee for all expenses reasonably and necessarily incurred by the Employee in connection with the business of the Company prior to the date of termination. These payments shall be made promptly upon termination and within the period of time mandated by law.     5.  Successors.       (a)  Company's Successors.  Any successor to the Company (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company's business and/or assets shall assume the Company's obligations under this Agreement and agree expressly to perform the Company's obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term "Company" shall include any successor to the Company's business and/or assets which executes and delivers the assumption agreement described in this subsection (a) or which becomes bound by the terms of this Agreement by operation of law.     (b)  Employee's Successors.  Without the written consent of the Company, Employee shall not assign or transfer this Agreement or any right or obligation under this Agreement to any other person or entity. Notwithstanding the foregoing, the terms of this Agreement and all rights of Employee hereunder shall inure to the benefit of, and be enforceable by, Employee's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.     6.  Notices.       (a)  General.  Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt request and postage prepaid. In the case of the Employee, mailed notices shall be addressed to him at the home address that he most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Secretary.     (b)  Notice of Termination.  Any termination by the Company for Cause or by the Employee as a result of a voluntary resignation or an Involuntary Termination shall be communicated by a 3 -------------------------------------------------------------------------------- notice of termination to the other party hereto given in accordance with this Section. Such notice shall indicate the specific termination provision in this Agreement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated. The failure by the Employee to include in the notice any fact or circumstance which contributes to a showing of Involuntary Termination shall not waive any right of the Employee hereunder or preclude the Employee from asserting such fact or circumstance in enforcing his rights hereunder.     7.  Arbitration.       (a) Except as provided in Section 7(d) below, any dispute or controversy arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach, or termination thereof, shall be settled by binding arbitration to be held in Palo Alto, California, in accordance with the National Rules for the Resolution of Employment Disputes then in effect of the American Arbitration Association (the "Rules"). The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator shall be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator's decision in any court having jurisdiction.     (b) The arbitrator(s) shall apply California law to the merits of any dispute or claim, without reference to conflicts of law rules. The arbitration proceedings shall be governed by federal arbitration law and by the Rules, without reference to state arbitration law. Employee hereby consents to the personal jurisdiction of the state and federal courts located in California for any action or proceeding arising from or relating to this Agreement or relating to any arbitration in which the parties are participants.     (c) Employee understands that nothing in this Section modifies Employee's at-will employment status. Either Employee or the Company can terminate the employment relationship at any time, with or without cause.     (d) EMPLOYEE HAS READ AND UNDERSTAND THIS SECTION, WHICH DISCUSSES ARBITRATION. EMPLOYEE UNDERSTANDS THAT SUBMITTING ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION TO THE EXTENT PERMITTED BY LAW, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EMPLOYEE'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, THE FOLLOWING CLAIMS: (i)ANY AND ALL CLAIMS OF WRONGFUL DISCHARGE OF EMPLOYMENT; BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIES; BREACH OF THE COVENANT OF GOOD FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT OR INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL MISREPRESENTATION; NEGLIGENT OR INTENTIONAL INTERFERENCE WITH CONTRACT OR PROSPECTIVE ECONOMIC ADVANTAGE; AND DEFAMATION. (ii)ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL STATE OR MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991, THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE FAIR LABOR STANDARDS ACT, THE 4 -------------------------------------------------------------------------------- CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, AND LABOR CODE SECTION 201, et seq.; (iii)ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.     8.  Miscellaneous Provisions.       (a)  No Duty to Mitigate.  The Employee shall not be required to mitigate the amount of any payment contemplated by this Agreement, nor shall any such payment be reduced by any earnings that the Employee may receive from any other source.     (b)  Waiver.  No provision of this Agreement may be modified, waived or discharged unless the modification, waiver or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Employee and by an authorized officer of the Company (other than the Employee). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.     (c)  Integration.  This Agreement and the stock option agreements representing the Options represent the entire agreement and understanding between the parties as to the subject matter herein and supersede all prior or contemporaneous agreements, whether written or oral.     (d)  Choice of Law.  The validity, interpretation, construction and performance of this Agreement shall be governed by the internal substantive laws, but not the conflicts of law rules, of the State of California.     (e)  Severability.  The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.     (f)  Employment Taxes.  All payments made pursuant to this Agreement shall be subject to withholding of applicable income and employment taxes.     (g)  Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.     IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year first above written.     COMPANY:     By:   --------------------------------------------------------------------------------     Title:   --------------------------------------------------------------------------------     EMPLOYEE:   -------------------------------------------------------------------------------- 5 -------------------------------------------------------------------------------- QuickLinks CHANGE OF CONTROL SEVERANCE AGREEMENT R E C I T A L S AGREEMENT

Exhibit (10)(j)* to Report on Form 10-K for Fiscal Year Ended June 30, 2001 by Parker-Hannifin Corporation     Parker-Hannifin Corporation 1990 Employees Stock Option Plan, as amended.     *Numbered in accordance with Item 601 of Regulation S-K.   PARKER-HANNIFIN CORPORATION 1990 EMPLOYEES STOCK OPTION PLAN Effective: September 1, 1990 Amended: October 28, 1993 Amended: August 15, 1996         1.      Purpose.      This 1990 Employees Stock Option Plan (the "Plan") is designed to enable the Corporation, by the grant of options, to attract and retain key employees for the Corporation and its subsidiaries and to provide additional incentive to these employees through increased stock ownership. Options granted under the Plan may be (a) incentive stock options within the meaning of Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"), or (b) nonqualified stock options.         2.      Administration.      The Plan shall be administered by a committee consisting of not less than three directors of the Corporation (the "Committee"), to be appointed by, and to serve during the pleasure of, the Board of Directors of the Corporation. No director who has within one year been eligible to participate in the Plan may be appointed or serve as a member of the Committee. Subject to the terms of the Plan, the Committee shall have full power and authority to interpret the provisions and to supervise the administration of the Plan and to define the terms of and grant options under the Plan. All decisions by the Committee pursuant to the provisions of the Plan shall be made by a majority of its members and shall be final.         3.      Employees Who May Participate in the Plan.       Employees to whom options are granted shall be designated from time to time by the Committee. An option may be granted to any salaried employee of the Corporation or of a subsidiary with executive, managerial, technical or professional responsibility, including any officer who is a member of the Board of Directors. An employee may hold more than one option; however, for incentive stock options, the aggregate fair market value (determined at the time the option is granted) of the shares with respect to such incentive stock options which are exercisable for the first time during any calendar year (under all plans of the Corporation and its subsidiaries) shall not exceed $100,000.         4.      Shares Subject to the Plan.      The shares subject to the Plan shall be the Corporation's Common Shares, without par value, and may be authorized but unissued shares or treasury shares. The total number of shares that may be delivered upon the exercise of all options granted under the Plan may not exceed 1,000,000, subject, however, to adjustment as provided in Section 12. Stock appreciation rights may be granted with respect to all or part of the shares subject to an option granted under the Plan. When all or part of an option is surrendered upon exercise of the related stock appreciation rights, the shares subject to the surrendered part of the option shall be considered exercised in full and shall not be available for the grant of future options under the Plan, and the number of shares that may be delivered under the Plan shall be reduced accordingly. When, however, an option is surrendered or expires for any reason other than the exercise of the related stock appreciation rights, the shares subject to the option shall again become available for offering under the Plan. -1-         5.        Option Price. The option price shall be determined by the Committee or by the Board of Directors. In the case of incentive stock options, the option price may not be less than 100% of the fair market value of the shares subject to the option on the date the option is granted, except that, if the optionee owns, at the time the option is granted, shares possessing more than 10% of the total combined voting power of all classes of stock of the Corporation or a subsidiary, the option price may be not less than 110% of the fair market value of the shares on the date the option is granted. In no event may previously unissued shares be issued at a price less than that permitted by the Ohio General Corporation Law. For purposes of this Plan, the "fair market value" of shares on any date shall be the reported closing price of the shares as reported for New York Stock Exchange-Composite Transactions on that date, or if no shares are traded on that date, the next preceding date on which trading occurred. In the event that the shares cease to be traded on the New York Stock Exchange, the "fair market value" of the shares shall be determined in the manner prescribed by the Committee.         6.        Exercise of Options. Except as otherwise provided in Section 7, or as may be permitted pursuant to options granted under Section 13, an option may be exercised only while the optionee is in the employ of the Corporation or of a subsidiary. Unless an option is accelerated as provided in this Section 6, an optionee to whom an option has been granted must remain in the continuous employ of the Corporation or of a subsidiary for one year from the date on which the option is granted before he or she may exercise any part of the option. Thereafter, and during the life of the option, the option may be exercised at any time as to all of the Common Shares subject to the option, or from time to time, as to any portion of such Common Shares or in such installments as the Committee may determine at the time the option is granted. No fraction of a Common Share may, however, be purchased upon the exercise of an option. An option shall be treated as outstanding for this purpose until the option is exercised in full, is surrendered upon the exercise of related stock appreciation rights, or expires by reason of the lapse of time.         The Board of Directors may, in its discretion and upon such terms as it deems appropriate, accelerate the date on which any outstanding option becomes exercisable in the event of a proposed merger or consolidation of the Corporation into or with another corporation, a proposed sale of all or a substantial part of the Corporation's assets, a tender or exchange offer for the Corporation's Common Shares, or another transaction or series of transactions that the Board determines is likely to result in a change in control of the Corporation. In addition to the foregoing, the Committee may purchase stock options previously granted to any person who is at the time of any such transaction a director or officer of the Corporation for a price equal to the difference between the consideration per share payable pursuant to the terms of the transaction and the option price.         7.        Exercise of Options After Termination of Employment. No option may be exercised after termination of the optionee's employment, except in the following situations:                 (a) If the termination of employment is due to permanent disability or to retirement under the applicable retirement plan or policy of the Corporation or a subsidiary, the optionee shall have the right to exercise the option in whole or in part within the period of two years after the date of termination of his employment; provided, however, that the Compensation and Management Development Committee of the Board of Directors may, at its sole discretion, extend the period of time in which a particular optionee may exercise an option, in whole or in part, but not for a period exceeding ten years after the date of grant.                         (b)    If the termination of employment is due to the death of the optionee, the optionee's estate, personal representative, or beneficiary shall have the right to exercise the option in whole or in part within the period of two years after the date of the optionee's death.                         (c)    If the termination of employment is due to any other reason except the optionee's permanent disability or retirement as specified in (a) above or the optionee's death as specified in (b) above, the optionee shall have the right to exercise the option in whole or in part within the period of three months after the date of such termination of employment.         8.             Termination of Options. An option granted under this Plan shall terminate, and the right of the employee to purchase shares upon exercise of the option shall expire, on the date determined by the Committee at the time the option is granted. No option, however, may have a life of more than ten years after the date it is granted, and, in the case of an employee who owns, at the time the option is granted, stock possessing more than 10% of the total combined voting power of all classes of stock of the Corporation or a subsidiary, no incentive stock option may have a life of more than five years after the date it is granted. If an option is accelerated pursuant to Section 6, the Board may prescribe an earlier termination date.         9.             Notice of Grant. When an employee is granted an option under the Plan, the Committee shall promptly cause the employee to be notified in writing of the nature of the grant and the terms of the option. The date on which the Committee approves the grant shall be considered to be the date on which the option is granted.                         Notice of Exercise: Payment for Shares. An option shall be considered to be exercised when the employee notifies the Corporation in writing of his intention to do so and tenders payment in full of the option price. Payment of the option price may be made in cash, by delivery of Common Shares of the Corporation (taken at their fair market value on the date of exercise, as defined in Section 5), or partly in cash and partly in shares, unless otherwise determined by the Committee. The employee shall have none of the rights of a shareholder with respect to shares purchased upon exercise of an option until he has paid the option price in full.         11.           Nontransferability of Options. An option granted under the Plan may not be transferred other than by will or by the laws of descent and distribution. Notwithstanding the foregoing, an employee may transfer any nonqualified stock option granted under this Plan to members of his immediate family (defined as his children, grandchildren and spouse) or to one or more trusts for the benefit of such family members or partnerships in which such family members are the only partners if the instrument evidencing such stock option expressly so provides (or is amended to so provide) and the employee does not receive any consideration for the transfer; provided that any such transferred stock option shall continue to be subject to the same terms and considerations that are applicable to such stock option immediately prior to its transfer (except that such transferred stock option shall not be further transferable by the transferee inter vivos). -3- Each employee to whom an option is granted, by accepting the option, agrees with the corporation that, in the event that the Corporation merges into or consolidates with another corporation, the Corporation sells all or a substantial part of its assets, or the Corporation's Common Shares are subject to a tender or exchange offer, he will consent to the transfer or assumption of the option, or accept a new option in substitution therefor, if the Committee or the Board of Directors requests him to do so.         12.        Adjustments Upon Changes in Shares. In the event of any change in the shares subject to the Plan or to any option right granted under the Plan by reason of a merger, consolidation, reorganization, recapitalization, stock dividend, stock split, exchange of shares, or other change in the corporate structure of the Corporation, the aggregate number of Common Shares as to which options may thereafter be granted under the Plan, the number of Common Shares subject to each outstanding option, and the option price for shares subject to each outstanding option shall be appropriately adjusted by the Committee.         13.        Substitute Options. The Board of Directors may grant options in substitution for, or upon the assumption of, options granted by another corporation that is merged into, consolidated with, or all or a substantial part of the assets or stock of which is acquired by the Corporation or a subsidiary. Subject to the limit in Section 4 on the number of shares that may be delivered upon the exercise of options granted under this Plan, the terms and provisions of any options granted under this Section 13 may vary from the terms and provisions otherwise specified in this Plan and may, instead, correspond to the terms and provisions of the options granted by the other corporation.         14.        Purchase for Investment. Each employee receiving shares upon exercise of an option may be required by the Corporation to furnish a representation that he is acquiring the shares as an investment and not with a view to distribution if the Corporation, in its sole discretion, determines that the representation is required to ensure that the resale or other disposition of the shares would not violate the Securities Act of 1933, as amended, or any applicable state securities laws. The Corporation reserves the right to place any legend or other symbol on certificates for shares delivered pursuant to the Plan, and to issue any stop transfer or similar instructions to the transfer agent, that the Corporation deems necessary and proper to assure compliance with any such representation.         15.        Compliance with Securities Law. No certificate for shares shall be delivered upon exercise of an option until the Corporation has taken any action that is required to comply with the provisions of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and any applicable state securities laws and with the requirements of any exchange on which the Corporation's Common Shares may, at the time, be listed.         16.         Duration and Termination of the Plan. The Plan shall remain in effect until August 31, 2000, and shall then terminate, unless terminated at an earlier date by action of the Board of directors. Except as provided in Section 18, termination of the Plan shall not affect options previously granted. -4-         17.         Amendment of the Plan. The Board of Directors may alter or amend the Plan from time to time prior to its termination, except that, without shareholder approval, no amendment may increase the aggregate number of shares with respect to which options may be granted (except in accordance with the provisions of Section 12), reduce the option price at which options may be exercised (except in accordance with the provisions of Section 12), extend the time within which options may be granted or the time within which an option may be exercised, or change the requirements relating to eligibility or to administration of the Plan. Except in accordance with the provisions of Section 12, the Board of Directors may not, without the consent of the holder of the option, alter or impair any outstanding options previously granted under this Plan. The Committee, may, with the agreement of the affected optionee, cancel any stock option granted pursuant to the Plan. In the event of such cancellation, the Committee may authorize the grant of a new option for the same number of Common Shares specified in the cancelled stock option or for a different number of Common Shares, at such option price and upon terms and conditions which would have been applicable under the Plan had the original cancelled stock option not been granted.         18.        Effective Date. This Plan was adopted by the Board of Directors and became effective on September 1, 1990, subject to approval by the Corporation's shareholders on or before October 24, 1990. Options may be granted prior to approval of the Plan by shareholders, but no such option may be exercised until after the Plan has been approved by shareholders. If the shareholders do not approve the Plan on or before October 24, 1990, all options previously granted under the Plan shall terminate. -5-

QuickLinks -- Click here to rapidly navigate through this document [***] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS. Exhibit 10.58 [Translation] Loan Agreement     Contract Number: 2001 ChaoLiuZi No.005 Lender:   China Merchants Bank, Beijing Branch, Chao Yang Men Subranch Legal Representative:   Xiu Xiangqun   Position:  President Address:   No.6 ChaoYangMen Bei Da Jie, Dongcheng district, Beijing Telephone:   85282361 Borrower:   UTStarcom (China) Co., Ltd. Address:   Fll No.6 ChaoYangMen Bei Da Jie, Beijing Beijing Legal Representative:   Hong Lu   Position:  Chairman Telephone:   65542030     WHEREAS: Party A desires to borrow working capital loan from the Lender for business operation. In accordance with the related laws and stipulations, in consideration of the mutual promise and to clarify the rights and obligations of each party, both parties agree to enter into this agreement and execute under this agreement. 1.Variety: Short term Revolving Fund. 2.Loan Amount: Reiminbi 50 million. 3.Purpose: The loan is used in working Capital Turnover and can not be appropriated for other purpose without the written approval of the Lender. 4.Loan Term: The duration of the loan under this agreement is twelve months which from March 14, 2001 to March 14, 2002. 5.Interest rate and calculation of Interest:     5.1  Interest rate: [***]     During the loan term, the interest rate will be adjusted in accordance with the provisions of the People's Bank in the event the People's Bank adjust the loan interest rate.     5.2  Calculation of Interest:     Interest shall accrue from draw-down date and be calculated [***]. The due date is [***] of very month ("due date").     5.3  Payment of interest:     The Borrower shall pay off [***] interest on the due date. The Lender have the right to deduct the interest from the Borrower's bank account in the Lender. The Lender could collect compound interest in the event the Borrower fails to pay the interest on time. -------------------------------------------------------------------------------- 6.Repayment of Loan:     6.1  The Borrower shall repay the principal and the interests pursuant to the provisions of this contract.     6.2  The Borrower could advance the repayment with the approval from the Lender. 7.Guarantee     7.1  The principal, interest and other related expenses are guaranteed by UTStarcom (Hangzhou) Telecommunication Co., Ltd. and issues an irrevocable guaranty to the Lender. 8.Rights of the Borrower     8.1  Draws and use the loan;     8.2  Declines other terms except this contract;     8.3  Assigns the debt to any third party upon the approval of the Lender. 9.Obligations of the Borrower     9.1  Provides true information upon the request by the Lender including all bank accounts, accounts number and balance of the accounts, assists the Lender to inspect review and check.     9.2  Accepts the supervision of the Lender regarding the use of loan and the status of manufacturing and finance.     9.3  Uses the loan pursuant to the provision of this contract.     9.4  Repay the due principal and interests on time.     9.5  Assigns the all or partial debts under this agreements to any third party upon the written approval of the Lender.     9.6  Advance notice to the Lender when the Borrower involves in contract, leasing, joint operation, consolidate (merger), liquidation, reorganization, joint venture or cooperate with foreign company, equity sales, share reformation and change of business operation manner including but no limited to contract, lease, joint venture, acquisition, liquidation, present and conversion into share company; The Borrower shall cooperate with the Lender to make efforts to make the Lender collect the principal and interests on time. 10.Rights of the Lender.     10.1  Requests the Borrower to repay the principal and interests on due date according to the stipulations of this agreement;     10.2  Requests the Borrower to provide the information related with the loan;     10.3  Knows the Borrower's manufacturing and financial status;     10.4  Supervises the use of the loan in accordance with the term of this agreement;     10.5  Deducts the outstanding principal and interest from the Borrowers bank account;     10.6  In the event the Borrower fail to perform the payment obligation under this agreement, the Lender have right to request the Borrower to recall the loan ahead of time, cease in extending the loan;     10.7  When the Borrower involves in contract, leasing, joint operation, consolidate (merger), liquidation, reorganization, joint venture or cooperate with foreign company, equity transference, share reformation, the Lender shall have right to request the Borrower clear of principal and the 2 -------------------------------------------------------------------------------- loan interest ahead of time, assign this loan to assignee confirmed by the Lender or provide acceptable guaranty to the Borrower. 11.Responsibility of the Lender     11.1  Extends the loan in accordance with the stipulations of this agreement;     11.2  Holds the Borrower's debts, financial, operational information in confidential except special provisions in Law. 12.Warranty of the Borrower     12.1  The Borrower is a company duly organized and validly existing under the law of the People's Republic of China and has power and authority to sign and perform this Contract;     12.2  Signature and performance this contract is full authorized by the board or other authorization;     12.3  The documents, information and files provided by the Borrower is true, correct, complete and effective without any material mistakes and missing.     12.4  The Borrower respects the Lender's operational policy which deposit and lending, credit and settlement is equal important. The Borrower warrants that its unused funds will deposit in the Bank account in Lender and entrust the Lender handle the Borrower's foreign currency settlement. 13.Extension of the Loan     In case the Borrower could not to repay the loan under this contract and need to extend the loan, the Borrower shall apply to Party B for the extension of the loan within [***] prior to maturity of the loan. The parties sign an extension loan agreement in written upon the approval of the Lender after the inspection made by the Lender. If the Lender disagrees to the extension of the loan, the Borrower shall repay the principal and the interest in accordance with the stipulations set forth in this contract. 14.Expenses     The Borrower shall reimburse the Lender for [***] expenses in connection with [***]. The Lender is empowered to deduct the [***] expense [***]. In the event that the money is not sufficient in the Borrower's account, the Borrower shall clear the balance upon the notice from the Lender [***] 15.Liabilities of Breach contract     15.1  In the event the Borrower fails to perform the obligations set forth in section 9.1 or 9.2 in this agreement, if it is material or the Borrower does not cure it timely, the Lender shall have right to cease in extending the loan and recall partial or total loan ahead of time.     15.2  The Borrower fails to perform the obligation set forth in section 9.3, the Lender shall have right to collect an interest at the rate of [***] for the amount misappropriated; If the matter is serious, the Lender shall have right to cease in extending the loan and recall partial or total loan ahead of time.     15.3  If the Borrower fails to perform the obligation set forth in section 9.4, the Lender is entitled to collect an interest at the rate of [***] for the default amount.     15.4  If the Borrower fails to perform the obligation set forth in section 9.5 and 9.6, the Lender fails to collect the repayment, the Lender shall have right to cease in extending the loan, recall the loan ahead of time. The Borrower shall compensate the Lender partial or all damage incurring from above default. 16.Amendments And Termination of Contract 3 --------------------------------------------------------------------------------     This contract could be amended and terminated upon the written agreements conclude by the parties. The contract shall be effective before the written amendment is made. The contract could not be changed, amended and terminated by one part without approval of the other part. 17.Miscellaneous     17.1  During the term of this contract, any tolerance, extension for the Borrows breach of contract and delay for excise any rights and benefit could not impair, affect and limit the Lender to excise its rights in accordance with this contract and related laws and regulation. It should not be construed that the Lender permit or recognize the Borrower's behaviors and waive current or future rights to take action to defend the Borrower.     17.2  In the event this contract or partial provisions contained in this Contract should be invalid, the Borrower shall perform the repayment responsibility. In the event aforesaid, the Lender shall have right to terminate this contract and immediately request the Borrower to repay the loan, interest and other expenses.     17.3  The notice and other communications required to be given by any party shall be in written. Telex and Telegram shall be deemed effectively given on the moment of transmission. Letter shall be deemed effectively given on the receipt of the post office.     17.4  The evidence of debt, the amendment, modification of the contract shall be made in written. Such documents shall be regard as the appendices of this contract and integral part of this Agreement. 18.Governing Law and Dispute resolution     18.1  The conclude, interpretation and dispute resolution shall be subject to the Laws of the People's Republic of China. The rights of the parities shall be safeguarded by the Laws of the People's Republic of China.     18.2  The disputes arising from execution of this contract shall be settled through friendly consultation by the parties. In case no settlement can be reached, the disputes shall be submitted to the People's Court of Beijing for judgment.     18.3  After this contract is empower compulsory execution with legal effectiveness by notarization, the Lender may apply to the People's court with jurisdiction to execution the contract. 19.Miscellaneous Provisions     19.1  This contract become effective after signed by the authorized representatives of both parties and go through the guaranty formality under Article 7 of this contract until the loan and the interests and other related expenses be cleared up.     19.2  This contract is executed in three original and be equally authentic. Each of the Borrower, the Lender and the Guarantor shall hold one copy. 4 --------------------------------------------------------------------------------     Lender: China Merchants Bank, Beijing Branch, Chao Yang Men Subranch     --------------------------------------------------------------------------------     (signature)     Borrower: UTStarcom (China) Co., Ltd.     --------------------------------------------------------------------------------     (signature) March 14, 2001 -------------------------------------------------------------------------------- Translation Verification     The foregoing represents a fair and accurate English translation of the original Chinese document. Dated: May 11, 2001     By:   /s/ SHAO-NING J. CHOU    --------------------------------------------------------------------------------     Name:   Shao-Ning J. Chou     Title:   Executive Vice President and Chief Operating Officer, China Operations -------------------------------------------------------------------------------- QuickLinks Exhibit 10.58 [Translation] Loan Agreement Translation Verification

Exhibit 10.7 ASSUMED ELIGIX, INC. 1997 EQUITY INCENTIVE PLAN Adopted June 30, 1997 As Amended August 31, 1998 As Amended January 28, 1999 Assumed by BioTransplant Incorporated on May 15, 2001 1.          PURPOSES.              (a)         The purpose of the Plan is to provide a means by which selected Employees and Directors and Consultants may be given an opportunity to benefit from increases in value of the common stock of the Company ("Common Stock") through the granting of (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) stock bonuses, and (iv) rights to purchase restricted stock.              (b)         The Company, by means of the Plan, seeks to retain the services of persons who are now Employees, Directors or Consultants, to secure and retain the services of new Employees, Directors and Consultants, and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Affiliates.              (c)         The Company intends that the Stock Awards issued under the Plan shall, in the discretion of the Board or any Committee to which responsibility for administration of the Plan has been delegated pursuant to subsection 3(c), be either (i) Options granted pursuant to Section 6 hereof, including Incentive Stock Options and Nonstatutory Stock Options, or (ii) stock bonuses or rights to purchase restricted stock granted pursuant to Section 7 hereof. All Options shall be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and in such form as issued pursuant to Section 6, and a separate certificate or certificates will be issued for shares purchased on exercise of each type of Option. 2.          DEFINITIONS.              (a)         "Affiliate" means any parent corporation or subsidiary corporation, whether now or hereafter existing, as those terms are defined in Sections 424(e) and (f) respectively, of the Code.              (b)         “Board” means the Board of Directors of the Company.              (c)         “Code” means the Internal Revenue Code of 1986, as amended.              (d)         “Committee” means a Committee appointed by the Board in accordance with subsection 3(c) of the Plan.              (e)         "Company" means Eligix, Inc., Delaware corporation.              (f)         "Consultant" means any person, including an advisor, engaged by the Company or an Affiliate to render consulting services and who is compensated for such services, provided that the term "Consultant" shall not include Directors who are paid only a director's fee by the Company or who are not compensated by the Company for their services as Directors.              (g)        "Continuous Status as an Employee, Director or Consultant" means the employment or relationship as a Director or Consultant is not interrupted or terminated. The Board, in its sole discretion, may determine whether Continuous Status as an Employee, Director or Consultant shall be considered interrupted in the case of: (i) any leave of absence approved by the Board, including sick leave, military leave, or any other personal leave; or (ii) transfers between locations of the Company or between the Company, Affiliates or their successors.              (h)        "Director" means a member of the Board.              (i)         "Employee" means any person, including Officers and Directors, employed by the Company or any Affiliate of the Company. Neither service as a Director nor payment of a director's fee by the Company shall be sufficient to constitute "employment" by the Company.              (j)         "Exchange Act" means the Securities Exchange Act of 1934, as amended.              (k)        "Fair Market Value" means, as of any date, the value of the Common Stock of the Company determined as follows and in a manner consistent with Section 260.140.50 of Title 10 of the California Code of Regulations:                                         (1)        If the Common Stock is listed on any established stock exchange, or traded on the NASDAQ National Market or the Nasdaq Small Cap Market, the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in Common Stock) on the day of determination, as reported in the Wall Street Journal or such other source as the Board deems reliable.                                         (2)        In the absence of such markets for the Common Stock, the Fair Market Value shall be determined in good faith by the Board.              (l)         "Incentive Stock Option" means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.              (m)       “Listing Date" means the first date upon which any security of the Company is listed (or approved for listing) upon notice of issuance on any securities exchange, or designated (or approved for designation) upon notice of issuance as a national market security on an interdealer quotation system and, if applicable, such securities exchange or interdealer quotation  system has been certified in accordance with the provisions of Section 25100(o) of the California Corporate Securities Law of 1968.              (n)        “Nonstatutory Stock Option" means an Option, not intended to qualify as an Incentive Stock Option.              (o)         "Officer" means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.              (p)         "Option" means a stock option granted pursuant to the Plan.              (q)         "Option Agreement" means a written agreement between the Company and an Optionee evidencing the terms and conditions of an individual Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan.              (r)         "Optionee" means a person to whom an Option is granted pursuant to the Plan.              (s)         "Plan" means this Eligix, Inc. 1997 Equity Incentive Plan.              (t)         "Stock Award" means any right granted under the Plan, including any Option, any stock bonus and any right to purchase restricted stock.              (u)        "Stock Award Agreement" means a written agreement between the Company and a holder of a Stock Award evidencing the terms and conditions of an individual Stock Award grant. Each Stock Award Agreement shall be subject to the terms and conditions of the Plan. 3.          ADMINISTRATION.              (a)         The Plan shall be administered by the Board unless and until the Board delegates administration to a Committee, as provided in subsection 3(c).              (b)         The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan:                                         (1)        To determine from time to time which of the persons eligible under the Plan shall be granted Stock Awards; when and how each Stock Award shall be granted; whether a Stock Award will be an Incentive Stock Option, a Nonstatutory Stock Option, a stock bonus, a right to purchase restricted stock or a combination of the foregoing; the provisions of each Stock Award granted (which need not be identical), including the time or times when a person shall be permitted to receive stock pursuant to a Stock Award and the number of shares with respect to which a Stock Award shall be granted to each such person.                                         (2)        To construe and interpret the Plan and Stock Awards granted under it, and to establish, amend and revoke rules and regulations for its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Stock Award Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective.                                         (3)        To amend the Plan or a Stock Award as provided in Section 13.                                         (4)        Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company which are not in conflict with the provisions of the Plan.              (c)         The Board may delegate administration of the Plan to a committee or committees ("Committee") of one or more members of the Board.  If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board (and references in this Plan to the Board shall thereafter be to the Committee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan. 4.          SHARES SUBJECT TO THE PLAN.              (a)         Subject to the provisions of Section 12 relating to adjustments upon changes in stock, the stock that may be issued pursuant to Stock Awards shall not exceed in the aggregate Five Million (5,000,000) shares of Common Stock. If any Stock Award shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised in full (or vested in the case of restricted stock), the stock not acquired under such Stock Award shall revert to and again become available for issuance under the Plan.              (b)         The stock subject to the Plan may be unissued shares or reacquired shares, bought on the market or otherwise. 5.          ELIGIBILITY.              (a)         Incentive Stock options may be granted only to Employees.  Stock Awards other than Incentive Stock Options may be granted only to Employees, Directors or Consultants.              (b)         No person shall be eligible for the grant of an Option if, at the time of grant, such person owns (or is deemed to own pursuant to Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any of its Affiliates unless the exercise price of such Option is at least one hundred ten percent (110%) of the Fair Market Value of such stock at the date of grant and the Option is not exercisable after the expiration of five (5) years from the date of grant. 6.          OPTION PROVISIONS.              Each Option shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The provisions of separate Options need not be identical, but each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions:              (a)         Term.  No Option shall be exercisable after the expiration of ten (10) years from the date it was granted.              (b)         Price.  The exercise price of each Incentive Stock Option shall be not less than one hundred percent (100%) of the Fair Market Value of the stock subject to the Option on the date the Option is granted and the exercise price of each Nonstatutory Stock Option shall be not less than eighty-five percent (85%) of the Fair Market Value of the stock subject to the Option on the date the Option is granted. Notwithstanding the foregoing, an Option may be granted with an exercise price lower than that set forth in the preceding sentence (if such Option is granted) pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code.              (c)         Consideration.  The purchase price of stock acquired pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (i) in cash at the time the Option is exercised, or (ii) at the discretion of the Board or the Committee, at the time of the grant of the Option, (A) by delivery to the Company of other Common Stock of the Company, (B) according to a deferred payment arrangement, except that payment of the common stock's "par value" (as defined in the Delaware General Corporation Law) shall not be made by deferred payment, or other arrangement (which may include, without limiting the generality of the foregoing, the use of other Common Stock of the Company) with the person to whom the Option is granted or to whom the Option is transferred pursuant to subsection 6(d), or (c) in any other form of legal consideration that may be acceptable to the Board.              In the case of any deferred payment arrangement, interest shall be payable at least annually and shall be charged at the minimum rate of interest necessary to avoid the treatment as interest, under any applicable provisions of the Code, of any amounts other than amounts stated to be interest under the deferred payment arrangement.              (d)         Transferability. An Option shall not be transferable except by will or by the laws of descent and distribution, and shall be exercisable during the lifetime of the person to whom the Option is granted only by such person.              (e)         Vesting. The total number of shares of stock subject to an Option may, but need not, be allotted in periodic installments (which may, but need not, be equal). The Option Agreement may provide that from time to time during each of such installment periods, the Option may become exercisable ("vest") with respect to some or all of the shares allotted to that period, and may be exercised with respect to some or all of the shares allotted to such period and/or any prior period as to which the Option became vested but was not fully exercised. The Option may be subject to such other terms and conditions on the time or times when it may be exercised (which may be based on performance or other criteria) as the Board may deem appropriate. The vesting provisions of individual Options may vary, but in each case to the extent required by California Code of Regulations section 260.140.41 will provide for vesting of at least twenty percent (20%) per year of the total number of shares subject to the Option. The provisions of this subsection 6(e) are subject to any Option provisions governing the minimum number of shares as to which an Option may be exercised.              (f)         Termination of Employment or Relationship as a Director or Consultant.  In the event an Optionee’s Continuous Status as an Employee, Director or Consultant terminates (other than upon the Optionee’s death or disability), the Optionee may exercise his or her Option (to the extent that the Optionee was entitled to exercise it at the date of termination) but only within such period of time ending on the earlier of (i) the date three (3) months after the termination of the Optionee’s Continuous Status as an Employee, Director or Consultant (or such longer or shorter period, which shall not be less than thirty (30) days if such termination is not for cause, as specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, at the date of termination, the Optionee is not entitled to exercise his or her entire Option, the shares covered by the unexercisable portion of the Option shall revert to and again become available for issuance under the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified in the Option Agreement, the Option shall terminate, and the shares covered by such Option shall revert to and again become available for issuance under the Plan.              An Optionee's Option Agreement may also provide that if the exercise of the Option following the termination of the Optionee's Continuous Status as an Employee, Director or Consultant (other than upon the Optionee's death or disability) would be prohibited at any time solely because the issuance of shares would violate the registration requirements under the Act, then the Option shall terminate on the earlier of (i) the expiration of the term of the Option set forth in the first paragraph of this subsection 6(f), or (ii) the expiration of a period of three (3) months after the termination of the Optionee's Continuous Status as an Employee, Director or Consultant during which the exercise of the Option would not be in violation of such registration requirements.              (g)        Disability of Optionee. In the event an Optionee's Continuous Status as an Employee, Director or Consultant terminates as a result of the Optionee's disability, the Optionee may exercise his or her Option (to the extent that the Optionee was entitled to exercise it at the date of termination), but only within such period of time ending on the earlier of (i) the date twelve (12) months following such termination (or such longer or shorter period, which in no event shall be less than six (6) months, specified in the Option Agreement), or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after the date of termination, the Optionee is not entitled to exercise his or her entire Option, the shares covered by the unexercisable portion of the Option shall revert to and again become available for issuance under the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate, and the shares covered by such Option shall revert to and again become available for issuance under the Plan.              (h)        Death of Optionee. In the event of the death of an Optionee during, or within a period specified in the Option Agreement after the termination of, the Optionee's Continuous Status as an Employee, Director or Consultant, the Option may be exercised (to the extent the Optionee was entitled to exercise the Option at the date of death) by the Optionee's estate by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the option upon the Optionee's death pursuant to subsection 6(d), but only within the period ending on the earlier of (i) the date eighteen (18) months following the date of death (or such longer or shorter period, which in no event shall be less than six (6) months specified in the Option Agreement), or (ii) the expiration of the term of such Option as set forth in the Option Agreement. If, at the time of death, the Optionee was not entitled to exercise his or her entire Option, the shares covered by the unexercisable portion of the Option shall revert to and again become available for issuance, under the Plan. If, after death, the Option is not exercised within the time specified herein, the Option shall terminate, and the shares covered by such Option shall revert to and again become available for issuance under the Plan.              (i)         Early Exercise. The Option may, but need not, include a provision whereby the Optionee may elect at any time while an Employee, Director or Consultant to exercise the Option as to any part or all of the shares subject to the Option prior to the full vesting of the Option. Any unvested shares so purchased may be subject to a repurchase right in favor of the Company or to any other restriction the Board determines to be appropriate as specified in The Option Agreement and in a manner consistent with Section 260.140.41 of the California Code of Regulations. 7.          TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.              Each stock bonus or restricted stock purchase agreement shall be in such form and shall contain such terms and conditions as the Board or the Committee shall deem appropriate. The terms and conditions of stock bonus or restricted stock purchase agreements may change from time to time, and the terms and conditions of separate agreements need not be identical, but each stock bonus or restricted stock purchase agreement shall include (through incorporation of provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions as appropriate:              (a)         Purchase Price. The purchase price under each restricted stock purchase agreement shall be such amount as the Board or Committee shall determine and designate in such Stock Price Agreement, but in no event shall the purchase price be less than eighty-five percent (85%) of the stock's Fair Market Value on the date such award is made. Notwithstanding the foregoing, the Board or the Committee may determine that eligible participants in the Plan may be awarded stock pursuant to a stock bonus agreement in consideration for past services actually rendered to the Company for its benefit.              (b)         Transferability. No rights under a stock bonus or restricted stock purchase agreement shall be transferable except by will or the laws of descent and distribution and shall be exercisable during the lifetime of the person to whom the Stock Award is granted only by such person.              (c)         Consideration. The purchase price of stock acquired pursuant to a stock purchase agreement shall be paid either: (i) in cash at the time of purchase; (ii) at the discretion of the Board or the Committee, according to a deferred payment or other arrangement with the person to whom the stock is sold, except that payment of the common stock's "par value" (as defined in the Delaware General Corporation Law) shall not be made by deferred payment; or (iii) in any other form of legal consideration that may be acceptable to the Board or, the Committee in its discretion. Notwithstanding the foregoing, The Board or the Committee to which administration of the Plan has been delegated may award stock pursuant to a stock bonus agreement in consideration for past services actually rendered to the Company or for its benefit.              (d)         Vesting.  Shares of stock sold or awarded under the Plan may, but need not, be subject to a repurchase option in favor of the Company in accordance with a vesting schedule to be determined by the Board or the Committee. To the extent required by California Code of Regulations section 260.140.41, the Stock Award Agreement shall provide (i) that the right to repurchase at the original purchase price shall lapse at a minimum rate of twenty percent (20%) per year over five (5) years from the date the Stock Award was granted, and (ii) such right shall be exercisable only (A) within the ninety (90) day period following the termination of employment or the relationship as a Director or Consultant, or (B) such longer period as may be agreed to by the Company and the holder of the Stock Award (for example, for purposes of satisfying the requirements of Section 1202(c)(3) of the Code (regarding "qualified small business stock")), and (iii) such right shall be exercisable only for cash or cancellation of purchase money indebtedness for the shares.              (e)         Termination of Continuous Status as an Employee, Director or Consultant. In the event a Participant's Continuous Status as an Employee, Director or Consultant terminates, the Company may repurchase or otherwise reacquire any or all of the shares of stock held by that person which have not vested as of the date of termination under the terms of the stock bonus or restricted stock purchase agreement between the Company and such person. 8.          CANCELLATION AND RE-GRANT OF OPTIONS.              The Board or the Committee shall have the authority to effect, at any time and from time to time, (i) the repricing of any outstanding Options under the Plan and/or (ii) with the consent of any adversely affected holders of Options, the cancellation of any outstanding Options under the Plan and the grant in substitution therefor of new Options under the Plan covering the same or different numbers of shares of stock, but having an exercise price per share not less than eighty-five percent (85%) of the Fair Market Value for a Nonstatutory Stock Option, one hundred percent (100%) of the Fair Market Value for an Incentive Stock Option or, in the case of an Incentive Stock Option held by a 10% stockholder (as described in subsection 5(b)), not less than one hundred ten percent (110%) of the Fair Market Value per share of stock on the new grant date.  Notwithstanding the foregoing, the Board or the Committee may grant an Option with an exercise price lower than that set forth above if such Option is granted as part of a transaction to which section 424(a) of the Code applies. 9.          COVENANTS OF THE COMPANY.              (a)         During the terms of the Stock Awards, the Company shall keep available at all times the number of shares of stock required to satisfy such Stock Awards.              (b)         The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to issue and sell shares under Stock Awards; provided, however, that this undertaking shall not require the Company to register under the Securities Act of 1933, as amended (the "Securities Act") either the Plan, any Stock Award or any stock issued or issuable pursuant to any such Stock Award. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the company deems necessary for the lawful issuance and sale of stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell stock upon exercise of such Stock Awards unless and until such authority is obtained. 10.        USE OF PROCEEDS FROM STOCK.              Proceeds from the sale of stock pursuant to Stock Awards shall constitute general funds of the Company. 11.        MISCELLANEOUS.              (a)         Subject to any applicable provisions of the California Corporate Securities Law of 1968, as amended, and related regulations relied upon as a condition of issuing securities pursuant to the Plan, the Board shall have the power to accelerate the time at which a Stock Award may first be exercised or the time during which a Stock Award or any part thereof will vest pursuant to subsection 6(e) or 7(d), notwithstanding the provisions in the Stock Award stating the time at which it may first be exercised or the time during which it will vest.              (b)         Neither an Employee, Director nor a Consultant nor any person to whom a Stock Award is transferred in accordance with the Plan shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares subject to such Stock Award unless and until such person has satisfied all requirements for exercise of the Stock Award pursuant to its terms.              (c)         Throughout the term of any Stock Award, to the extent required by California law, the Company shall deliver to the holder of such Stock Award, not later than one hundred twenty (120) days after the close of each of the Company's fiscal years during the term of such Stock Award, a balance sheet and an income statement. This subsection shall not apply (i) after the Listing Date, or (ii) when issuance is limited to key employees whose duties in connection with the Company assure them access to equivalent information.              (d)         Nothing in the Plan or any instrument executed or Stock Award granted pursuant thereto shall confer upon any Employee, Consultant or other holder of Stock Awards any right to continue in the employ of the Company or any Affiliate or to continue serving as a Consultant and Director, or shall affect the right of the Company or any Affiliate to terminate the employment of any Employee with or without notice and with or without cause, or the right to terminate the relationship of any Consultant pursuant to the terms of such Consultant's agreement with the Company or Affiliate or service as a Director pursuant to the Company's Bylaws.              (e)         To the extent that the aggregate Fair Market Value (determined at the time of grant) of stock with respect to which Incentive Stock Options are exercisable by any Optionee during any calendar year under all plans of the Company and its affiliates exceeds one hundred thousand dollars ($100,000), the Options or portions thereof which exceed such limit (according to the order in which they were granted) shall be treated as Nonstatutory Stock Options.              (f)         The Company may require any person to whom a Stock Award is granted, or any person to whom a Stock Award is transferred in accordance with the Plan, as a condition of exercising or acquiring stock under any Stock Award, (1) to give written assurances satisfactory to the Company as to such person's knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters, and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Stock Award; and (2) to give written assurances satisfactory to the Company stating that such person is acquiring the stock subject to the Stock Award for such person's own account and not with any present intention of selling or otherwise distributing the stock. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (i) the issuance of the shares upon the exercise or acquisition of stock under the Stock Award has been registered under a then currently effective registration statement under the Securities Act, or as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the stock.              (g)        To the extent provided by the terms of a Stock Award Agreement, the person to whom a Stock Award is granted may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of stock under a Stock Award by any of the following means or by a combination of such means: (1) tendering a cash payment; (2) authorizing the Company to withhold shares from the shares of the Common Stock otherwise issuable to the participant as a result of the exercise or acquisition of stock under the Stock Award; or (3) delivering to the Company owned and unencumbered shares of the Common Stock of the Company. 12.        ADJUSTMENTS UPON CHANGES IN STOCK.              (a)         If any change is made in the stock subject to the Plan, or subject to any Stock Award, without the receipt of consideration by the Company (through merger, consolidation, reorganization recapitalization, reincorporation, stock dividend, dividend in property other than cash, stock split, liquidation of dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of consideration by the Company), the Plan will be appropriately adjusted in the class(es) and maximum number of shares subject to the Plan pursuant to subsection 4(a), and the outstanding Stock Awards will be appropriately adjusted in the class(es) and number of shares and price per share of stock subject to such outstanding Stock Awards. Such adjustments shall be made by the Board or the Committee, the determination of which shall be final, binding and conclusive. (The conversion of any convertible securities of the Company shall not be treated as a "transaction not involving the receipt of consideration by the Company.")              (b)         In the event of: (1) a dissolution, liquidation or sale of substantially all of the assets of the Company; (2) a merger or consolidation in which the Company is not the surviving corporation; or (3) a reverse merger in which the Company is the surviving corporation but the shares of the Company's common stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise, then to the extent permitted by applicable law: (i) any surviving corporation or a parent of such surviving corporation shall assume any Stock Awards outstanding under the Plan or shall substitute similar Stock Awards for those outstanding under the Plan, or (ii) such Stock Awards shall continue in full force and effect.  In the event any surviving corporation or its parent refuses to assume or continue such Stock Awards, or to substitute similar Stock Awards for those outstanding under the Plan, then, with respect to Stock Awards held by persons then performing services as Employees, Directors or Consultants, the time during which such Stock Awards may be exercised shall be accelerated, the vesting of such Stock Awards shall be accelerated if so determined by the Board and the Stock Awards terminated if not exercised prior to such event. 13.        AMENDMENT OF THE PLAN AND STOCK AWARDS.              (a)         The Board at any time, and from time to time, may amend the Plan. However, except as provided in Section 12 relating to adjustments upon changes in stock, no amendment shall be effective unless approved by the stockholders of the Company to the extent stockholder approval is necessary for the Plan to satisfy the requirements of Section 422 of the Code, applicable Securities laws or an Nasdaq or securities exchange listing requirements.              (b)         The Board may in its sole discretion submit any other amendment to the Plan for stockholder approval.              (c)         It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide eligible employees, Directors or Consultants with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder relating to Incentive Stock Options and/or to bring the Plan and/or Incentive Stock Options granted under it into compliance therewith.              (d)         Rights under any Stock Award granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (i) the Company requests the consent of the person to whom the Stock Award was granted and (ii) such person consents in writing. 14.        TERMINATION OR SUSPENSION OF THE PLAN.              (a)         The Board may suspend or terminate the Plan at any time.  Unless sooner terminated, the Plan shall terminate ten (10) years from the date the Plan is adopted by the Board or approved by the stockholders of the Company, whichever is earlier. No Stock Awards may be granted under the Plan while the Plan is suspended or after it is terminated.              (b)         Rights and obligations under any Stock Award granted while the Plan is in effect shall not be impaired by suspension or termination of the Plan, except with the consent of the person to whom the Stock Award was granted. 15.        EFFECTIVE DATE OF PLAN.              The Plan shall become effective on the date adopted by the Board, but no Stock Awards granted under the Plan shall be exercised unless and until the Plan has been approved by the stockholders of the Company, which approval shall be within twelve (12) months before or after the date the Plan is adopted by the Board. NOTICE OF EXERCISE Eligix, Inc.   200 Boston Ave, Suite 2600   Medford, MA 02155 Date of Exercise: Ladies and Gentlemen:              This constitutes notice under my stock option that I elect to purchase the number of shares for the price set forth below. Type of option (check one):   Incentive   o   Nonstatutory   o           Stock option dated:             --------------------------------------------------------------------------------     Number of shares as to which option is  exercised:             --------------------------------------------------------------------------------               Certificates to be  issued in name of:             --------------------------------------------------------------------------------               Total exercise price:   $         --------------------------------------------------------------------------------               Cash payment delivered herewith:   $         --------------------------------------------------------------------------------                  By this exercise, I agree (i) to provide such additional documents as you may require pursuant to the terms of the Eligix, Inc. 1997 Stock Option Plan, (ii) to provide for the payment by me to you (in the manner designated by you) of your withholding obligation, if any, relating to the exercise of this option, and (iii) if this exercise relates to an incentive stock option, to notify you in writing within fifteen (15) days after the date of any disposition of any shares of Common Stock issued upon exercise of this option that occurs within two (2) years after the date of grant of this option or within one (1) year after such shares of Common Stock are issued upon exercise of this option.              I hereby make the following certifications and representations with respect to the number of shares of Common Stock of the Company listed above (the "Shares"), which are being acquired by me for my own account upon exercise of the option as set forth above:              I acknowledge that the Shares have not been registered under the Securities Act of 1933, as amended (the "Act"), and are deemed to constitute "restricted securities" under Rule 701 and may be securities owned by an "affiliate" under Rule 144 promulgated under the Act. I warrant and represent to the Company that I have no present intention of distributing or selling said Shares, except as permitted under the Act and any applicable state securities laws.              I further acknowledge that I will not be able to resell the Shares for at least ninety (90) days after the stock of the Company becomes publicly traded (i.e., subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934) under Rule 701 and that more restrictive conditions apply to affiliates of the Company under Rule 144.              I further acknowledge that all certificates representing any of the Shares subject to the provisions of the Option shall have endorsed thereon appropriate legends reflecting the foregoing limitations, as well as any legends reflecting restrictions pursuant to the Company's Articles of Incorporation, Bylaws and/or applicable securities laws.              I further agree that, if required by the Company (or a representative of the underwriters) in connection with the first underwritten registration of the offering of any securities of the Company under the Act, I will not sell or otherwise transfer or dispose of any shares of Common Stock or other Securities of the Company during such period (not to exceed one hundred eighty (180) days) following the effective date of the registration statement of the Company filed under the Act (the "Effective Date") as may be requested by the Company or the representative of the underwriters. I further agree that the Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such period.   Very truly yours,               --------------------------------------------------------------------------------  

EMPLOYMENT AGREEMENT             This EMPLOYMENT AGREEMENT (the "Agreement"), made as of October 1, 2001 by and among Tyson Foods, Inc., a Delaware corporation (the "Company"), and John Tyson, a resident of the State of Arkansas (the "Executive"). RECITALS             To induce Executive's service as Chairman and Chief Executive Officer of the Company during the Term (as defined in Section 2 below), the Company desires to provide Executive with compensation and other benefits on the terms and conditions set forth in this Agreement.             Executive is willing to accept such employment and perform services for the Company, on the terms and conditions hereinafter set forth.             It is therefore hereby agreed by and among the parties as follows:             1.        Employment.             1.1      Subject to the terms and conditions of this Agreement, the Company agrees to employ Executive during the Term as Chairman and Chief Executive Officer. In such capacity, Executive shall report to the Company's Board of Directors and shall have the powers, responsibilities and authorities as are assigned by the Company's Board of Directors.             1.2      Subject to the terms and conditions of this Agreement, Executive hereby accepts employment as the Chairman and Chief Executive Officer of the Company as of the date hereof and agrees to devote his full working time and efforts, to the best of his ability, experience and talent, to the performance of services, duties and responsibilities in connection therewith. Executive shall perform such duties and exercise such powers, commensurate with his position, as the Company's Board of Directors shall from time to time delegate to him on such terms and conditions and subject to such restrictions as the Company's Board of Directors may reasonably from time to time impose.             313 --------------------------------------------------------------------------------               2.        Term of Employment. Executive's term of employment under this Agreement shall commence as of the date hereof (the "Effective Date") and, subject to the terms hereof, shall terminate on such date (the "Termination Date") which is the earlier of (i) October 1, 2004 or (ii) the termination of Executive's employment pursuant to this Agreement (the period from the Effective Date until the Termination Date shall be the "Term"). The Termination Date (and the Term) shall automatically be extended for an additional year on October 1, 2004 and on each subsequent first day of the Company's fiscal year thereafter unless (a) Executive's employment has been terminated prior to such day, or (b) not later than 30 days prior to such day, either party to this Agreement shall have given written notice to the other party that he or it does not wish to extend further the Termination Date (and the Term).             3.        Compensation.             3.1      Salary. The Company shall pay Executive a base salary ("Base Salary") at the rate of $1,000,000 per annum during the Term; provided, however, that commencing on September 29, 2002, the Compensation Committee of the Company's Board of Directors (the "Compensation Committee") shall, and each year thereafter shall, review the Executive's annual Base Salary for potential increase; however, Executive's right to annual increases shall not be unreasonably denied, and the Base Salary shall not be decreased at any time during the Term. Base Salary shall be payable in accordance with the ordinary payroll practices of the Company. Any increase in Base Salary shall constitute "Base Salary" hereunder.             3.2      Annual Bonus. It is expressly understood and contemplated that Executive's bonus plan will be mutually agreed to by the parties hereto for the Company's fiscal year beginning September 30, 2001 and for each fiscal year thereafter during the Term. The annual bonus plan shall be driven by and proportionate to GAAP determined EBIT generated by Company business activities reporting to Executive.             3.3      Stock Option Awards. As of the date of approval by the Compensation Committee, Executive shall receive an option to purchase 200,000 shares of Company Class A common stock at an exercise price equal to the market price of Company Class A common stock on the date of the grant; the other terms and conditions of such award shall be governed by the terms of a stock option award agreement in a form substantially similar to that presently used by the Company. The options awarded pursuant to this Section 3.3 shall be for a term of ten (10) years and shall vest forty percent (40%) on the second anniversary of the date of the award and in twenty (20%) increments annually thereafter until fully vested.             3.4      Restricted Stock. As of the date of approval by the Compensation Committee, Executive shall receive an award of 300,000 shares of restricted Company Class A common stock pursuant to a restricted stock award agreement in a form substantially similar to that  314 --------------------------------------------------------------------------------  presently used by the Company, as follows:                   (a) 200,000 shares of such restricted stock shall vest on October 10, 2003; and                   (b) 100,000 shares of such restricted stock shall vest on October 10, 2006.             3.5      Perquisites. During the Term, the Company shall provide Executive with the following:             (a)      Reimbursement for annual country club dues incurred by Executive during the Term;             (b)      Use of, and the payment of all reasonable expenses (including, without limitation, insurance, repairs, maintenance, fuel and oil) for, an automobile. The monthly lease payment or allowance for such automobile shall be consistent with the past practices for other executives at the Company;             (c)      Company provided split dollar life insurance with a face amount of no less than the amount currently carried by the Company with respect to Executive and in a form similar to that provided by the Company to Executive             (d)      Reasonable personal use of the Company-owned aircraft; provided, however, that Executive's personal use of the Company-owned aircraft shall not interfere with Company use of the Company-owned aircraft. The Company will reimburse and gross-up Executive for any and all income tax liability incurred by Executive in connection with his personal use of the Company-owned aircraft; and             (e)      Reimbursement from the Company during the Term for costs incurred by Executive for tax and estate planning advice from an entity recommended by the Company.             3.6      Compensation Plans and Programs. Executive shall be eligible to participate in any compensation plan or program maintained by the Company other than plans or programs related to (i) Company options; provided, however, that the limitation in this clause (i) shall not apply in any Company fiscal year beginning after October 1, 2004 and (ii) restricted stock; provided, however, that the limitation in this clause (ii) shall not apply in any Company fiscal year beginning after September 28, 2002 .             4.        Employee Benefits.             4.1      Employee Benefit Programs, Plans and Practices. The Company shall provide Executive during the Term with coverage under all employee pension and welfare benefit programs, plans and practices (commensurate with his position in the Company and to the extent permitted under any employee benefit plan) in accordance with the terms thereof, which the Company generally makes available to its senior executives. 315 --------------------------------------------------------------------------------               4.2      Vacation and Fringe Benefits. Executive shall be entitled to no less than twenty (20) business days paid vacation in each calendar year (or such greater time as Company policy permits a person of his employment seniority), which shall be taken at such times as are consistent with Executive's responsibilities hereunder. In addition, Executive shall be entitled to the perquisites and other fringe benefits generally made available to senior executives of the Company, commensurate with his position with the Company.             5.        Expenses. Executive is authorized to incur reasonable expenses in carrying out his duties and responsibilities under this Agreement, including, without limitation, expenses for travel and similar items related to such duties and responsibilities. The Company will reimburse Executive for all such expenses upon presentation by Executive, from time to time, of accounts of such expenditures (appropriately itemized and approved consistent with the Company's policy).             6.        Termination of Employment.             6.1      Termination by the Company Not for Cause or by Executive for Good Reason.             (a)      The Company may terminate Executive's employment at any time for any reason. If Executive's employment is terminated prior to the Termination Date, as that date may be extended from time to time under the terms of Section 2 hereof, (i) by the Company (other than for Cause (as defined in Section 6.2(c) hereof) or by reason of Executive's death or Permanent Disability (as defined in Section 6.2(d) hereof)), or (ii) by the Executive for Good Reason (as defined in Section 6.1(c) hereof) prior to the Termination Date, Executive shall receive the following items and payments:             (i)      An amount (the "Termination Amount") in lieu of any bonus in respect of all or any portion of the fiscal year in which such termination occurs and any other cash compensation, which Termination Amount shall be payable in a single lump sum within thirty (30) days following the date of such termination. The Termination Amount shall consist of an amount equal to the sum of (x) three (3) times Executive's Base Salary for the fiscal year immediately preceding the year in which such termination occurs plus (y) three (3) times Executive's bonus for the fiscal year immediately preceding the year in which such termination occurs;             (ii)      Executive shall be entitled to receive a cash lump sum payment in respect of accrued but unused vacation days (the "Vacation Payment") and to Base Salary earned but not yet paid (the "Compensation Payment");             (iii)      Any then unvested restricted stock and/or time-vesting stock option awards previously granted to Executive by the Company, including, without limitation, those grants set forth in Sections 3.3 and 3.4 hereof, shall become immediately one-hundred percent vested.  316 > -------------------------------------------------------------------------------- Any portion of a time-vesting stock option award accelerated pursuant to this Section 6.1(a) shall be exercisable pursuant to the terms of the stock option plan and the stock option award agreement applicable to such award; and             (iv)      Any other benefits due to Executive pursuant to the terms of any employee benefit plan or policy maintained generally for employees or a group of management employees.             (b)      The Vacation Payment and the Compensation Payment shall be paid by the Company to Executive within 30 days after the termination of Executive's employment by check payable to the order of Executive or by wire transfer to an account specified by Executive.             (c)      For purposes of this Agreement, "Good Reason" shall mean any of the following (without Executive's express prior written consent):             (i)      Any material breach by the Company of this Agreement, including any material reduction by the Company of Executive's, title, duties or responsibilities (except in connection with the termination of Executive's employment for Cause, as a result of Permanent Disability, as a result of Executive's death or by Executive other than for Good Reason); or            (ii)      A reduction by the Company in Executive's Base Salary, other than a reduction which is part of a general salary reduction program affecting senior executives of the Company generally; or             (iii)      Any change by the Company of the Executive's place of employment to a location more than fifty (50) miles from the Company's headquarters.             6.2      Discharge for Cause; Voluntary Termination by Executive; Termination Because of Death or Permanent Disability.             (a)      The Company shall have the right to terminate the employment of Executive for Cause. In the event that Executive's employment is terminated prior to the Termination Date (i) by the Company for Cause, or (ii) by Executive other than (A) for Good Reason or (B) as a result of the Executive's Permanent Disability or death, Executive shall only be entitled to receive the Compensation Payment and the Vacation Payment. Executive shall not be entitled, among other things, to the payment of any bonus in respect of all or any portion of the fiscal year in which such termination occurs, but shall be entitled to the payment of any unpaid bonus earned with respect to any prior fiscal year. After the termination of Executive's employment  317 -------------------------------------------------------------------------------- under this Section 6.2, the obligations of the Company under this Agreement to make any further payments, or provide any benefits specified herein, to Executive shall thereupon cease and terminate.             (b)      If Executive's employment is terminated as a result of Executive's Permanent Disability or death:             (i)      Executive shall be entitled to receive the annual bonus described in Section 3.2 hereof prorated to the date of Executive's Permanent Disability or death;             (ii)      Any then unvested restricted stock and/or time-vesting stock option awards previously granted to Executive by the Company, including, without limitation, those grants set forth in Sections 3.3 and 3.4 hereof, shall become immediately one-hundred percent vested; provided, however that in the event of Executive's death future option awards shall;             (iii)      The Executive shall receive any other benefits due to Executive pursuant to the terms of any employee benefit plan or policy maintained generally for employees or a group of management employees; and             (iv)      In addition to any other payment to be made hereunder in the event of Executive's death, (A) Executive's designee(s), which shall be determined pursuant to an executed Designation of Beneficiary form attached hereto as Exhibit "A" and which may be made at any time and changed from time to time by Executive, shall for twenty (20) years after the date of Executive's death receive an annual payment equal to thirty three and one third percent (33-1/3%) of Executive's Base Salary at the time of Executive's death, and (B) Executive's dependents at the time of his death shall be provided health insurance as generally available to Executive at the time of death.             (c)      As used herein, the term "Cause" shall be limited to (i) willful malfeasance, willful misconduct or gross negligence by Executive in connection with his employment, (ii) willful and continuing refusal by Executive to perform his duties hereunder or any lawful direction of the Company's Board of Directors (the "Board"), after notice of any such refusal to perform such duties or direction was given to Executive and Executive is provided a reasonable opportunity to cure such deficiency, (iii) any material breach of the provisions of Section 12 of this Agreement by Executive or any other material breach of this Agreement by Executive after notice of any such breach and an opportunity to cure such breach or (iv) the conviction of Executive of any (A) felony or (B) a misdemeanor involving moral turpitude. Termination of Executive pursuant to this Section 6.2 shall be made by delivery to Executive of a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the then members of the Board at a meeting of the  318 -------------------------------------------------------------------------------- Board called and held for the purpose (after 30 days prior written notice to Executive and reasonable opportunity for Executive to be heard before the Board prior to such vote), finding that in the reasonable judgment of the Board, Executive was guilty of conduct set forth in any of clauses (i) through (iv) above and specifying the particulars thereof.             (d)      For purposes of this Agreement "Permanent Disability" shall have the same meaning ascribed thereto in the Company's Long-Term Disability Benefit Plan applicable to senior executive officers as in effect on the date hereof.             7.        Mitigation of Damages. Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise after the termination of his employment hereunder, and any amounts earned by Executive, whether from self-employment, as a common-law employee or otherwise, shall not reduce the amount of any Termination Amount otherwise payable to him.             8.        Notices. All notices or communications hereunder shall be in writing, addressed as follows: To the Company: Tyson Foods, Inc. 2210 Oaklawn Drive Springdale, Arkansas 72762-6999 FAX: (501) 290-4028 Attn: General Counsel     To Executive: John Tyson P.O. Box 2020 Springdale, Arkansas 72765-2020 Any such notice or communication shall be delivered by hand or by courier or sent certified or registered mail, return receipt requested, postage prepaid, addressed as above (or to such other address as such party may designate in a notice duly delivered as described above), and the third business day after the actual date of mailing shall constitute the time at which notice was given.             9.       Separability; Legal Fees. If any provision of this Agreement shall be declared to be invalid or unenforceable, in whole or in part, such invalidity or unenforceability shall not affect the remaining provisions hereof which shall remain in full force and effect. Each party hereto shall be solely responsible for any and all legal fees incurred by him or it in connection with this Agreement, including the enforcement. In the event the Executive is required to bring any action to enforce rights or to collect monies due under this Agreement and is successful in such action, the Company shall reimburse the Executive for all of Executive's reasonable attorneys' fees and expenses in preparing, investigating and pursuing such action.             10.     Assignment. This Agreement shall be binding upon and inure to the benefit of the heirs and representatives of Executive and the assigns and successors of the Company, but neither this Agreement nor any rights or obligations hereunder shall be assignable or otherwise subject to hypothecation by Executive (except by will or by  319 > -------------------------------------------------------------------------------- operation of the laws of intestate succession) or by the Company, except that the Company may assign this Agreement to any successor (whether by merger, purchase or otherwise) to the stock, assets or business(es) of the Company.             11.     Amendment. This Agreement may only be amended by written agreement of the parties hereto.             12.     Nondisclosure of Confidential Information; Non-Competition; Non-Disparagement.             (a)      Executive shall not, without the prior written consent of the Company, use, divulge, disclose or make accessible to any other person, firm, partnership, corporation or other entity any Confidential Information (as defined below) pertaining to the business of the Company or any of its affiliates, except (i) while employed by the Company, in the business of and for the benefit of the Company, or (ii) when required to do so by a court of competent jurisdiction, by any governmental agency having supervisory authority over the business of the Company, or by any administrative body or legislative body (including a committee thereof) with jurisdiction to order Executive to divulge, disclose or make accessible such information. For purposes of this Section 12(a), "Confidential Information" shall mean non-public information concerning the financial data, strategic business plans, product development (or other proprietary product data), customer lists, marketing plans and other non-public, proprietary and confidential information of the Company or its affiliates (the "Restricted Group") or customers, that, in any case, is not otherwise available to the public (other than by Executive's breach of the terms hereof).             (b)      During the Term and for one (1) year thereafter, Executive agrees that, without the prior written consent of the Company, (A) he will not, directly or indirectly, in the United States, participate in any Position (as defined below) in any business which is in direct competition with any business of the Restricted Group and (B) he shall not, on his own behalf or on behalf of any person, firm or company, directly or indirectly, solicit or offer employment to any person who has been employed by the Restricted Group at any time during the 12 months immediately preceding such solicitation, and (C) he shall not, on his own behalf or on behalf of any person, firm or company, solicit, call upon, or otherwise communicate in any way with any client, customer, prospective client or prospective customer of the Company or of any member of the Restricted Group for the purposes of causing or of attempting to cause any such person to purchase products sold or services rendered by the Company or by any member of the Restricted Group from any person other than the Company or any member of the Restricted Group. The term "Position" shall include, without limitation, a partner, director, holder of more than 5% of the outstanding voting shares, principal, executive, officer, manager or any employment or consulting position. It is acknowledged and agreed that  320 -------------------------------------------------------------------------------- the scope of the clause as set forth above is essential, because (i) a more restrictive definition of "Position" (e.g. limiting it to the "same" position with a competitor) will subject the Company to serious, irreparable harm by allowing competitors to describe positions in ways to evade the operation of this clause, and substantially restrict the protection sought by the Company, and (ii) by the allowing Executive to escape the application of this clause by accepting a position designated as a "lesser" or "different" position with a competitor, the Company is unable to restrict the Executive from providing valuable information to such competing company to the harm of the Company.             (c)      Executive agrees that he will not, directly or indirectly, individually or in concert with others, engage in any conduct or make any statement that is likely to have the effect of undermining or disparaging the reputation of the Company or any member of the Restricted Group, or their good will, products, or business opportunities, or that is likely to have the effect of undermining or disparaging the reputation of any officer, director, agent, representative or employee, past or present, of the Company or any member of the Restricted Group. Company agrees that it shall not, directly or indirectly, engage in any conduct or make any statement that is likely to have the effect of undermining or disparaging the reputation of Executive.             (d)      For purposes of this Section 12, a business shall be deemed to be in competition with the Restricted Group if it is principally involved in the purchase, sale or other dealing in any property or the rendering of any service purchased, sold, dealt in or rendered by the Restricted Group as a material part of the business of the Restricted Group within the same geographic area in which the Restricted Group effects such purchases, sales or dealings or renders such services. Nothing in this Section 12 shall be construed so as to preclude Executive from investing in any company pursuant to the provisions of Section 1.3 hereof.             (e)      Executive and the Company agree that this covenant not to compete is a reasonable covenant under the circumstances, and further agree that if in the opinion of any court of competent jurisdiction such restraint is not reasonable in any respect, such court shall have the right, power and authority to excise or modify such provision or provisions of this covenant as to the court shall appear not reasonable and to enforce the remainder of the covenant as so modified. Executive agrees that any breach of the covenants contained in this Section 12 would irreparably injure the Company. Accordingly, Executive agrees that the Company may, in addition to pursuing any other remedies it or they may have in law or in equity, cease making any payments otherwise required by this Agreement and obtain an injunction against Executive from any court having jurisdiction over the matter restraining any further violation of this Agreement by Executive.             13.      Beneficiaries; References. Executive shall be entitled to select (and change, to the extent permitted under any applicable law) a beneficiary or beneficiaries to receive any compensation or benefit payable hereunder following Executive's death, and may change such election, in either case by giving the Company written notice thereof. In  321 > --------------------------------------------------------------------------------  shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal representative. Any reference to the masculine gender in this Agreement shall include, where appropriate, the feminine.             14.      Survivorship. The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations. In particular, the provisions of Section 12 hereunder shall remain in effect as long as is necessary to give effect thereto.             15.      Governing Law. This Agreement shall be construed, interpreted and governed in accordance with the laws of Arkansas, without reference to rules relating to conflicts of law.             16.      Effect on Prior Agreements. This Agreement contains the entire understanding among the parties hereto and supersedes in all respects any prior or other agreement or understanding among the parties or any affiliate or predecessor of the Company and Executive with respect to Executive's employment, including but not limited to any severance arrangements. Under no circumstances shall Executive be entitled to any other severance payments or benefits of any kind, except for the payments and benefits described herein.             17.      Withholding. The Company shall be entitled to withhold from payment any amount of withholding required by law.             18.      Counterparts. This Agreement may be executed in two or more counterparts, each of which will be deemed an original. 322 > --------------------------------------------------------------------------------               IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. TYSON FOODS, INC.   By:      /s/ Steven Hankins Title:   Executive Vice President Chief Financial Officer             /s/ John Tyson           John Tyson   323 > --------------------------------------------------------------------------------   EXHIBIT "A" Designation of Beneficiary       I, John Tyson, party to that certain Employment Agreement with Tyson Foods, Inc. dated as of October 1, 2001, hereby the designate the following person or persons to receive the payments to be made pursuant to Section 6.2(b)(iv) of said Employment Agreement: Primary Beneficiary       ______________________________________________________________   Secondary Beneficiary       ______________________________________________________________       Further, this Designation of Beneficiary may be revoked at any time by (i) a writing to such effect or (ii) a subsequently executed Designation of Beneficiary.         IN WITNESS WHEREOF, the undersigned has executed this Designation of Beneficiary on this _______ day of ______________, 20____.                                             ____________________________________                                           John Tyson   ACKNOWLEDGMENT State of _________________ County of _______________       On this the __________ day of _______________________, 20___, before me, a notary public, personally appeared John Tyson, known to me or satisfactorily proven to be the person whose name was subscribed to the within instrument and acknowledged that he had executed the same for the purposes therein contained.       In witness whereof I hereunto set my hand and official seal.                                     ______________________________                                           Notary Public                         My Commission Expires:   324 > --------------------------------------------------------------------------------  

SCHEDULE A FORMATION ISSUANCES Founders Number of Shares of Common Stock BELL & HOWELL INFORMATION AND LEARNING COMPANY 10,366,667 INFONAUTICS, INC. 4,633,333 SERIES A PREFERRED STOCK Investors Number of Shares of Series A Preferred Stock TBG INFORMATION INVESTORS LLC 3,010,000 CORE LEARNING GROUP LLC 2,510,000 CORE LEARNING GROUP - BC, LLC 500,000 APA EXCELSIOR V, L.P.. 1,486,941 PATRICOF PRIVATE INVESTMENT CLUB II, L.P. 18,060 FRANK A. BONSAL, JR. 35,715 WS INVESTMENT COMPANY 99B 14,286 ALAN K. AUSTIN 14,286 THE SAN DOMENICO TRUST 3,286 TIMOTHY J. SPARKS 7,143 DANIEL K. YUEN 285   SERIES B PREFERRED STOCK Investors Number of Shares of Series B Preferred Stock (1) CORE LEARNING GROUP - BC, LLC 2,374,587 TBG INFORMATION INVESTORS LLC 924,092 APA EXCELSIOR V, L.P.. 978,218 PATRICOF PRIVATE INVESTMENT CLUB II, L.P. 11,881 BELL & HOWELL INFORMATION AND LEARNING COMPANY 4,950,495 SOFTBANK VENTURE, INC. 3,300,330 IGSB LSP I, LLC 825,083 FRANK A. BONSAL, JR. 21,730 OBERNDORF FAMILY PARTNERS, L.P. 825,082 COVINGTON & BURLING 8,251 THE COVINGTON FUND LLC 24,752 GERALD FRANKEL 50,000 HOWARD M. BLOCK 8,250 (1) Reflects the number of shares of Series B Preferred Stock to be issued at the conclusion of all closings of the Series B Financing. ADDITIONAL ISSUANCES NAME Number and Class of Shares Holders of the Company's Common Stock who have heretofore executed a joinder to the Original Agreement.(2)   (2) For purposes of Article III (Right of First Offer) of this agreement, this party shall not be deemed to be a "Founder" and shall not be deemed to be a party to said Article III.  

Exhibit 10.2 Option Agreement dated as of August 19, 2001 between eVision USA. Com. Inc. and eBanker USA. com, Inc. OPTION AGREEMENT This OPTION AGREEMENT, dated as of August 19, 2001, is entered into between eVision USA.Com, Inc. (eVision) and eBanker USA.com, Inc. (eBanker).         WHEREAS, eVision and Online Credit Limited (Online) have provided eBanker with two agreements, being this Option Agreement and an Option Hedge Agreement dated August 19, 2001 between Online and eBanker, respectively, which, when combined, offers eBanker the potential to raise up to $135,794.25 in risk-free and cost-free capital.         WHEREAS, eVision wishes to receive an option to purchase up to 20% of the current outstanding common shares of eBanker in the event that the Asset Purchase Agreement dated June 8, 2001 and Asset Purchase Agreement Extension dated June 26, 2001 between eVision and Online is approved.         NOW THEREFORE, eBanker agrees to issue eVision an option to purchase up to 543,177 new treasury shares of eBanker if eVision successfully sells its interest in eBanker to Online through the proposed asset sale (Option).         The Option will be exercisable at $4.07 per share on or before December 31, 2001, at $4.31 per share on or before December 31, 2002 and at $4.57 per share on or before December 31, 2003, and will expire on December 31, 2003. EBANKER USA.COM, INC. By: /s/ Robert H. Trapp            Robert H. Trapp Title: Secretary                  EVISION USA.COM, INC. By: /s/ Tony T.W. Chan      Title: Director                                Tony T.W. Chan

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.5 AMENDMENT NO. 4 TO REAL ESTATE PURCHASE AND SALE AGREEMENT     THIS AMENDMENT NO. 4 TO REAL ESTATE PURCHASE AND SALE AGREEMENT (this "Amendment") dated as of March 26, 2001, is made by and between Pope Resources, a Delaware limited partnership, its wholly owned subsidiary Olympic Property Group LLC, a Washington limited liability company, and its wholly owned subsidiaries Olympic Real Estate Development LLC, a Washington limited liability company, Olympic Real Estate Management, Inc., a Washington corporation, and Olympic Resorts LLC, a Washington limited liability company (collectively "Seller"), and HCV Pacific Partners LLC, a California limited liability company (or its assigns as permitted herein) ("Buyer"), regarding that certain Real Estate Purchase and Sale Agreement dated January 12, 2001, between Buyer and Seller, as amended by Amendment No. 1 dated February 8,2001, Amendment No. 2 dated February 14, 2001, and Amendment No. 3 dated February 27, 2001 (as amended, the "Agreement"), for the purchase and sale of certain property located in Jefferson and Pierce Counties, Washington, described therein (the "Property").     I.  EFFECT OF AMENDMENT.  This Amendment amends and modifies the Agreement. In the event of any conflict between the Agreement and this Amendment, this Amendment shall control. Except as contained within the Agreement and this Amendment, there are no other agreements or understandings between Buyer and Seller relating to the Property. Capitalized terms not otherwise defined herein shall have the meanings given them under the Agreement.     II.  INSPECTION PERIOD.  Section 4.1 of the Agreement is amended to provide as follows: The period beginning on January 12, 2001, and ending on April 2, 2001, shall be the "Inspection Period."     III.  CONDITIONS PRECEDENT TO CLOSING.  All conditions precedent to Buyer's obligation to complete the purchase of the Property under the Agreement (including without limitation those described at Sections 3.1, 5.2, 5.6, 5.8, and 5.10 of the Agreement) except those described at Sections 5.1, 5.3, 5.4, 5.5, 5.7, 5.9, and 5.11 of the Agreement, shall be deemed satisfied or waived by Buyer unless Buyer shall deliver to Seller written notice otherwise on or before April 2, 2001.     IV.  SCHEDULES.  Section 16.9 of the Agreement is amended to provide as follows: The parties acknowledge and agree that, as of the date this Agreement has been executed, some schedules and exhibits have not been completed and agreed upon and the parties have also not agreed upon a final allocation of the Purchase Price among the Real Property, the Personal Property, and the Olympic Water and Sewer, Inc. stock. The parties agree to review and negotiate such matters diligently and in good faith, and upon completion and mutual approval of all such schedules, exhibits and other matters, they shall promptly execute an amendment to this Agreement memorializing such agreements. If all schedules hereto are not approved by the parties in an amendment to this Agreement mutually executed and delivered on or before April 2, 2001, then this Agreement shall terminate, the Earnest Money shall be returned to Buyer, and the parties shall have no further obligations hereunder except under those provisions intended to survive the termination of this Agreement.     V.  OWSI STOCK PURCHASE AGREEMENT.  The obligations of Buyer and Seller under the Agreement are expressly conditioned on, and subject to satisfaction of, the following condition precedent: on or before April 2, 2001, Buyer as buyer and Olympic Property Group LLC as seller shall have mutually executed and delivered a Stock Purchase Agreement relating to the stock of Olympic Water and Sewer, Inc. --------------------------------------------------------------------------------     Except as expressly amended by this Amendment, the Agreement is hereby ratified and confirmed and shall remain in full force and effect. BUYER:   HCV PACIFIC PARTNERS LLC, a California limited liability company     By:   /s/ RANDALL J. VERRUE    --------------------------------------------------------------------------------     Print Name:   Randall J. Verrue --------------------------------------------------------------------------------     Its:   President & CEO --------------------------------------------------------------------------------     Date:   3/26/01 -------------------------------------------------------------------------------- SELLER:   POPE RESOURCES L.P., a Delaware limited partnership, by POPE MGP, Inc., a Delaware corporation, its managing general partner     By:   /s/ GREGORY M. MCCARRY    --------------------------------------------------------------------------------     Print Name:   Gregory M. McCarry --------------------------------------------------------------------------------     Its:   V.P. Real Estate --------------------------------------------------------------------------------     Date:   3/26/01 -------------------------------------------------------------------------------- 2 --------------------------------------------------------------------------------     OLYMPIC PROPERTY GROUP LLC, a Washington limited liability company     By:   /s/ GREGORY M. MCCARRY    --------------------------------------------------------------------------------     Print Name:   Gregory M. McCarry --------------------------------------------------------------------------------     Its:   C.O.O. --------------------------------------------------------------------------------     Date:   3/26/01 --------------------------------------------------------------------------------     OLYMPIC REAL ESTATE DEVELOPMENT LLC, a Washington limited liability company     By:   /s/ GREGORY M. MCCARRY    --------------------------------------------------------------------------------     Print Name:   Gregory M. McCarry --------------------------------------------------------------------------------     Its:   C.O.O. --------------------------------------------------------------------------------     Date:   3/26/01 --------------------------------------------------------------------------------     OLYMPIC REAL ESTATE MANAGEMENT, INC., a Washington corporation     By:   /s/ TOM GRIFFIN    --------------------------------------------------------------------------------     Print Name:   Tom Griffin --------------------------------------------------------------------------------     Its:   Vice President --------------------------------------------------------------------------------     Date:   3/26/01 --------------------------------------------------------------------------------     OLYMPIC RESORTS LLC, a Washington limited liability company     By:   /s/ GREGORY M. MCCARRY    --------------------------------------------------------------------------------     Print Name:   Gregory M. McCarry --------------------------------------------------------------------------------     Its:   C.O.O. --------------------------------------------------------------------------------     Date:   3/26/01 -------------------------------------------------------------------------------- 3 -------------------------------------------------------------------------------- QuickLinks Exhibit 10.5 AMENDMENT NO. 4 TO REAL ESTATE PURCHASE AND SALE AGREEMENT

EXHIBIT 10 (d) THE INTERPUBLIC GROUP OF COMPANIES, INC. 1997 PERFORMANCE INCENTIVE PLAN ("the Plan") 1997 PLAN OPTION CERTIFICATE THIS DOCUMENT IS IMPORTANT AND SHOULD BE KEPT IN A SAFE PLACE THIS IS TO CERTIFY that, on the date shown below, an Option was granted, subject to the Rules of the above-mentioned Plan, to the under-mentioned to subscribe at the Exercise Price stated below the number of shares of Common Stock of The Interpublic Group of Companies, Inc. specified below. Grantee:  Name J. Brendan Ryan     Date of Grant: August 23, 2001     Number of shares of Common Stock Subject to the Option: 100,000     Exercise Price per share:  $27.525       Option Expiration Date:  August 23, 2011   The Option may not be exercised in any part for a period of three years from the date of granting hereof. Thereafter the Option shall be exercisable in three annual installments. The first installment shall be for 40% of the number of shares covered by the Option. Each succeeding installment shall be for 30% of the number of shares covered by the Option. The first installment may be exercised on or after the third anniversary date hereof, and each of the two additional installments may be exercised on or after each successive anniversary date. To the extent that any installment hereof has become exercisable, it may be exercised at any time prior to the expiration of the Option as provided in the attached Exhibit A. IN WITNESS WHEREOF this Certificate was duly executed this 23rd day of August, 2001 by THE INTERPUBLIC GROUP OF COMPANIES, INC. by the affixing of its common seal in the presence of : - Senior Vice President   /s/ C. KENT KROEBER                    C. KENT KROEBER             Secretary   /s/ NICHOLAS J. CAMERA                    NICHOLAS J. CAMERA Grantee:    J. BRENDAN RYAN                              J. BRENDAN RYAN                              (Signature) (5/19/97) THE INTERPUBLIC GROUP OF COMPANIES, INC. 1997 Performance Incentive Plan EXHIBIT A                          OPTION CERTIFICATE between The Interpublic Group of Companies, Inc. (hereinafter called the "Corporation"), and the individual whose name appears on the document to which this Option Certificate is attached (hereinafter called the "Cover Document"), such individual being an employee of the Corporation or one or more of its subsidiaries (hereinafter called the "Grantee");                          PURSUANT TO and under all the terms and conditions of THE INTERPBULIC GROUP OF COMPANIES, INC. 1997 PERFORMANCE INCENTIVE PLAN (hereinafter called "the Plan"), the Corporation offers the Grantee an opportunity to purchase shares of the Common Stock of the Corporation on the following terms and conditions:                          1.  The Corporation hereby irrevocably grants to the Grantee the right and option (hereinafter called the "Option") to purchase from the Corporation an aggregate of that number of shares of the Common Stock of the Corporation shown on the Cover Document in accordance with all the terms and conditions of the Plan and this Agreement.                          2.  The purchase price of said shares is shown in the Cover Document. All issue and transfer taxes upon the sale of shares pursuant to the exercise of all or any part of the Option and all fees and expenses incident thereto shall be paid by the Corporation.                          3.  The term of the Option shall be for a period of ten years from the date as of which the Option is granted, subject to earlier termination as provided herein.                          4.  Except as provided in paragraphs 5 and 9, the Option may not be exercised until the date on the Cover Document.                          5.  In the event of a change of control of the Corporation, as defined in Article III(c) of the Plan, the Option may be exercised for all of the shares covered by the Option (except to the extent already exercised), notwithstanding the installment provisions set forth in the Cover Document.                          6.  An installment of the Option when exercisable may be exercised at one time or from time to time except that such partial exercise of the installment shall be for 50 shares or a multiple thereof, or for all the remaining shares thereunder, whichever is the lesser. (1997 Performance Incentive Plan)                          7.  The purchase price of the shares as to which the Option shall be exercised shall be paid in full in cash, or (as permitted by the Corporation) with the use of corporate stock at the time of the exercise. If payment is made by check or draft, such check or draft must be drawn on a bank located in the United States of America.                          8.  This Option is not transferable otherwise than by will or by the laws of descent and distribution. During the lifetime of the Grantee, this Option may be exercised only by the Grantee.                          9.  The following provisions shall govern the vesting of stock options where the Grantee terminates employment before fully vesting in the award:                          (A)  If a Grantee terminates employment by reason of disability or death, the Grantee shall vest, upon such termination, in a pro rata fraction of the unvested portion of the award, determined by multiplying (a) the ratio of (i) the number of months the Grantee was employed from the date of grant to the date of termination to (ii) the total number of months from the date of grant to the date on which the Grantee would have been fully vested in the award by (b) the total number of unvested shares covered by the award.   (i) If the Grantee's cessation of employment is due to disability, he may, at any time within three years after such cessation of employment, exercise the Option as set forth above.       (ii) If the Grantee dies while in the employment of the Corporation (or within three years after having ceased to be employed by the Corporation owing to his or her disability) and without having fully exercised the Option, the executors or administrators or legatees or distributees of his estate shall have the right, during the one-year period following his death, to exercise the Option in the manner described above.                          (B)  Except as provided in paragraph (C) below, if the employee's employment is involuntarily terminated by the Company other than for cause at least one year after the date of grant, the employee shall vest, upon such termination, in a pro rata fraction of the unvested portion of the award, determined by multiplying (a) the ratio of (i) the number of months the employee was employed from the date of grant to the date of termination to (ii) the total number of months from the date of grant to the next date on which the employee would have become vested in an additional portion of the award by (b) the number of unvested shares that were scheduled to become vested on such date.                          (C)  If an employee continues in employment following receipt of a Notice of Termination of Employment or continues to be classified as an employee (as an Employee Consultant or otherwise) during a period of reduced work responsibilities or during a period specified by a negotiated settlement with the employee, the Grantee shall continue to vest during such period in accordance with the vesting schedule that applies to the award. If a Grantee, who was at least age 50 with at least 5 but less than 20 years of service on the date of a stock option grant, voluntarily retires at least one year after the date of grant, the Grantee shall vest in a pro rata fraction of the unvested portion of the option determined by multiplying (a) the ratio of (i) the number of months the Grantee was employed from the date of grant to the date of retirement to (ii) the total number of months from the date of grant to the next date on which the Grantee would have become vested in an additional portion of the option by (b) the portion of the option that was scheduled to become vested on such date; provided that the ratio in clause (a), above, shall not be less than 50%.                          (E)  If a Grantee, who was at least age 50 with at least 20 years of service on the date an option is granted, voluntarily retires or becomes disabled, the Grantee shall be 100% vested in the option so long as at least one year has passed since the date of grant. In the event of the Grantee's death, the executors or administrators or legatees or distributees of his estate shall have the right, during the one-year period following his death, to exercise the Option in the manner described above. 22 If the Grantee's employment is terminated for any reason other than those identified in the preceding paragraphs (such as a termination for cause), the unvested portion of the award shall be immediately forfeited. To the extent such Option is vested in accordance with the terms of the Option and the Plan, the Grantee (or, following the Grantee's death, the Grantee's beneficiary or personal representative) may exercise any Option held by the Grantee at the time of such termination, for a period of three months following such termination. In no event shall an Option be exercisable more than ten years from the date it was granted.                          10.  The Grantee shall not have voting or dividend rights or any other rights of a stockholder in respect to any shares of Common Stock covered by this Option prior to the time that his name is recorded on the stockholder ledger of the Corporation as the holder of record of such shares acquired pursuant to an exercise of the Option.                          11.  Subject to the terms and conditions of the Plan and of this Agreement, any exercise of this Option shall be by written notice delivered to the President or the Secretary of the Corporation, at its principal office, which is now located at 1271 Avenue of the Americas, Rockefeller Center, New York, New York 10020. Such written notice shall state the election to exercise the Option and the number of shares in respect of which it is being exercised and shall be signed by the person or persons so exercising the Option. Such notice shall be accompanied by payment of the full purchase price of said shares, whereupon the Corporation shall deliver a certificate or certificates representing said shares as soon as practicable. Unless there has been an effective registration of the securities offered under the Plan pursuant to the Securities Act of 1933, upon exercise of the Option the Grantee shall also furnish a statement in writing that the shares are being acquired for investment purposes and not with a view to their sale or distribution, as required by the Plan.                          12.  This option shall not be treated as an incentive stock option for purposes of Section 422 of the Internal Revenue Code of 1986, as amended from time to time or any successor provision.                          13.  All words and phrases used herein shall have the same meaning as in the Plan, and all provisions, terms and conditions of the Plan not herein specifically set forth are incorporated herein by reference. (7/1/00)

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.32 REGISTRATION RIGHTS AGREEMENT     This Registration Rights Agreement (the "Agreement") is entered into as of May 25, 2001 by and between Tetra Tech, Inc., a Delaware corporation ("Tetra Tech"), and MaxTech Holdings, Inc., a Delaware corporation (the "Holder"). R E C I T A L S     A.  Tetra Tech and the Holder are parties to the Stock Purchase Agreement of even date (the "Stock Purchase Agreement"), pursuant to which Tetra Tech will purchase all of the outstanding shares of capital stock of Maxim Technologies, Inc., a Delaware corporation (the "Company").     B.  Pursuant to the Stock Purchase Agreement, the Holder will receive 237,596 shares of the common stock, $.01 par value, of Tetra Tech ("Tetra Tech Common Stock"); and     C.  This Agreement is the Registration Rights Agreement referred to in Section 6.2 of the Stock Purchase Agreement and, pursuant thereto, must be entered into by the parties in connection with the consummation of the transactions contemplated by the Stock Purchase Agreement. A G R E E M E N T     NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:     1.  Certain Definitions.  As used in this Agreement, the following terms shall have the following respective meanings:     "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time.     "Form S-3" shall mean such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by Tetra Tech with the SEC.     "Prospectus" shall mean the prospectus included in any Registration Statement, as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference in such Prospectus.     "Register", "registered" and "registration" shall mean and refer to a registration effected by preparing and filing a Registration Statement and taking all other actions that are necessary or appropriate in connection therewith, and the declaration or ordering of effectiveness of such Registration Statement by the SEC.     "Registration Expenses" shall have the meaning set forth in Section 4.     "Registrable Securities" shall mean the shares of Tetra Tech Common Stock (i) issued pursuant to the Stock Purchase Agreement (whether at the Closing or thereafter), and (ii) issued as a dividend or other distribution with respect to or in exchange for or in replacement of the shares referenced in (i) above; provided, however, that Registrable Securities shall not include any shares of Tetra Tech Common Stock that have previously been registered and sold to the public or have been sold pursuant to Rule 144 (or similar successor rule) after the date of this Agreement.     "Registration Statement" shall mean any registration statement of Tetra Tech in compliance with the Securities Act that covers Registrable Securities pursuant to the provisions of this Agreement, including, without limitation, the Prospectus, all amendments and supplements to such Registration -------------------------------------------------------------------------------- Statement, including all post-effective amendments, all exhibits and all material incorporated by reference in such Registration Statement.     "Rule 144" shall mean Rule 144 promulgated under the Securities Act or any similar successor rule, as the same shall be in effect from time to time.     "Rule 144A" shall mean Rule 144A promulgated under the Securities Act or any similar successor rule, as the same shall be in effect from time to time.     "Rule 415" shall mean Rule 415 promulgated under the Securities Act, or any similar successor rule, as the same shall be in effect from time to time.     "Securities Act" shall mean the Securities Act of 1933, as amended from time to time.     "SEC" shall mean the Securities and Exchange Commission.     "Underwritten offering" shall mean a registration in which securities of Tetra Tech are sold to an underwriter or through an underwriter as agent for reoffering to the public.     2.  Registration for Holder.       (a) Tetra Tech shall file a Registration Statement on Form S-3 providing for the registered sale by the Holder, pursuant to Rule 415, and/or any similar rule that may be adopted by the SEC, of the Registrable Securities from time to time during the effectiveness of the registration. Tetra Tech shall file such Registration Statement on May 29, 2001, and shall keep such Registration Statement continuously effective and updated for a period ending on the date on which the Holder is eligible to sell Registrable Securities under Rule 144 (or similar successor rule) without any volume limitation. Tetra Tech represents and warrants that it is currently eligible to file a Registration Statement on Form S-3.     (b) The Holder shall not have the right to register securities under this Agreement unless the Holder provides and/or confirms in writing prior to or after the filing of the Registration Statement such information (including, without limitation, information as to the number of Registrable Securities that the Holder has sold pursuant to any such Registration Statement from time to time) as Tetra Tech reasonably requests in connection with such Registration Statement.     3.  Registration Procedures.  In connection with Tetra Tech's registration obligations pursuant to Section 2 hereof, Tetra Tech will use reasonable best efforts to effect such registration to permit the sale of the Registrable Securities covered thereby in accordance with the Holder's intended method or methods of disposition thereof (which shall include, without limitation, cash sales in market or other transactions), and pursuant thereto Tetra Tech will:     (a) prepare and file with the SEC a Registration Statement with respect to such Registrable Securities and use its reasonable best efforts to cause such Registration Statement to become effective as soon as practicable; provided that, before filing any Registration Statement or Prospectus or any amendments or supplements thereto, Tetra Tech will furnish to the Holder and its counsel, copies of all such documents proposed to be filed at least ten days prior thereto, and Tetra Tech will not file any such Registration Statement or amendment thereto or any Prospectus or any supplement thereto to which the Holder shall reasonably object within such ten day period; provided, further, that Tetra Tech will not name or otherwise provide any information with respect to the Holder in any Registration Statement or Prospectus without the express written consent of the Holder, unless required to do so by the Securities Act and the rules and regulations thereunder;     (b) prepare and file with the SEC such amendments, post-effective amendments and supplements to the Registration Statement and the Prospectus as may be necessary to comply with the provisions of the Securities Act and the rules and regulations thereunder with respect to the disposition of all securities covered by such Registration Statement; 2 --------------------------------------------------------------------------------     (c) notify the Holder (i) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to the Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the SEC for amendments or supplements to the Registration Statement or the Prospectus or for additional information, (iii) of the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose, (iv) of the receipt by Tetra Tech of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose and (v) of the happening of any event which makes any statement made in the Registration Statement, the Prospectus or any document incorporated therein by reference untrue or which requires the making of any changes in the Registration Statement, the Prospectus or any document incorporated therein by reference in order to make the statements therein not misleading in light of the circumstances then existing;     (d) use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of the Registration Statement at the earliest possible moment;     (e) deliver to the Holder, without charge, such reasonable number of conformed copies of the Registration Statement (and any post-effective amendment thereto) and such number of copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto (and any documents incorporated by reference therein) as the Holder may reasonably request. Tetra Tech consents to the use of the Prospectus or any amendment or supplement thereto by the Holder in connection with the offer and sale of the Registrable Securities covered by the Prospectus or any amendment or supplement thereto;     (f)  prior to any offering of Registrable Securities covered by a Registration Statement, register or qualify or cooperate with the Holder in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or blue sky laws of such jurisdictions as the Holder reasonably requests, and use reasonable best efforts to keep each such registration or qualification effective, including through new filings, or amendments or renewals, during the period such Registration Statement is required to be kept effective pursuant to the terms of this Agreement; and do any and all other acts or things necessary or advisable to enable the disposition in all such jurisdictions reasonably requested by the Holder of the Registrable Securities covered by such Registration Statement, provided that under no circumstances shall Tetra Tech be required in connection therewith or as a condition thereof to qualify to do business or to file a general consent to service of process in any such states or jurisdictions;     (g) cooperate with the Holder to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold, free of any and all restrictive legends, such certificates to be in such denominations and registered in such names as the Holder may request;     (h) upon the occurrence of any event contemplated by Section 3(c)(v) above, prepare a supplement or post-effective amendment to the Registration Statement or the Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;     (i)  make generally available to the holders of Tetra Tech's outstanding securities earnings statements satisfying the provisions of Section 11(a) of the Securities Act, no later than 60 days after the end of any 12 month period (or 90 days, if such period is a fiscal year) beginning with the first month of Tetra Tech's first fiscal quarter commencing after the effective date of the Registration Statement, which statements shall cover said 12 month period; 3 --------------------------------------------------------------------------------     (j)  provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by each Registration Statement from and after a date not later than the effective date of such Registration Statement;     (k) use its best efforts to cause all Registrable Securities covered by each Registration Statement to be listed, subject to notice of issuance, prior to the date of the first sale of such Registrable Securities pursuant to such Registration Statement, on each securities exchange on which the Tetra Tech Common Stock is then listed, and admitted to trading on the Nasdaq Stock Market, if the Tetra Tech Common Stock is then admitted to trading on the Nasdaq Stock Market;     (l)  enter into such agreements (including underwriting agreements in customary form containing, among other things, reasonable and customary indemnities) and take such other actions as the Holder shall reasonably request in order to expedite or facilitate the disposition of such Registrable Securities; and     (m) cooperate with the Holder and the managing underwriter or underwriters in their marketing efforts with respect to the sale of the Registrable Securities, including participation by Tetra Tech management in "road show" presentations.     The Holder agrees that, upon receipt of any notice from Tetra Tech of the happening of any event of the kind described in Section 3(c)(v) hereof, the Holder will forthwith discontinue disposition of Registrable Securities under the Prospectus related to the applicable Registration Statement until the Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(h) hereof, or until it is advised in writing by Tetra Tech that the use of the Prospectus may be resumed.     It shall be a condition precedent to the obligations of Tetra Tech to take any action pursuant to this Section 3 with respect to the Registrable Securities of the Holder that the Holder shall furnish to Tetra Tech upon request such information regarding itself and the Registrable Securities held by it as shall be required by the Securities Act to effect the registration of the Holder's Registrable Securities.     4.  Registration Expenses.  All expenses incident to any registration to be effected hereunder and incident to Tetra Tech's performance of or compliance with this Agreement, including without limitation all registration and filing fees, fees and expenses of compliance with securities or blue sky laws, printing expenses, messenger and delivery expenses, National Association of Securities Dealers, Inc., stock exchange and qualification fees, fees and disbursements of Tetra Tech's counsel and of independent certified public accountants of Tetra Tech (including the expenses of any special audit required by or incident to such performance), the fees and disbursements of one counsel and one accountant representing the Holder in such offering, expenses of the underwriters that are customarily requested in similar circumstances by such underwriters (excluding discounts, commissions or fees of underwriters, selling brokers, dealer managers or similar securities industry professionals relating to the distribution of the Registrable Securities, which will be borne by the Holder), all such expenses being herein called "Registration Expenses," will be borne by Tetra Tech. Tetra Tech will also pay its internal expenses, the expense of any annual audit and the fees and expenses of any person retained by Tetra Tech.     5.  Indemnification.       (a)  Indemnification by Tetra Tech.  Tetra Tech agrees to indemnify and hold harmless the Holder, its officers, directors, partners and employees and each person who controls the Holder (within the meaning of Section 15 of the Securities Act) from and against any and all losses, claims, damages and liabilities (including any investigation, legal or other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted) (collectively, "Damages") to which the Holder may become subject under the Securities Act, the Exchange Act or other federal or state securities law or regulation, at common law or otherwise, insofar as such Damages arise out of or are based upon (i) any untrue statement or alleged untrue 4 -------------------------------------------------------------------------------- statement of a material fact contained in any Registration Statement, Prospectus or preliminary prospectus or any amendment or supplement thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or (iii) any violation or alleged violation by Tetra Tech of the Securities Act, the Exchange Act or any state securities or blue sky laws in connection with the Registration Statement, Prospectus or preliminary prospectus or any amendment or supplement thereto, provided that Tetra Tech will not be liable to the Holder to the extent that such Damages arise from or are based upon any untrue statement or omission (x) based upon written information furnished to Tetra Tech by the Holder expressly for the inclusion in such Registration Statement, (y) made in any preliminary prospectus if the Holder failed to deliver a copy of the Prospectus with or prior to the delivery of written confirmation of the sale by the Holder to the party asserting the claim underlying such Damages and such Prospectus would have corrected such untrue statement or omission and (z) made in any Prospectus if such untrue statement or omission was corrected in an amendment or supplement to such Prospectus which was delivered to the Holder prior to the Holder's sale and the Holder failed to deliver such amendment or supplement prior to or concurrently with the sale of Registrable Securities to the party asserting the claim underlying such Damages.     (b)  Indemnification by Holder of Registrable Securities.  The Holder agrees to indemnify and hold harmless Tetra Tech, its directors and each officer who signed such Registration Statement and each person who controls Tetra Tech (within the meaning of Section 15 of the Securities Act), under the same circumstances as the foregoing indemnity from Tetra Tech to the Holder but only if and to the extent that such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement of a material fact or omission of a material fact that was made in the Prospectus, the Registration Statement, or any amendment or supplement thereto, in reliance upon and in conformity with information relating to the Holder furnished in writing to Tetra Tech by the Holder expressly for use therein, provided that in no event shall the aggregate liability of the Holder exceed the amount of the net proceeds received by the Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. Tetra Tech and the Holder shall be entitled to receive indemnities from underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, to the same extent as customarily furnished by such persons in similar circumstances.     (c)  Conduct of Indemnification Proceedings.  Any person entitled to indemnification hereunder will (i) give prompt notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided, however, that any person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such person and not of the indemnifying party unless (A) the indemnifying party has agreed to pay such fees or expenses, (B) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such person or (C) in the reasonable judgment of such person and the indemnifying party, based upon advice of their respective counsel, a conflict of interest may exist between such person and the indemnifying party with respect to such claims (in which case, if the person notifies the indemnifying party in writing that such person elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such person). If such defense is not assumed by the indemnifying party, the indemnifying party will not be subject to any liability for any settlement made without its consent (but such consent will not be unreasonably withheld). No indemnified party will be required to consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by all claimants or plaintiffs to such indemnified party of a release from all liability in respect to such claim or litigation. Any indemnifying party who is not 5 -------------------------------------------------------------------------------- entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim. As used in this Section 5(c), the terms "indemnifying party", "indemnified party" and other terms of similar import are intended to include only Tetra Tech (and its officers, directors and control persons as set forth above) on the one hand, and the Holder (and its officers, directors, partners, employees, attorneys and control persons as set forth above) on the other hand, as applicable.     (d)  Contribution.  If for any reason the foregoing indemnity is unavailable under applicable law, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such losses, claims, damages, liabilities or expenses (i) in such proportion as is appropriate to reflect the relative fault of the indemnifying party and the indemnified party in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified party shall be determined by reference to, among other things, whether the untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such indemnifying party or by such indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties acknowledge and agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in this Section 5(d). Notwithstanding the foregoing, the Holder shall not be required to contribute any amount in excess of the amount the Holder would have been required to pay to an indemnified party if the indemnity under Section 5(b) hereof was available. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation joint.     (e)  Timing of Payments.  An indemnifying party shall make payments of all amounts required to be made pursuant to the foregoing provisions of this Section 5 to or for the account of the indemnified party from time to time promptly upon receipt of bills or invoices relating thereto or when otherwise due or payable.     (f)  Survival.  The indemnity and contribution agreements contained in this Section 5 shall remain in full force and effect, regardless of any investigation made by or on behalf of Tetra Tech, the Holder, its officers, directors, partners, attorneys, agents or any person, if any, who controls Tetra Tech or the Holder as aforesaid, and shall survive the transfer of such Registrable Securities by the Holder.     6.  Preparation; Reasonable Investigation.  In connection with the preparation and filing of a Registration Statement pursuant to the terms of this Agreement:     (a) Tetra Tech shall, with respect to a Registration Statement filed pursuant to Section 2, give the Holder, its underwriters, if any, and their respective counsel and accountants the opportunity to participate in the preparation of such Registration Statement (other than reports and proxy statements incorporated therein by reference and properly filed with the SEC) and each Prospectus included therein or filed with the SEC, and each amendment thereof or supplement thereto; and     (b) Tetra Tech shall give the Holder, its underwriters, if any, and their respective counsel and accountants such reasonable access to its books and records and such opportunities to discuss the business of Tetra Tech with its officers and the independent public accountants who have certified its financial statements as shall be necessary, in the opinion of the Holder or such underwriters, to conduct a reasonable investigation within the meaning of Section 11(b)(3) of the Securities Act.     7.  Rule 144.  Tetra Tech covenants that it will use commercially reasonable efforts to file, on a timely basis, the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder, and it will take such further action as the 6 -------------------------------------------------------------------------------- Holder may reasonably request (including, without limitation, compliance with the current public information requirements of Rule 144(c) and Rule 144A), all to the extent required from time to time to enable the Holder to sell Registrable Securities without registration under the Securities Act within the limitation of the conditions provided by Rule 144, Rule 144A or any similar rule or regulation hereafter adopted by the SEC. Upon the request of the Holder, Tetra Tech will promptly deliver to the Holder a written statement verifying that it has complied with such information and requirements.     8.  Specific Performance.  The Holder, in addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. Tetra Tech agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.     9.  Notices.  All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by United States first-class mail, postage prepaid, sent by facsimile or delivered personally by hand or nationally recognized courier addressed (a) if to the Holder, at such address for the Holder set forth in the Stock Purchase Agreement, or at such other address as the Holder or permitted assignee shall have furnished to Tetra Tech in writing, or (b) if to Tetra Tech, at such address for Tetra Tech set forth in the Stock Purchase Agreement. All such notices and other written communications shall be effective on the date of mailing, facsimile transfer or delivery.     10.  Successors and Assigns: Assignment of Rights.  The rights and benefits of the Holder hereunder may not be assigned to a transferee or assignee without the consent of Tetra Tech.     11.  Severability.  In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby.     12.  Entire Agreement; Amendment; Waiver.  This Agreement, the Stock Purchase Agreement and the other agreements contemplated thereby constitute the full and entire understanding and agreement among the parties with regard to the subjects hereof and thereof. Without limiting the foregoing, the rights of the Holder to registration pursuant to the terms of this Agreement shall be subject to the limitations on resale contained in the Investment Letter (as defined in the Stock Purchase Agreement). Neither this Agreement nor any term hereof may be amended, waived, discharged or terminated, except by a written instrument signed by Tetra Tech and the Holder and any such amendment, waiver, discharge or termination shall be binding upon all the parties hereto, but in no event shall the obligation of any party hereto be materially increased, except upon the written consent of such party.     13.  Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be original, and all of which together shall constitute one instrument.     14.  Governing Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware without giving effect to principles of conflicts of laws thereof.     15.  No Third Party Beneficiaries.  The covenants and agreements set forth herein are for the sole and exclusive benefit of the parties hereto and their respective successors and assigns and such covenants and agreements shall not be construed as conferring, and are not intended to confer, any rights or benefits upon any other persons. 7 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.     TETRA TECH, INC.             By: /s/ LI-SAN HWANG    -------------------------------------------------------------------------------- Li-San Hwang Chairman, Chief Executive Officer and President             MAXTECH HOLDINGS, INC.             By: /s/ JAMES. T. HANEY    -------------------------------------------------------------------------------- 8 -------------------------------------------------------------------------------- QuickLinks EXHIBIT 10.32 REGISTRATION RIGHTS AGREEMENT R E C I T A L S A G R E E M E N T

Exhibit 10.152 EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement") is entered into as of this 23rd day of January, 2001 (the "Effective Date"), by and between Paul Hastings ("Executive") and Axys Pharmaceuticals, Inc., a Delaware corporation (the "Company"). Whereas , the Company desires to employ Executive to provide personal services to the Company, and wishes to provide Executive with certain compensation and benefits in return for such services; and Whereas , Executive wishes to be employed by the Company and provide personal services to the Company in return for certain compensation and benefits. Now, Therefore , in consideration of the mutual promises and covenants contained herein, it is hereby agreed by and between the parties hereto as follows: 1. Employment By The Company. 1.1 The Company agrees to employ Executive in the position of President and Chief Executive Officer of the Company. During Executive's employment with the Company, Executive will devote his best efforts and substantially all of his business time and attention to the business of the Company. 1.2 Executive shall serve in an executive capacity and shall perform such duties as are customarily associated with his then current titles, consistent with the Bylaws of the Company and as required by the Company's Board of Directors (the "Board"). 1.3 The employment relationship between the parties shall also be governed by the general employment policies and practices of the Company, including those relating to protection of confidential information and assignment of inventions, except that when the terms of this Agreement differ from or are in conflict with the Company's general employment policies or practices, this Agreement shall control. 1.4 The Company and Executive each acknowledge that either party has the right to terminate Executive's employment with the Company at any time for any reason whatsoever, with or without Cause or advance notice. This at-will employment relationship cannot be changed except in a writing signed by both Executive and a majority of the Board. 2. Compensation. 2.1 Salary. Executive shall receive, for services to be rendered under this Agreement, an annualized base salary ("Base Salary") equal to $400,000. Such Base Salary shall commence as of the Effective Date, and shall be payable in installments consistent with the Company's payroll policies. Executive's Base Salary shall be reviewed at least annually by the Board, and in the Board's sole discretion, may be increased at any time. 2.2 Termination. (a) In the event Executive's employment terminates for any reason other than death, disability, a termination upon a Change of Control, a voluntary termination not for Good Reason, or a termination for Cause, upon execution of an effective release in the form attached hereto as Exhibit A: (i) Executive shall receive twelve (12) monthly payments each equal in amount to one-twelfth (1/12th) of the sum of (x) the full amount of one year's Target Bonus (at the level in effect at that time) and (y) his then Base Salary; (ii) additional Stock Options (as defined below) shall, immediately prior to Executive's termination of employment, become vested with respect to that number of shares which would have become vested had Executive remained in continuous service with the Company for an additional twelve (12) months following the date of Executive's termination of employment; and (iii) for a period of twelve (12) months (or until comparable benefits coverage becomes available to Executive, if sooner), the Company shall pay the costs associated with the continuation of Executive's medical, dental, and vision benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") as in effect immediately prior to Executive's termination of employment. (b) For purposes of this Agreement, "Good Reason" means that any of the following are undertaken without Executive's express written consent: (i) the assignment to Executive of any duties or responsibilities which result in any diminution or adverse change of Executive's position, status or circumstances of employment; (ii) a reduction by the Company in Executive's Base Salary; (iii) the taking of any action by the Company which would adversely affect Executive's participation in, or reduce Executive's benefits under, the Company's benefit plans (including equity benefits) as of the time this Agreement is executed, except to the extent the benefits of all other executive officers of the Company are similarly reduced; (iv) a relocation of Executive's principal office to a location more than forty (40) miles from 180 Kimball Way, South San Francisco, California, except for required travel by Executive on the Company's business; (v) any breach by the Company of any material provision of this Agreement; or (vi) any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company. For purposes of this Agreement, "Cause" means: (V) an intentional action or intentional failure to act by Executive which was performed in bad faith and to the material detriment of the Company; (W) Executive intentionally refuses or intentionally fails to act in accordance with any lawful and proper direction or order of the Board; (X) Executive willfully and habitually neglects the duties of employment; (Y) Executive violates Section 4 or Section 5 of this Agreement or (Z) Executive is convicted of a felony crime involving moral turpitude; provided, however, that in the event that any of the foregoing events under clauses (V), (W), (X) or (Y) above is capable of being cured, the Company shall provide written notice to Executive describing the nature of such event and Executive shall thereafter have ten (10) business days to cure such event. (c) In the event of Executive's termination upon a Change of Control, upon execution of an effective release in the form attached hereto as Exhibit A: (i) Executive shall, within seven (7) days of such termination, one lump sum payment equivalent to eighteen (18) months of his then Base Salary, plus a pro rata share of his Target Bonus for the calendar year in which such termination occurs, plus the amount of eighteen months of his Target Bonus, minus standard withholdings and deductions; (ii) all of Executive's outstanding Stock Options shall become fully vested and exercisable immediately upon the occurrence of such termination; and (iii) for a period of eighteen (18) months (or until comparable benefits coverage becomes available to Executive, if sooner), the Company shall pay the costs associated with the continuation of Executive's medical dental, and vision benefits under COBRA as in effect immediately prior to Executive's termination of employment. For purposes of this paragraph, both Executive's "Base Salary" and "Target Bonus" shall be the greater of those amounts in effect either immediately prior to the Change of Control or the termination of Executive's employment. (d) A termination upon a Change of Control shall be deemed to occur for purposes of this Agreement in the event of a Change of Control (as defined below) upon which or within thirteen (13) months following the consummation of which: Executive does not continue to render services as President and Chief Executive Officer of the Company (or any successor or surviving corporation) or Executive terminates employment with the Company (or a successor or surviving corporation) for Good Reason. For purposes of this Agreement, a Change of Control means (i) any sale, merger, consolidation, tender offer or similar acquisition of shares, or other transaction or series of related transactions (each a "Transaction") as a result of which at least a majority of the voting power of the Company is not held, directly or indirectly, by the persons or entities who held the Company's securities with voting power before such Transaction (provided, however, that any person who acquired voting securities of the Company in contemplation of the Transaction and who immediately after such Transaction possesses direct or indirect ownership of at least ten percent (10%) of the securities of the Company or the surviving entity (or if the Company or the surviving entity is a controlled affiliate of another entity, then of such controlling entity) shall not be included in the group of those persons or entities who held the Company's securities with voting power before such Transaction); (ii) a sale or other disposition of all or a substantial part of the Company's assets, whether in one transaction or a series of related transactions; or (iii) individuals who on the date hereof constitute the Board and any new director (other than a director designated by a person or entity who has entered into an agreement to effect a transaction described in clause (i) or (ii) above) whose nomination and/or election to the Board was approved by a vote of at least a majority of the directors then still in office who either were directors on the date hereof or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board. 2.3 Golden Parachute Taxes. Notwithstanding anything contained in this Agreement to the contrary, to the extent that payments and benefits provided under this Agreement to Executive and benefits provided to, or for the benefit of, Executive under any other Company plan or agreement (such payments or benefits are collectively referred to as the "Payments") would be subject to the excise tax (the "Excise Tax") imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), the Payments shall be reduced (but not below zero) to the extent necessary so that no Payment to be made or benefit to be provided to the Executive shall be subject to the Excise Tax, but only if, by reason of such reduction, the net after-tax benefit received by Executive shall exceed the net after-tax benefit received by him if no such reduction was made. For purposes of this Section 2.3, "net after-tax benefit" shall mean (a) the Payments which Executive receives or is then entitled to receive from the Company that would constitute "parachute payments" within the meaning of Section 280G of the Code, less (b) the amount of all federal, state and local income taxes payable with respect to the foregoing calculated at the maximum marginal income tax rate for each year in which the foregoing shall be paid Executive (based on the rate in effect for such year as set forth in the Code as in effect at the time of the first payment of the foregoing), less (c) the amount of excise taxes imposed with respect to the payments and benefits described in (a) above by Section 4999 of the Code. The foregoing determination will be made by the a nationally recognized accounting firm (the "Accounting Firm") selected by the Company (which may be, but will not be required to be, the Company's independent auditors). The Company will direct the Accounting Firm to submit its determination and detailed supporting calculations to both the Executive and the Company within fifteen (15) days after his date of termination of employment. If the Accounting Firm determines that such reduction is required by this Section 2.3, the Executive, in his sole and absolute discretion, may determine which Payments shall be reduced to the extent necessary so that no portion thereof shall be subject to the excise tax imposed by Section 4999 of the Code, and the Company shall pay such reduced amount to him. The fees and expenses of the Accounting Firm for its services in connection with the determinations and calculations contemplated by this Section 2.3 will be borne by the Company. 2.4 Annual Bonus. Executive will be eligible for an annual bonus up to fifty percent (50%) of Executive's then current Base Salary upon achievement of reasonable goals specified by the Board (the "Target Bonus"). Such goals shall be set forth in writing by the Board prior to the close of the first quarter of each fiscal year of the Company, with fifty percent (50%) of such goals to be dependent on Executive's individual performance and fifty percent (50%) of such goals to be dependent on the Company's performance. 2.5 Employee Loan. On the Effective Date, the Company agrees to loan Executive $300,000 pursuant to the terms of the form of promissory note attached hereto as Exhibit B (the "Note"). The Note is full-recourse, secured by any shares of the Company's common stock acquired by Executive upon the exercise of any Stock Options, bears interest at the rate of 5.61% per annum and is payable in full on the earlier of (a) thirty (30) days following Executive's termination of employment (other than Executive's termination of employment for Good Reason or Executive's termination of employment without Cause or due to death or disability) or (b) January 2, 2004. Provided that Executive continues to render services to the Company through each such date, the Company will forgive one thirty-sixth (1/36th) of the principal amount of the Note and any accrued interest thereon on the first day of each calendar month following the Effective Date, such that (provided Executive has not ceased to render services to the Company as of each such date) the Note shall be forgiven in its entirety on January 1, 2004. In the event Executive is terminated without Cause or due to death or disability or that Executive terminates his employment for Good Reason, the Company will concurrently therewith forgive all remaining principal and interest due under the Note. 2.6 Medical and Dental Coverage. The Company shall provide Executive with the medical and dental coverage which is no less favorable than that provided to any other executive of the Company. 2.7 Standard Company Benefits. Executive shall be entitled to all other rights and benefits for which he is eligible under the terms and conditions of such benefits which may be in effect from time to time and provided by the Company to its employees generally and/or to its management and executive employees in particular. 2.8 Expenses. Executive shall be entitled to receive prompt reimbursement of all reasonable expenses incurred by Executive in performing Company services. Executive agrees to furnish the Company reasonably adequate records and other documentary evidence of such expenses for which Executive seeks reimbursement. Such expenses shall be accounted for under the policies and procedures established by the Company. 2.9 Vacation and Sick Leave. Executive shall be entitled to vacation and to sick leave in accordance with policies as periodically established by the Company for Company officers. In addition, Executive shall be entitled, without loss of pay, to be absent voluntarily from the performance of employment duties for such periods of time and for such valid and legitimate reasons as the Board in its discretion may determine. 2.10 Stock Options. Executive shall be granted options to purchase 500,000 shares of the Company's common stock (the "Time Vesting Options") at an exercise price equal to the fair market value of the Company's common stock as of the date of grant of such options. Provided Executive remains in continuous service with the Company as of the applicable vesting dates, twelve and one half percent (12-1/2%) of the Time Vesting Options shall vest upon the six (6) month anniversary of the Effective Date and the remaining Time Vesting Options shall vest at the rate of 1/42nd of such remaining options per month, such that one hundred percent (100%) of the Time Vesting Options shall be vested on the fourth (4th) anniversary of the Effective Date. The Time Vesting Options shall be treated as incentive stock options within the meaning of Section 422 of the Code to the maximum extent possible and shall become exercisable as they become vested, and the remaining portion of the Time Vesting Options shall become exercisable upon the date of grant of such options. The vested portion of all Stock Options which are not incentive stock options shall be transferable to family members to the maximum extent permitted by the Securities Act of 1933, as amended. Other terms and conditions of the Time Vesting Options shall be consistent with the terms of the Company's compensatory stock plan under which they are granted and as mutually agreed to by the Company and Executive. In addition to the Time Vesting Options, effective as of the Effective Date, Executive shall be granted non-statutory stock options to purchase 100,000 shares of the Company's common stock (the "Performance Vesting Options") at an exercise price equal to the fair market value of the Company's common stock as of the Effective Date. Provided Executive remains in continuous service with the Company through the seventh (7th) anniversary of the Effective Date, the Performance Vesting Options shall become vested and exercisable in their entirety as of the seventh (7th) anniversary of the Effective Date; provided however, that upon the determination by the Board of Directors that Executive has met by Executive's performance during 2001 at least seventy-five percent (75%) of certain performance goals to be established jointly by Executive and the Board and/or the Compensation Committee of the Board during the first quarter of calendar year 2001, the Performance Vesting Options shall vest and become exercisable pursuant to the schedule described above with respect to the Time Vesting Options as if governed by such schedule as of their date of grant. Other terms and conditions of the Performance Vesting Options shall be consistent with the terms of the Company's compensatory stock plan under which they are granted and as mutually agreed to by the Company and Executive. The Time Vesting Options and Performance Vesting Options, together with any additional options to purchase shares of the Company's common stock that Executive may be granted from time to time are referred to herein collectively as the "Stock Options." The Stock Options shall be granted by the Board or authorized committee of the Board, and shall be granted pursuant to, and except as provided herein shall be governed by, the terms of the Company's stock option plans and customary forms of stock option agreement as amended from time to time. 3. Confidential Information Obligations. 3.1 Agreement. Executive agrees to execute and abide by Executive's Employment, Confidential Information and Invention Assignment Agreement ("Confidentiality Agreement"), 3.2 Remedies. Executive's duties under the Confidentiality Agreement shall survive termination of his employment with the Company. Executive acknowledges that a remedy at law for any breach or threatened breach by him of the provisions of the Confidentiality Agreement would be inadequate, and he therefore agrees that the Company shall be entitled to injunctive relief in case of any such breach or threatened breach. 4. Outside Activities. 4.1 Except with the prior written consent of the Board, Executive will not during the term of this Agreement undertake or engage in any other employment, occupation or business enterprise, other than ones in which Executive is a passive investor. Executive may engage in civic and not-for-profit activities and may, upon notice to the Board, serve as a member of Boards of Directors of companies not deemed to be engaged in competition with the Company so long as such activities do not materially interfere with the performance of his duties hereunder, and the Company hereby agrees that Executive may serve as a director of RxMarketplace.com, ViaCell, and LXR without further notice to the Board. 4.2 Except as permitted by Section 4.3, Executive agrees not to acquire, assume, or participate in (directly or indirectly) any position, investment or interest known by him to be adverse or antagonistic to the Company, its business, or its prospects, financial or otherwise. 4.3 During the term of his employment by the Company, except on behalf of the Company, Executive will not have any direct or indirect business connection or interest, in any capacity whatsoever, with any other person or entity known by him to compete directly with the Company, throughout the world, in any line of business engaged in (or planned to be engaged in) by the Company. Nothing in this paragraph shall bar Executive from owning securities of any competitor corporation as a passive investor, so long as his aggregate direct holdings in any one such corporation shall not constitute more than 1% of the voting stock of that corporation. 5. Noninterference. While employed by the Company, and for one (1) year immediately following the termination of Executive's employment, Executive agrees not to interfere with the Company's business by soliciting, attempting to solicit, inducing, or otherwise causing any employee of the Company to terminate his or her employment in order to become an employee, consultant, or independent contractor to or for any competitor of the Company. Executive agrees that this restriction is reasonably necessary to protect the Company's legitimate business interest in its substantial relationships with employees, consultants, and independent contractors and its valuable confidential business information. 6. General Provisions. 6.1 Notices. Any notices provided hereunder must be in writing and shall be deemed effective upon the earlier of (i) personal delivery (including delivery by fax or overnight courier) or (ii) the third day after mailing by first-class mail, to the Company at its primary office location and to Executive at his address as then listed in the Company's payroll records. 6.2 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal, or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality, or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed and construed in such jurisdiction so as to render it enforceable under applicable law insofar as possible consistent with the intent of the parties. 6.3 Waiver. If either party should waive any breach of any provisions of this Agreement, that party shall not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement. 6.4 Complete Agreement. This Agreement and its Exhibits constitute the entire agreement between Executive and the Company and it is the complete, final, and exclusive embodiment of their agreement with regard to this subject matter and supersedes all prior letter agreements and understandings between the parties. It is entered into without reliance on any promise or representation other than those expressly contained herein, and it cannot be modified or amended except in a writing signed by both the Executive and at least one member of the Compensation Committee of the Board. 6.5 Counterparts. This Agreement may be executed in separate counterparts, any one of which need not contain signatures of more than one party, but all of which taken together will constitute one and the same Agreement. 6.6 Headings. The headings of the sections hereof are inserted for convenience only and shall not be deemed to constitute a part hereof nor to affect the meaning thereof. 6.7 Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive and the Company, and their respective successors, assigns, heirs, executors and administrators, except that Executive may not assign any duties hereunder and may not assign any rights hereunder without the written consent of the Company, which shall not be withheld unreasonably. 6.8 Choice of Law. All questions concerning the construction, validity and interpretation of this Agreement will be governed by the law of the State of California, without regard to such state's conflict-of- laws rules. 6.9 Non-Publication. The parties mutually agree not to disclose publicly the terms of this Agreement except to the extent that disclosure is mandated by applicable law or such disclosure is to the parties' respective attorneys, accountants other advisors, and immediate family. 6.10 Agreement Controls. In the event of a conflict between the text of the Agreement and any summary, description or other information regarding the Agreement, the text of the Agreement shall control. 6.11 Attorneys' Fees. If either party hereto brings any action to enforce his or its rights hereunder, each party in any such action shall be responsible for his or its costs and attorneys fees incurred in connection with such action. 6.12 Tax Withholding. All payments made pursuant to this Agreement shall be subject to all applicable federal, state and local income and employment tax withholding. 6.13 Arbitration. To ensure rapid and economical resolution of any and all disputes which may arise under this Agreement, the Company and Executive each agree that any and all disputes or controversies, whether of law or fact of any nature whatsoever (including, but not limited to, all state and federal statutory and common law discrimination claims), with the sole exception of those disputes which may arise from Executive's Confidentiality Agreement, arising from or regarding the interpretation, performance, enforcement or breach of this Agreement, or any other disputes or claims arising from or related to Executive's employment or the termination of his employment, shall be resolved by final and binding confidential arbitration conducted by Judicial Arbitration and Mediation Services Inc. ("JAMS") under the then existing JAMS Rules of Practice and Procedure; provided that the arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written arbitration decision including the arbitrator's essential findings and conclusions and a statement of the award. The Company shall pay all of Executives' JAMS arbitration fees. In addition to any other relief, the arbitrator may award to the prevailing party recovery of its attorneys' fees and costs. Nothing in this Agreement is intended to prevent either Executive or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration. 6.14 Right to Work. As required by law, this offer of employment is subject to satisfactory proof of Executive's right to work in the United States. 6.15 No Duty to Seek Employment. Executive and the Company acknowledge and agree that nothing contained in the Agreement shall be construed as requiring Executive to seek or accept alternative or replacement employment in the event of his termination of employment by the Company for any reason, and no payment or benefit payable hereunder shall be conditioned on Executive's seeking or accepting such alternative or replacement employment. [Remainder of this page intentionally left blank] In Witness Whereof , the parties have executed this Agreement on the day and year first above written. Axys Pharmaceuticals, Inc.     By: /s/ Douglas Altschuler Name: Douglas Altschuler Title: V.P./General Counselor     Accepted and agreed this 23rd day of January, 2001   /s/ Paul J. Hastings Paul Hastings -------------------------------------------------------------------------------- Exhibit A RELEASE Certain capitalized terms used in this Release are defined in the Employment Agreement entered into as of _____________, 2000 between Axys Pharmaceuticals, Inc. and me which I have reviewed. I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." I hereby expressly waive and relinquish all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to my release of any claims I may have against the Company. Except as otherwise set forth in this Release, I hereby release, acquit and forever discharge the Company, its parents and subsidiaries, and their officers, directors, agents, servants, employees, shareholders, successors, assigns and affiliates, of and from any and all claims, liabilities, demands, causes of action, costs, expenses, attorneys fees, damages, indemnities and obligations of every kind and nature, in law, equity, or otherwise, known and unknown, suspected and unsuspected, disclosed and undisclosed, arising out of or in any way related to claims and demands directly or indirectly arising out of my employment with the Company or the termination of that employment, including but not limited to, claims of intentional and negligent infliction of emotional distress, any and all tort claims for personal injury, claims or demands related to salary, bonuses, commissions, or any other ownership interests in the Company, vacation pay, fringe benefits, expense reimbursements, severance pay, or any other form of disputed compensation; claims pursuant to any federal, state or local law or cause of action including, but not limited to, the federal Civil Rights Act of 1964, as amended; the federal Age Discrimination in Employment Act of 1967, as amended ("ADEA"); the federal Employee Retirement Income Security Act of 1974, as amended; the federal Americans with Disabilities Act of 1990; the California Fair Employment and Housing Act, as amended; tort law; contract law; statutory law; common law; wrongful discharge; discrimination; fraud; defamation; and breach of the implied covenant of good faith and fair dealing; provided, however, that nothing in this paragraph shall be construed in any way to release the Company from its obligation to indemnify me from any third party action brought against me based on my employment with the Company, pursuant to the Company's by-laws, any applicable agreement or applicable law, or to reduce or eliminate any coverage I may have under the Company's director and officer liability policy, if any. I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under ADEA. I also acknowledge that the consideration given under the Agreement for the waiver and release in the preceding paragraph hereof is in addition to anything of value to which I was already entitled. I further acknowledge that I have been advised by this writing, as required by the ADEA, that: (A) my waiver and release do not apply to any rights or claims that may arise on or after the date I execute this Release; (B) I should consult with an attorney prior to executing this Release; (C) I have twenty-one (21) days to consider this Release (although I may choose to voluntarily execute this Release earlier); (D) I have seven (7) days following the execution of this Release to revoke this Release; and (E) this Release shall not be effective until the date upon which the revocation period has expired, which shall be the eighth day after this Release is executed by me. Paul Hastings Date:____________________ --------------------------------------------------------------------------------

OPTION AGREEMENT           THIS AGREEMENT is made this 8th day of May, 2001, between RAPTOR MASTER, L.L.C., an Oklahoma limited liability company ("Raptor"), having a notice address at 1141 N. Robinson, Suite 300, Oklahoma City, Oklahoma 73102 and CLIMATE MASTER, INC., a Delaware corporation ("CMI"), having a notice address at 16 South Pennsylvania, P.O. Box 754, Oklahoma City, Oklahoma 73101. W I T N E S S E T H:            1.  Purchase Option. Raptor, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, does hereby grant to CMI on the terms hereafter stated, the irrevocable right and option to purchase (the "Purchase Option") the fee simple title to the property described on Exhibit A hereto (hereafter collectively called the "Property").                1.1  Real Property. All of the real property (the "Real Property") described on Schedule 1 attached hereto, together with the manufacturing warehouse and office facility located thereon, containing approximately 230,000 square feet of gross area, together with improvements, fixtures, walkways, parking areas and other items of real property located thereon (collectively the "Building").                1.2  Tangible Personal Property. All tangible personal property located on the Real Property which is owned by Raptor and used in the ownership, operation, management and maintenance of the Building and Real Property.                1.3  Intangible Personal Property. All intangible personal property owned by Raptor and used in the ownership, operation and maintenance of the Building and the Real Property, including, without limitation, all contract rights, documents of title, general intangibles and business records pertaining to the Building and the Real Property, excluding therefrom only: cash on hand and in bank accounts held by Raptor.           2.  Exercise of Option. The Purchase Option hereby granted to CMI may be exercised by CMI by service to Raptor of written notice of such exercise at any time during the primary term of that certain Amended and Restated Lease of even date herewith between Raptor as landlord and CMI as tenant covering the Real Property and Building.           3.  Purchase Price. If CMI elects to exercise the Purchase Option hereby granted, CMI agrees at closing to pay to Raptor a purchase price of $40,000 if this Purchase Option is exercised by May ___, 2002, $80,000 if exercised by May ___, 2003, $120,000 if exercised by May ___, 2004, $160,000 if exercised by May ___, 2005, and $200,000 if exercised thereafter during the term of this Option. As additional consideration to Raptor for the Purchase Option, CMI agrees: (a) to assume Raptor's obligations under the Lease Agreement arising subsequent to the Closing Date and to assume Raptor's obligations under the First Fee Mortgage and obtain the full release of Raptor under the First Fee Mortgage (as defined in Schedule 1 hereto); (b) to indemnify and hold Raptor harmless from all loss, cost and expense incurred in connection with     such obligations assumed by CMI under (a) above of this section; and (c) to execute such additional documents as might reasonably be required by Raptor to further evidence such assumption and indemnification.           4.  Option Consideration. In consideration of the grant of the option in this Agreement, CMI shall pay to Raptor $40,000 on the ___ day of November, 2001, and $40,000 on the ___ day of each sixth month thereafter during the term of this Option but only insofar as payments are made by Raptor, or properly set off, under that certain promissory note, endorsed to CMI, dated May ___, 2001, with Raptor as maker and Prime Financial Corporation as holder.           5.  Title. Raptor will deliver the following items to CMI at the times hereafter specified:                5.1  Title Commitment. Within thirty (30) days after the date of CMI's exercise of the Purchase Option, Raptor will furnish to CMI a current commitment (the "Title Commitment") for issuance of an ALTA Form B Owner's Title Insurance Policy covering the Property (the "Title Policy") in an amount equal to the sum of the purchase price of the Property described in paragraph 3, plus the face amounts of the First Fee Mortgage, issued and reinsured or coinsured by title insurance companies designated by Raptor (collectively hereafter called the "Title Company") subject to reasonable approval by CMI, showing good and marketable, fee simple title to the Property to be vested in Raptor, free and clear of any and all liens, encumbrances and mortgages (except the First Fee Mortgage), subject only to those exceptions to title as previously approved by CMI and to any existing easements, rights-of-way, restrictions and covenants of record that do not adversely materially affect CMI's permitted use of the Property (the "Approved Title Exceptions").                5.2  Title Defects. If the Title Commitment sets forth exceptions other than the Approved Title Exceptions and other than the standard printed exceptions contained in the Title Commitment, CMI will have fifteen (15) days after delivery of the Title Commitment to furnish to Raptor a written report specifying any objections to such exceptions and Raptor will thereafter have forty-five (45) days after the date of delivery of such written notification to cure such defects or to obtain a revised Title Commitment from which the objectionable exceptions have been removed. No matter will be construed as, or constitute, a title defect so long as the same is not so construed under the Real Estate Title Examination Standards of the Oklahoma Bar Association. In the event that the Title Commitment contains at the expiration of the above described forty-five (45) day period an exception other than the Approved Title Exceptions or the standard printed exceptions, then CMI will be entitled, at its sole option, to either: (i) waive such exception to title, or (ii) to exercise any and all other rights or remedies against Raptor to which CMI may be entitled at law or in equity.                5.3  Title Policy. Raptor's sole obligation with respect to the status of title to the Property is to have on the date of this Agreement, during the term hereof and on the Closing Date good and marketable, fee simple title to the Property, free and clear of any and all liens, encumbrances and mortgages (except the First Fee Mortgage) subject to the Approved Title Exceptions, and furnish the Title Commitment in the manner required under paragraphs 4.1 and 4.2 and all costs and premiums relating to the issuance of the Title Commitment and the Title Policy will be borne by CMI.   2             6.  Closing. Raptor and CMI agree that the purchase will be consummated as follows:                6.1  Closing Date. The sale of the Property will be consummated on or before thirty (30) days after the date of satisfaction of Raptor's obligations with respect to title; the parties agree in good faith to try to consummate the sale of the Property in no event later than sixty (60) days after the date CMI gives written notice of its exercise of the Purchase Option granted hereby. The exact time and place of closing to be designated by CMI, subject to the reasonable approval of Raptor (the "Closing Date").                6.2  Raptor's Deliveries. At closing, Raptor will deliver or cause to be delivered to CMI the following items (all documents will be duly executed and acknowledged where required): (a) a general warranty deed conveying the Real Property to CMI; (b) a bill of sale and assignment conveying all of the tangible and intangible personal property to CMI; (c) a certificate reasonably setting forth an inventory of personal property and a listing of accounts payable and contracts relating to the Property; and (d) such additional documents as might be reasonably required by CMI to consummate the sale of the Property to CMI. All such documents shall be in form and content reasonably satisfactory to CMI.                6.3  CMI's Deliveries. As closing, CMI will deliver or cause to be delivered to Raptor the following items (all documents will be duly executed and acknowledged where required): (a) the purchase price of the Property, in certified funds; (b) an appropriate Oklahoma sales tax return; and (c) such additional documents as might be reasonably required by Raptor to consummate the sale of the Property to CMI. All such documents shall be in form and content reasonably satisfactory to Raptor.                6.4  Closing Costs. Raptor will pay the following closing costs: (a) Raptor's attorneys' fees; and (b) the expenses, including recording costs applicable thereto, relating to the satisfaction of any objections to title made in accordance with paragraph 4.2 above. CMI will pay all other closing costs, including without limitation: (a) CMI's attorneys' fees; (b) all recording fees or costs, except those recording costs relating to the satisfaction of any objections to title made in accordance with paragraph 4.2 above; (c) the cost of documentary stamps to be affixed to the general warranty deed conveying the Property to CMI; (d) any premium charge or expense related to the issuance of the Title Commitment or the Title Policy; and (e) any escrow or closing fees charged with respect to the closing of this transaction.                6.5  Closing Memorandum. On the Closing Date the parties agree to execute and deliver a memorandum of closing to acknowledge delivery and acceptance of the items required by this paragraph and the status of performance of the other provisions of this Agreement.           7.  Adjustments and Prorations. All receipts and disbursements of the property will be prorated on the Closing Date and the purchase price will be adjusted on the following basis :                7.1  Rents. All rents payable or receivable from the tenant of the Building prior to the Closing Date will be paid to Raptor; rents payable or receivable subsequent to the Closing Date and thereafter will be paid to 3   CMI. Any rents received by CMI after the Closing Date that were payable or receivable prior to the Closing Date will be paid to Raptor.                7.2  Accounts Payable. All sums due for accounts payable which were owing or incurred by Raptor prior to the Closing Date with respect to the structural maintenance of the Building, the Building's roof and other obligations of Raptor as Landlord under the Lease Agreement will be paid by Raptor and Raptor agrees to indemnify and hold CMI harmless with respect thereto. CMI will furnish to Raptor for payment any such bills for which prior period received after the Closing Date and MCI will have no further obligation with respect thereto. All other accounts payable with respect to maintenance of the Building will be paid by CMI and CMI agrees to indemnify and hold Raptor harmless with respect thereto.                7.3  Property Taxes. All real and personal property ad valorem taxes and installments of special assessments, if any, will be paid by Raptor.                7.4  Utility Charges. All utility charges will be paid by CMI. All utility security deposits, if any, will be retained by the party originally funding those deposits.           8.  Project Condition. Except as Raptor is otherwise obligated under the Lease Agreement or this Agreement, it is understood that Raptor has not made hereunder and will not be obligated to make any representation or warranty as to the condition or state of repair of the Building and Improvements on the Property and has not hereunder made and will not be obligated to make any agreement to alter, repair or improve the Building and Improvements on the Property. Except as Raptor is otherwise obligated under the Lease Agreement or this Agreement, the sole obligation of Raptor on the Closing Date will be to deliver to CMI: (i) good and marketable, fee simple title to the Property, free and clear of any and all liens, encumbrances and mortgages (except the First Fee Mortgage), subject to the Approved Title Exceptions; and (ii) possession of the Property in substantially the same condition (normal wear and tear and insured casualty loss excepted) as existed on the date of CMI's exercise of the Purchase Option and CMI agrees to accept possession of the Property on the Closing Date in an "AS IS" condition "WITH ALL FAULTS".           9.  Defaults; Remedies. The events of default by Raptor under this Agreement will include: (a) the failure to comply with any term of this Agreement to be observed and performed by Raptor; and (b) the failure to perform and failure by Raptor to cure within the times provided, of any of Raptor's obligations under that certain lease agreement (the "Lease Agreement") between Raptor and CMI of even date herewith and default thereunder will further constitute an event of default under this Agreement. The events of default by CMI under this Agreement will include: (a) the failure to comply with any term of this Agreement to be observed or performed by CMI; and (b) the occurrence, and failure by CMI to cure within the times provided, of any of the events specified at subparagraphs (a) through (g) as provided under Section 15 of the Lease Agreement. In the event either party fails to perform such party's respective obligations hereunder (except as excused by the other party's default), the party claiming default shall make written demand for performance. If the defaulting party fails to comply with such written demand within ten (10) days after receipt thereof, the non-defaulting party will have the option either to waive such default or to seek any right or remedy to which the non-defaulting party may be entitled at law or in equity. 4           10.  Subordination. Subject to the terms of the Lease Agreement, the Purchase Option hereby granted shall be and is hereby made subject and subordinate to the First Fee Mortgage.           11.  Assignment. The rights of CMI hereunder cannot be assigned in whole or in part without the contemporaneous assignment by CMI to the same entity of CMI's leasehold estate under the Lease Agreement in accordance with the requirements of Section 9.1 thereunder.           12.  Representations. Raptor hereby represents, warrants and covenants to CMI that Raptor has and during the term of this Agreement will at all times have good and marketable, fee simple title in and to the Property, free and clear of any and all liens, encumbrances and mortgages (except the First Fee Mortgage) and subject only to those exceptions to title as previously approved in writing by CMI (whether pursuant to Section 16.2.3 of the Lease Agreement or otherwise) and to any existing easements, rights-of-way, restrictions and covenants of record that do not adversely materially affect CMI's permitted use of the Property.           13.  Miscellaneous.                 13.1  Time. Time is of the essence of this Agreement.                 13.2  Notice. All notices required hereunder will be in writing and served by certified mail, return receipt requested, postage prepaid, at the addresses shown above, until service of proper notice of a change of such address.                13.3  Amendment. This Agreement will not be altered, waived, amended or extended, except by written agreement signed by Raptor and CMI.                13.4  Severability. If any clause or provision of this Agreement is illegal, invalid or unenforceable under any present or future law, the remainder of this Agreement will not be affected thereby. It is the intention of the parties that if any provision is held to be illegal, invalid or unenforceable, there will be added in lieu thereof a provision of similar terms to such provision as is possible and be legal, valid and enforceable.                13.5  Binding Effect. Subject to the restrictions set forth herein, the provisions of this Agreement will inure to the benefit of and be binding on Raptor and CMI and their respective successors and permitted assigns.                13.6  Litigation Expense. In the event either party hereto commences litigation against the other to enforce its rights hereunder, the prevailing party in such litigation shall be entitled to recover from the other its reasonable attorneys' fees and expenses incidental to such litigation.                13.7  Other Instruments. On termination, expiration or release of the Purchase Option and within ten (10) days after written request by Raptor, from time to time, CMI agrees to execute such further documents as might be reasonably requested by Raptor to document such termination, expiration or release of the Purchase Option. 5                13.8  Governing Law. This Agreement will be construed and enforced according to the internal laws of the State of Oklahoma. All claims, disputes and other matters in question arising out of or relating to this Agreement, or the breach thereof, will be decided by proceedings in a court of competent jurisdiction in the State of Oklahoma.           IN WITNESS WHEREOF, the undersigned have executed this instrument on the date first above written.                                                                                 RAPTOR MASTER, L.L.C., an Oklahoma limited                                                                                  liability company                                                                                 By                                                                                                                                                                                                                            Manager                                                                                  CLIMATE MASTER, INC., a Delaware                                                                                corporation                                                                                 By                                                                                                                                                                                                                           President STATE OF OKLAHOMA      )                                                  ) ss: COUNTY OF OKLAHOMA )           This instrument was acknowledged before me on May ____, 2001, by _____________________ ___________________, as Manager of Raptor Master, L.L.C., an Oklahoma limited liability company. (Seal)                                                                                                                                                                                                                                         Notary Public                                                                                  My Commission Expires:                                          STATE OF OKLAHOMA      )                                                  ) ss: COUNTY OF OKLAHOMA )           This instrument was acknowledged before me on May ____, 2001, by ___________________ ___________________, as President of Climate Master, Inc., a Delaware corporation. (Seal)                                                                                                                                                                                                                                 Notary Public                                                                              My Commission Expires:                                            6   SCHEDULE 1 First Fee Mortgage is that certain mortgage dated May ___, 2001 between Raptor Master, L.L.C. as mortgagor and Gold Bank covering the property which is the subject of the attached Option, together with the debt secured thereby.

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.1 EMPLOYMENT AGREEMENT PARTIES:     EMPLOYER: TANNING TECHNOLOGY CORPORATION ("Tanning" or "Employer")     and     EMPLOYEE: Mark Teflian ("Employee") AGREEMENT:     Employer agrees to hire Employee and Employee accepts employment on the terms and conditions set forth below, which are acknowledged by the parties to be good and sufficient consideration for this Agreement. 1.At Will Employment. Employee is employed at will, which means that Employer or Employee may terminate the employment relationship at any time, with or without prior notice, warning, procedure or formality, for any cause or reason or for no cause or reason. Notwithstanding the foregoing, Employee is entitled to the severance and acceleration of vesting of stock options set forth in Section 4 of the Employee Term Sheet under the circumstances and subject to the qualifications described therein. 2.Position/Compensation/Benefits. Employee's position, compensation and benefits are specified in the attached Employee Term Sheet. 3.Duties/Best Efforts. Employee agrees to devote Employee's full professional time and attention to the business of Employer and those duties and obligations entrusted to Employee and/or as specified by Employee's supervisor or superiors from time to time. Employee shall at all times perform Employee's duties faithfully, industriously and to the best of Employee's ability, experience and talent. 4.Confidentiality, Non-Disclosure and Proprietary Rights. a.Employee understands and agrees that the following classes of information (collectively "Confidential Information"), whether or not in writing and whether or not formally marked, are and shall remain the exclusive and confidential property of the Employer: •data, software, processes, client contacts, client/customer lists, service techniques, market development and expansion plans, personnel training and development methods, internal business organization and methods, "Inventions" (as defined below), and other technical, business and financial information which gives Employer a competitive advantage in its business •information and data provided to Employer from time to time by third parties on the understanding and condition that such data and information will be kept confidential and will not be disclosed to any entity or person not authorized by such third party •ideas, processes, software, information, data, or other items that may be developed by Employee from time to time as work product of the employment relationship Any information which is generally known to the public will not be deemed Confidential Information. b.Throughout the time Employee is employed by Employer (the "Period of Employment"), and thereafter, Employee will not use or disclose Confidential Information, and will take all reasonable precautions to prevent any person or entity access to any of the Confidential -------------------------------------------------------------------------------- Information, other than as required in the performance of Employee's duties with Employer. In order to satisfy the needs of Employer's clients and customers, Employee will sign any confidentiality agreement reasonably requested by such third parties and/or Employer. Employee understands that he/she is not permitted to use the Confidential Information for his/her own purposes or benefit. c.Except in the performance of Employee's duties to Employer, Employee shall not duplicate in any way or remove from the work premises any property of Employer or its business associates, including but not limited to any Confidential Information. At the end of the Employee's Period of Employment, Employee will deliver to Employer all such property, including all copies of materials embodying Confidential Information, and including, without limitation, files contained on paper, electronic, optical or other media. d.Employee hereby agrees to assign, and does hereby assign, all of Employee's right, title and interest in or to any and all ideas, concepts, know-how, techniques, processes, inventions, discoveries, developments, software, works of authorship, innovations and improvements (collectively "Inventions") conceived or made by Employee during Employee's Period of Employment, whether alone or in concert with others, whether patentable or subject to potential copyrights or not, except those that the Employee developed or develops entirely on Employee's own time without using the equipment, supplies, facilities, or Confidential Information of the Employer, and provided that such Inventions are unrelated to the business of the Employer. Employee agrees to promptly inform and disclose all Inventions to the Employer in writing, and with respect to those Inventions that Employee is required to assign to the Employer hereunder, to provide all assistance reasonably requested by the Employer in the preservation of its interests in the Inventions (such as by making applications, executing documents, testifying, etc.), such assistance to be provided at the Employer's expense but without additional compensation to the Employee. Employee agrees that all such Inventions are Confidential Information and are the sole and absolute property of Employer. e.Employee agrees that any work or Invention prepared by the Employee during Employee's Period of Employment which is subject to assignment under paragraph (d) above, and which is eligible for United States copyright protection or protection under the Universal Copyright Convention, the Berne Copyright Convention and/or the Buenos Aires Copyright Convention shall be a "work made for hire" and the sole and absolute property of Employer. In the event that any such work is deemed not to be a "work made for hire", Employee hereby assigns all right, title and interest in and to the copyright in such work to the Employer, and agrees to provide all assistance reasonably requested in the establishment, preservation and enforcement of the Employer's copyright in such work, such assistance to be provided at the Employer's expense but without any additional compensation to Employee. f.In the event that the Employer is unable, as a result of inability to find the Employee after a reasonably diligent effort, as a result of the death or incapacity of the Employee, or as a result of the unjustifiable refusal of the Employee, to secure the Employee's signature on any documents, applications, or letters patent, copyright or other analogous protection relating to Inventions or other proprietary rights, the Employee hereby irrevocably designates and appoints Employer, by its duly authorized officers and agents as the Employee's agent and attorney-in-fact, to act for and on the Employee's behalf and stead to execute and file any such application or applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent, copyright, or other analogous protection thereon with the same legal force and effect as if executed by the Employee. 5.Non-Competition Covenant and Agreement. Employee holds an executive position with Employer in which Employee manages portions of the business operations of Employer and supervises or oversees other employees. Employee is considered a key employee of Employer whose efforts are integral to Employer's business and for which Employee receives commensurately high compensation and benefits. Employer has invested and/or will invest considerable time and money -------------------------------------------------------------------------------- in the development and enhancement of Employee's education, training and skills and the knowledge of Employer's unique business, which business is worldwide in scope and market. This enhanced skill and knowledge is a substantial asset of Employer and will be the principal reason that Employer continues the employment relationship and continues to compensate Employee for Employee's work. In addition, Employee has or will become aware of the Confidential Information including the Trade Secrets, trade practices, and customer lists/names of Employer, which Confidential Information in the hands of a competitor or potential competitor would cause substantial loss and damage to Employer and/or its customers and clients. Finally, Employee will have close customer contact, which would enable Employee to divert customer trade. Employee acknowledges that Employee's employment creates a relationship of confidence and trust between Employer and Employee with respect to the Confidential Information of Employer, its affiliates, customers and clients. Employee also acknowledges the highly competitive nature of Employer's business. In consideration of the above matters, Employee agrees and acknowledges that it is reasonable, necessary and appropriate in order to protect the immediate interests of and avoid substantial injury to Employer for Employee to accept restrictions on Employee's right to work or be employed in a fashion which will compete with Employer's business and type of business. Therefore, Employee covenants, agrees to, and accepts the following restrictions: a.Employee will not, alone or in concert or cooperation with any other person or entity, as owner, manager, principal, employee, investor, shareholder, consultant, or any other type of operator or advisor, directly or indirectly, engage in the business of, develop, seek to develop, market, produce or provide any commercial product or service provided by, or under development by Employer or any of its affiliates during the Period of Employment. This non-competition obligation shall apply to North America, Europe, and any other country where Employer or any of its subsidiaries or affiliates are actively engaged in or pursuing business during the Employee's Period of Employment. This paragraph (a) shall not prohibit the ownership by Employee of less than 5% of any publicly traded corporation, provided that Employee is not otherwise engaged with such corporation in any of the activities prohibited by this paragraph 5. The restriction set forth in this paragraph (a) shall be in effect during the Period of Employment and for one year after the termination of employment for any reason; provided, however, that if such employment is terminated by Employer without cause during the first year of employment, this restriction will be in effect during the Period of Employment, and thereafter for a number of days equal to the length of the employment. b.Employee will not, during the Period of Employment, and for one year after the termination of employment for any reason, directly or indirectly, (1) hire an employee, consultant, agent or representative of Employer or its affiliates, successors or assigns or solicit the employment or services of any person who is employed by Employer or its successors or assigns, or any former employee of the Employer whose employment has been terminated for less than six (6) months; or (2) solicit, directly or indirectly, the business of, or business competitive with the Employer's then current business with, any customer or client of the Employer. The above shall not prohibit the Employee from using the services of any such person in a way that clearly does not compete with the business of Employer. c.The time periods of the restrictions set forth in paragraphs (a) and (b) above shall be extended for any period of time that Employee is found to be in violation of any provision of this paragraph 5. If any court shall determine that the duration, geographic limitations, subject or scope of any restriction contained in this paragraph 5 is unenforceable, it is the intention of the parties that this paragraph 5 shall not thereby be terminated but shall be deemed amended to the extent required to make it valid and enforceable, such amendment to apply only with respect to the operation of this paragraph 5 in the jurisdiction of the court that has made the adjudication. 6.Affiliated Entities. Employee understands that Employer's business may be carried out by or in conjunction with affiliated companies or subsidiaries. Employee agrees that Employee's obligations -------------------------------------------------------------------------------- of confidentiality and non-competition shall apply equally to the Confidential Information, business and employees of Employers' subsidiaries and affiliates. For such purposes, any reference to Employer or Tanning in this Agreement shall also be deemed to be a reference to its subsidiaries and affiliates. 7.Remedies for Breach of Non-Disclosure/Non-Compete Provisions. Employee acknowledges and agrees that the provisions of this Agreement are essential to the Employer and are reasonable and necessary to protect the legitimate interests of the Employer and its affiliates and that the damages sustained by the Employer or its affiliates as a result of a breach of the agreements contained herein will subject the Employer or its affiliates to immediate, irreparable harm and damage, the amount of which, although substantial, cannot be reasonably ascertained, and that recovery of damages at law will not be an adequate remedy. Employee therefore agrees that the Employer and its affiliates, in addition to any other remedy they may have under this Agreement or at law, shall be entitled to injunctive and other equitable relief to prevent or curtail any breach of any provision of this Agreement. In the event suit or action is instituted to enforce this Agreement or any of the terms and conditions hereof, including, but not limited to, suit for a temporary restraining order or preliminary or permanent injunction, the prevailing party shall be entitled to costs and reasonable attorneys' fees. Employee waives any right to the posting of a bond in the event of an issuance of a temporary restraining order, preliminary injunction or permanent injunction upon the issuance of such an order by a court of competent jurisdiction. 8.Employee Notification Requirement. During the Period of Employment, and thereafter during any subsequent period of time that the Employee is reasonably likely to be subject to a continuing obligation under the terms of this Agreement, the Employee will notify the Employer of any change of address, and the Employee will identify and notify the Employer of each and any new job or other business activity in which the Employee plans to engage, together with the name and address of the new employer and a reasonably detailed description of the nature of the Employee's new position with such new employer sufficient for Employer to be able to enforce its rights under this Agreement. 9.Former Employment or Work. Employee represents, acknowledges and agrees that Employee has not brought, and will not bring with Employee, or use in the performance of Employee's duties for the Employer, any materials or documents of any former employer, client, person, or entity of any type, which are not generally available to the public, unless the Employee has obtained written authorization for the possession and use of such materials or documents and provided such authorization to Employer. Employee also understands and agrees, that in Employee's employment with the Employer, Employee shall not breach any obligation of confidentiality or legal duty that Employee has to any former employer or client and agrees that Employee will fulfill any and all such obligations during Employee's Period of Employment. Employee agrees to indemnify and hold Employer harmless with respect to any breach of this provision pursuant to the terms of paragraph 11 below. 10.Assignment. This Agreement, and the duties, obligations and benefits hereunder shall bind and benefit the parties hereto, and to the extent necessary to carry out its intentions, the legal and personal representatives of the parties. This Agreement may not be assigned without the written permission of the parties, except that the Employer may assign this Agreement to any successor of the Employer by reason of reorganization, merger, consolidation, or the partial or complete sale of the Employer's business and/or assets. 11.Indemnification and Remedy. Each party agrees to indemnify and hold harmless the other against any and all damages, claims, losses or expenses, including reasonable attorney's fees, arising from or relating to any breach of this Agreement. 12.Entire Agreement and Amendment. This Agreement, including the attached Employee Term Sheet which is incorporated by this reference, constitutes the entire agreement between the Employer and Employee, and any verbal or written communication between the parties prior to the adoption of this Agreement, including any offer letter from Employer to Employee, shall be deemed merged -------------------------------------------------------------------------------- herein and of no further force and effect. Notwithstanding the foregoing, however, Employee shall continue to be liable for the veracity of any representations concerning Employee made in connection with his or her job application to Employer. This Agreement supersedes any conflicting policies relating to Tanning employees. Except as provided in the attached Employee Term Sheet, this Agreement may only be altered or amended by a writing signed by the Employee and an authorized officer of the Employer and no officer, employee, agent or representative of Tanning has the authority to orally modify any term of this Agreement including, without limitation, the at-will nature of Employee's employment. 13.Waiver. Neither the delay nor failure by the Employer or Employee to enforce any provision or exercise any right under this Agreement, nor partial or single enforcement or exercise of any such provision or right, shall constitute a waiver of that or any other provision or right. 14.Governing Law and Venue. This Agreement is entered into in Denver, Colorado, and as such it shall be interpreted and enforced under the laws of the State of Colorado applicable to contracts made to be performed entirely within Colorado. Except as necessary to enforce Employer's rights pursuant to paragraphs 4 through 7 above, to the extent that any action is brought in a court of law in connection with this Agreement, the exclusive venue for such action shall be a court of appropriate jurisdiction, including the Federal courts, located in the City and County of Denver, Colorado. 15.Interpretation. In the event that any one or more provision in this Agreement shall, for any reason, be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, but this Agreement shall be construed as if such provision had never been contained herein. If any provision in this Agreement shall be held to be excessively broad as to duration, activity or subject in any jurisdiction, it shall be construed by limiting and reducing the provision which is deemed excessively broad. A limitation or reduction in the application of any provision in one jurisdiction shall not affect the application of the same provision in any other jurisdiction. 16.Notices. Any notice required or permitted by this Agreement shall be effective when received, and shall be sufficient if in writing and personally delivered (including by express courier) or sent by certified mail with return receipt to the address set forth at the end of this Agreement or at such other address as may by notice be specified by one party to the other. 17.Survival. The provisions of this Agreement which by their nature are intended to survive, including without limitation the confidentiality, non-disclosure, non-competition, non-solicitation and indemnification provisions, shall survive the termination of this Agreement. 18.Arbitration. Except with respect to an action by Employer to seek to enforce its legal or equitable rights pursuant to paragraphs 4 through 7 above, and after the exhaustion of all applicable administrative remedies, any controversy or claim arising out of or related to this Agreement shall be resolved by arbitration in Colorado under the Commercial Rules of the American Arbitration Association in effect at the time such controversy or claim arises (the "Rules") by one arbitrator appointed by the American Arbitration Association in accordance with its Rules, except that the parties specifically authorize the Arbitrator to set a schedule for, accept the submission of and dispositively rule on any or all of the issues raised in motion(s) and supporting briefs for summary judgment prior to conducting any such arbitration. The arbitrator shall apportion the costs of arbitration. The award of the arbitrator shall be in writing, shall be final and binding upon the parties, shall not be appealed from or contested in any court and may, in appropriate circumstances, include injunctive relief. Should any party fail to appear or be represented at the arbitration proceedings after due notice in accordance with the Rules, then the arbitrator may nevertheless render a decision in the absence of that party, and such decision shall have the same force and effect as if the absent party had been present, whether or not it shall be adverse to the interests of that party. Any award rendered hereunder may be entered for enforcement, if necessary, in any court of competent jurisdiction, and the party against whom enforcement is sought shall bear the expenses, including attorneys' fees, of enforcement. -------------------------------------------------------------------------------- 19.Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall together constitute one and the same Agreement. Employee accepts employment with Employer on the above-terms and acknowledges by Employee's signature below that Employee is employed at-will, which means that either Employer or Employee may terminate the employment relationship at any time, with or without prior notice, warning, procedure or formality, for any cause or reason or for no cause or reason. TANNING TECHNOLOGY CORPORATION, a Delaware corporation (Employer)   EMPLOYEE By:   /s/ Bipin Agarwal --------------------------------------------------------------------------------   /s/ Mark Teflian --------------------------------------------------------------------------------         Mark Teflian Printed Name: Bipin Agarwal     Title: Executive Vice President and Co-Founder   Date: June 19, 2001 Date: June 19, 2001     Address and Phone:     4600 South Syracuse St., Suite 1200   43 Tower Lane Denver, CO 80237   Cohasset, MA 02025 303-220-9944     -------------------------------------------------------------------------------- EMPLOYEE TERM SHEET Name of Employee: Mark Teflian 1.Position. Employee is hired as Vice President, Strategic Business Development and Solutions commencing July 9, 2001. Employee will report to Henry Skelsey. 2.Compensation and Benefits.     a.  Salary: Employee will receive a semi-monthly base salary of $8,750.00 which is equal to an annual salary of $210,000. Employee's salary will be reviewed periodically and adjusted as appropriate in light of Employee's performance.     b.  Incentive Plan: Incentive opportunity of $140,000 on annualized basis for achieving business objectives (including revenue quotas) to be mutually agreed as part of the alliance business plan. We will work with you to create a detailed incentive plan within the first 90 days of your employment. The incentive plan will provide for semi-annual incentive earnings paid in August for the first half of the year and February for the second half of the year. We will provide you with a guaranteed incentive payment of $5,000.00 per month (paid on a semi-monthly basis through payroll) for the first six months of employment. Actual incentives earned in excess of this guarantee will be paid in accordance with the documented incentive compensation plan.     c.  Stock Options: Employee is eligible to participate in the Tanning Technology Corporation Stock Option Plan, subject to specified terms for vesting and other qualifications and conditions of the Plan, and as set forth in the governing Stock Option Agreement to be executed by Employee.     d.  Vacation: Employee is eligible for 15 vacation days per calendar year, the use of which is to be chosen in consultation with Employee's supervisors and/or superiors and in consideration of the business needs of Tanning. Employee may carry vacation days over from one calendar year to the next only in accordance with Tanning policy.     e.  Relocation: Employee is eligible for a relocation package.     f.   Other Benefits: Employee is eligible to participate in any life insurance, disability, medical, dental, pension, profit sharing and retirement programs as may be made available in Tanning's discretion to Tanning employees of similar seniority or position within Tanning. 3.Flexible Terms. The provisions above, with the exception of any vested stock options, may be changed by Employer at any time, such as in connection with periodic performance evaluations, without revising or affecting the validity of the other terms of the Employment Agreement or requiring any new or additional Agreement between the parties; provided that Employer may not reduce the Employee's salary or total incentive plan opportunity without the Employee's prior approval. The method and schedule of any payments to Employee may also be changed unilaterally by Employer at any time. Employer is entitled to withhold from any compensatory payments which it makes to Employee under this Agreement or otherwise an amount sufficient to satisfy all Federal, State and local income and employment tax withholding requirements. 4.Severance. Notwithstanding anything to the contrary in the Employment Agreement, in the event of termination of employment by Employer without Cause or by the Employee for Good Reason, Employee shall be entitled to a severance payment in an amount equal to six months of Employee's base salary plus the guaranteed incentive payment for such period (if any) in effect at the time of termination.     In addition, in the event of termination of employment by Employer without Cause or by the Employee for Good Reason, vesting of Employee's stock options (with respect to the options granted at time of hire) will accelerate to be equal to the vesting that would have been earned for an additional 12 months of employment.     In the event of termination of employment by Employer without Cause or by Employee for Good Reason within 180 days after the Change of Control, vesting of Employee's stock options (with respect -------------------------------------------------------------------------------- to the options granted at time of hire) will accelerate to be fully vested on the effective date of the involuntary termination without Cause or termination by the Employee for Good Cause.     The payment of severance and acceleration of the vesting of Employee's options described in this Section 4 shall be the sole compensation payable to Employee on termination of Employee's employment. 5.Definitions:     "Cause" shall mean (in each case as determined in good faith by the Board of Directors of the Employer): (i) the willful failure of the Employee to perform (other than by reason of disability), or willful misconduct or gross negligence in the performance of, the duties and responsibilities of the Employee to the Employer; provided that the Employee is first provided with written notice of the alleged failure, willful misconduct or gross negligence and is afforded a reasonable opportunity to cure the same; (ii) a breach of fiduciary duties to the Employer; (iii) a material breach of the terms of this Agreement or any other agreement between Employee and Employer, or a material violation of the written or established rules and policies of the Employer as such rules and policies may from time to time be amended or modified by the Employer; provided that the Employee is first provided with written notice of the alleged breach or violation and is afforded a reasonable opportunity, not to exceed seven days, to cure the same; (iv) the Employee's conviction, or plea of no contest for, any felony or any other crime that involves fraud, dishonesty or moral turpitude; or (v) conduct by the Employee that constitutes fraud or dishonesty, or the embezzlement or misappropriation of funds or other property by the Employee.     "Good Reason" shall mean: (i) a material diminution in the nature or scope of the Employee's responsibilities, duties or authority; provided, however, that the assignment to others of the duties and responsibilities of the Employee while the Employee is out of work due to a disability or on a leave of absence for any reason, shall not constitute a material diminution in the nature or scope of the Employee's responsibilities, duties or authority; (ii) a material breach by the Employer of its obligation to provide the Employee the compensation and benefits in accordance with the terms of his Agreement; provided that Employer is first provided with written notice of the alleged breach and is afforded a reasonable opportunity, not to exceed seven days, to cure the same; or (iii) the relocation of the Employee's principal place of work with the Employer by more than fifty (50) miles from Denver, Colorado.     "Change of Control" shall mean: a merger, liquidation, consolidation or transfer of all or substantially all of the assets of Tanning or any other transaction or series of related transactions, in each case that results in the acquisition by any person or group (other than a person or group that beneficially owns a majority of the aggregate voting power of the capital stock of Tanning immediately prior to any such transaction) of beneficial ownership of securities of Tanning representing a majority of the aggregate voting power of the capital stock of Tanning (calculated in all cases on a fully diluted basis). TANNING TECHNOLOGY CORPORATION, a Delaware corporation (Employer)   EMPLOYEE By:   /s/ Bipin Agarwal --------------------------------------------------------------------------------   /s/ Mark Teflian -------------------------------------------------------------------------------- Printed Name: Bipin Agarwal   Mark Teflian Title: Executive Vice President and Co-Founder   Date: June 19, 2001 Date: June 19, 2001     -------------------------------------------------------------------------------- QuickLinks EXHIBIT 10.1 EMPLOYMENT AGREEMENT EMPLOYEE TERM SHEET

DATED July, 06 2001         CME Development Corporation   - and -      Robert E. Burke                  CONTRACT OF EMPLOYMENT                             CONTRACT OF EMPLOYMENT AND STATEMENT OF PARTICULARS PURSUANT TO SECTION 1 OF THE EMPLOYMENT RIGHTS ACT 1996 Name and Address of Employer: CME Development Corporation c/o 8th Floor, Aldwych House 71-91 Aldwych, London, WC2B,4HN (the "Company") Name and address of Employee: Robert Burke (21 Fordington Road London N6 4SS) Date this contract takes effect July 16, 2001         1. COMMENCEMENT OF EMPLOYMENT Your employment with the Company commenced on July 16th, 2001. No previous employment counts as part of your continuous period of employment.   2. JOB TITLE AND DUTIES 2.1 Your job title is Vice-President and Chief Operating Officer, reporting to the Managing Director of the Company or to the President and Chief Executive Officer (the "CEO") of CME Media Enterprises Ltd, a Bermuda company, the ultimate owner of the CME Group companies. For the purposes of this Employment contract, "CME Group" shall mean CME Media Enterprises Ltd, and any other company, directly or indirectly through one or more intermediaries, controlling, controlled by, or under common control with CME Media Enterprises Ltd. 2.2 Your main duties shall be as reasonably assigned by the CEO from time to time commensurate with your position as Vice President and Chief Operating Officer. Your primary responsibility will be to establish, together with the CEO, an annual business plan and budget (the "Budget"), and to implement programs and procedures to enable the delivery of the annual Budget of the Company and its subsidiaries and the non-monetary objectives of the annual business plan. You, the Non-executive Chairman and the President and CEO will form what will be known as the "President's Office" to which all other employees will report directly or indirectly. A measure of the effectiveness of this office shall be the interchangability of roles and responsibilities as determined by the operating needs of the Company. 2.3 You shall devote the whole of your business time (unless prevented by ill-health or accident or otherwise directed by the Company) to the duties of this contract and you shall not be directly or indirectly interested or concerned in any manner in any other business except with the Company's prior written consent. 3. PLACE OF WORK 3.1 You will be based in the Company's London office or at such other places in the as the Company may from time to time require. 3.2 The duties of this appointment shall relate to the UK but it is, agreed that your position will require that you spend 60% to 70% of your time travelling outside the UK. 4. REMUNERATION 4.2 Your basic salary is 180,000 pounds (GBP) per annum, payable by equal monthly instalments in arrears by credit transfer into your bank account. 4.2 The Company will review your salary annually, the first review to take place no later than July 1st, 2002. Any increase of your salary is entirely at the Company's discretion and the Company will have no contractual obligation to increase your salary. 4.3 In addition to your base salary, you will be entitled to a monthly 3,500 pounds (GBP) allowance payable only until such time the Board of Directors of CME Media Enterprises Ltd will approve an initial stock option grant, if any, in accordance with Section 4.5 below 4.4 You shall be entitled to participate in an annual discretionary "Pay For Performance" scheme. 4.4.1 The amount, if any, of such a Pay for Performance shall be determined by the CEO of the Company, and is subject to the approval of the Compensation Committee of CME Media Enterprises Ltd. The Company shall provide you with the opportunity to earn annual Pay for Performance. The amount of any such Pay For Performance shall be determined by the CEO of the Company and will be assessed on the basis of achievement of yearly personal deliverables, and the performance of the Company on a combined EBITDA basis in relation to the Budget. The personal deliverables shall be established annually together with the CEO as part of the budget process. 4.4.2 The target performance pay shall be 33% of the yearly compensation. If 85% of the Budget is achieved, you will be eligible for 50% of the target performance pay. If EBITDA is 150% of Budget, you will be eligible for a performance payment equal to 200% of the target performance pay. Amounts of performance pay between 50% and 200% of the target based upon EBITDA achieved shall be calculated according to a non-linear sliding scale. The Compensation Committee may, at its sole discretion, modify the method or basis of calculation of the target performance pay for any given year. 4.4.3 Pay for Performance payment shall be made in two instalments. The first instalment shall be made in the first pay period following the Board's approval of the audited financial statements and the second instalment shall be made in the July pay period. In order to be eligible for these instalments you must be a full time employee of the Company at the time the payment is due. 4.4.4 In the event of any dispute in the calculation of the performance pay, the decision of the Compensation Committee in accordance with the above criteria shall be final. 4.4.5 For the year 2001 you will be eligible for performance pay equal to 50% of the amount otherwise payable if you had been an employee of the Company for the entire year. 4.5 In the event of completion of the pending international arbitrations regarding the Company's disputes in the Czech Republic, the Company may, in its sole discretion, grant you stocks options in CME Media Enterprises Ltd in accordance with CME Media Enterprises Ltd's Stock Option Plan. In addition, the Company may at its sole discretion extend the Stock Option Plan in the future. The timing and amount of any subsequent option awards shall be at the discretion of the Compensation Committee and the Board of Directors of CME Media Enterprises Ltd. Options will be incentive stock options to the extent permitted by Section 422(d) of the US Internal Revenue Code of 1986, as amended. In the event that any of the terms of the Stock Option Plan become more favourable to Executives of the Company, then you shall be entitled to benefit from such provisions to the extent allowed by the Compensation Committee. 5. OTHER BENEFITS 5.1 You are entitled to membership of the following schemes (each referred to below as an "insurance scheme") at the Company's expense: 5.1.1 a medical and dental expenses insurance scheme (BUPA) providing such cover for you and your legal spouse and any children under the age of eighteen (18) or under the age of twenty four, if full time students, as the Company may from time to time notify you; 5.1.2 a salary continuance on long-term disability insurance scheme providing such cover for you as the Company may from time to time notify you; 5.1.3 a life insurance scheme under which a lump sum benefit shall be payable on your death during the term of this contract, the benefit of which shall be paid to your dependants or such other beneficiary as the trustees of the scheme [select at their discretion], after considering any beneficiaries identified by you in any expression of your wishes delivered to the trustees before your death. The benefit is equal to 2 times your annual basic salary at your death, provided however that annual basic salary for this purpose shall not exceed Inland Revenue limits; 5.1.4 a personal accident insurance scheme providing such cover for you as the Company may from time to time notify you. 5.2 Benefits under any insurance scheme shall be subject to the rules of the scheme(s) and the terms of any applicable insurance policy and are conditioned upon your complying with and satisfying any applicable requirements of the insurers. Copies of these rules and policies and particulars of the requirements shall be provided to you on request. The Company shall not have any liability to pay any benefit to you under any insurance scheme unless it receives payment of the benefit from the insurer under the scheme. 5.3 Any insurance scheme which is provided for you is also subject to the Company's right to alter the cover provided or any term of the scheme or to cease to provide (without replacement) the scheme at any time if in the opinion of the Company your state of health is or becomes such that the Company is unable to insure the benefits under the scheme at the normal premiums applicable to a person of your age. 5.4 The provision of any insurance scheme does not in any way prevent the Company from lawfully terminating this contract in accordance with the provisions in clause 12 even if to do so would deprive you of membership of or cover under any such scheme. 5.5 In addition to the above, you will be entitled to all Company Benefits on such terms that are not less favourable than other senior non-expatriate executives. 6. EXPENSES The Company shall reimburse you for all reasonable expenses incurred by you in the proper performance of your duties under this contract, on production of appropriate receipts. 7. HOURS OF WORK 7.1 Your normal working hours are 40 hours per week/from 9:00 to 18:00 Monday to Friday together with such additional hours as may be necessary for the proper performance of your duties. This may include working in the evenings outside normal office hours at weekends or on public holidays. No additional pay or time off will be permitted. 7.2 In accordance with the Working Time Regulations 1998, your average working time should not exceed 48 hours for each seven day period in any reference period unless you have agreed, in a separate agreement, to opt-out of this limit. 8. HOLIDAYS 8.1 You are entitled to 20 days holiday with pay every calendar year in addition to bank and other public holidays. The Company's holiday year runs from 1st January to 31st December. 8.2 Your holiday entitlement is inclusive of your statutory entitlement, which is twenty (20) days per annum. When calculating your statutory entitlement bank and public holidays are taken into account. The statutory entitlement cannot be carried over from one holiday year to the next and no pay in lieu can be made to you. 8.3 Your entitlement to holiday accrues pro rata throughout each holiday year (disregarding fractions of days). You will be deemed to have taken statutory holiday first. 8.4 Any entitlement to holiday remaining at the end of any holiday year over and above your statutory entitlement may be carried forward to the next holiday year but no payment in lieu will be made for accrued untaken vacation. 8.5 8.5.1 If you have taken holiday in excess of your entitlement on termination of employment you will be required to give account for it and the Company will make a deduction from your final salary payment accordingly. If you have accrued holiday owing to you, the Company may at its discretion, require you to take the outstanding holiday during any notice period or make a payment in lieu thereof. 8.5.2 For the purposes of clause 8.5.1 above, a day's pay will be calculated on the basis of 1/260th of your annual salary less deductions. 8.6 If your employment is terminated without notice, you will not be entitled to holiday pay for holiday that would have accrued during the notice period, had you continued to be employed throughout that time. 9. SICKNESS 9.1 The Company may from time to time require you to be examined by a medical adviser nominated by the Company and you agree to provide such formal consents as may be necessary for the results of such examinations to be disclosed to the Company. 9.2 SSP regulations apply and the following should be noted: 9.2.1 No SSP is payable for the first three (3) qualifying days of a period of incapacity for work, unless these are linked to a previous period of incapacity as set out at 9.2.3 below. These first three qualifying days are referred as to "waiting days". 9.2.2 Provided the certification set out in clause 10 below is supplied by you, SSP will be payable from the fourth qualifying day in a period of incapacity for work up to a maximum of twenty eight (28) weeks. Qualifying days are days of the week on which you are required to be available for work within the terms of your contract. 9.2.3 If two (2) periods of incapacity for work are linked by fifty six (56) days or less and provided you have completed three waiting days in the first period of incapacity, these will count as waiting days for the purpose of the second period and the first day of absence in the second period will qualify for payment of SSP. 10. NOTIFICATION OF ABSENCE 10.1 Payment of SSP (or any other payment during sickness) is conditional upon your notifying the Company of your incapacity for work on the first day of your absence and upon certifying your absence as follows: 10.1.1 for absences of up to seven (7) successive calendar days inclusive you must on your return to work complete and sign the Sickness Declaration form, copies of which you may obtain from your immediate supervisor; 10.1.2 for absences of eight (8) successive calendar days or more you must supply a medical certificate signed by a Doctor and keep the Company regularly informed about your expected date of return to work. 11. PENSION 11.1 There is currently no pension scheme applicable to your employment and you will be contracted into the State Scheme. However, access to a Stakeholder Pension will be made available by the Company to eligible employees from 8 October 2001. 11.2 Normal retiring age is sixty five (65). 12. TERMINATION 12.1 The Company may terminate this contract on giving you 12 months notice (the "Notice Term") in writing to expire at any time. 12.2 The Company may, at any time and in its absolute discretion (whether or not any notice of termination has been given under clause 12.1 above), terminate this contract with immediate effect and make a lump sum payment in lieu of notice. This payment will be made within 15 business days of such termination and shall comprise your earned salary, accrued vacation, your basic salary (at the rate payable when this option is exercised) for the Notice Term and all benefits vested at the time of termination, and shall be subject to deductions for income tax and national insurance contributions as appropriate. You will not, under any circumstances, have any right to payment in lieu of notice unless the Company has exercised its option to pay in lieu of notice. 12.3 Your employment may be terminated by the Company without notice or payment in lieu of notice solely by reason of your gross misconduct. Examples of gross misconduct are set out in the Company's employee handbook, and the disciplinary and appeal procedures set forth therein shall govern any such circumstance, provided however, that the disciplinary and appeal procedures applicable to you, as an executive of the Company, shall be conducted by the Board of Directors or the Compensation Committee of the CME Group. 12.4 In case you fail for a period of 180 consecutive days, or for shorter periods aggregating more than 180 days during any twelve-month period, to render the services contemplated hereunder, then the Company, at its option, may terminate your employment by notice from the Company to you, effective on the giving of such notice ("Disability"). In case of termination for Disability or Retirement or Death, you will be entitled to your earned salary, your accrued vacation and your basic salary (at the rate payable when this option is exercised) for 12 months after the effective date of termination, and to all benefits vested at the effective date of termination. All payments shall be subject to deductions for income tax and national insurance contributions as appropriate. 12.5 You may terminate your employment for any reason by giving 60 days notice to the Company. You shall be paid your basic salary through the end of such 60-day notice period, together with all benefits vested at the time of termination. All payments shall be subject to deductions for income tax and national insurance contributions as appropriate. 12.6 You may also terminate your employment with the Company immediately upon giving notice to the Company for Good Reason. For purposes of this contract, Good Reason shall include a material breach by the Company of this contract, a reduction in your compensation, title, position or duties. Within five business days of such termination by you, the Company shall pay to you in a lump sum any earned salary, accrued vacation, one year of your basic salary (at the rate payable when this option is exercised), and all benefits vested at the time of termination, subject to appropriate deductions for income tax and national insurance contributions 12.7 Upon the termination by whatever means of this contract you shall immediately return to the Company all documents, computer media, credit cards, keys and all other property belonging to or relating to the business of the Company which is in your possession or under your power or control and you must not retain copies of any of the above. Upon the termination of your employment you will give up all your positions in all companies within the CME Group. 13. SUSPENSION 13.1 The Company may suspend you from your duties on full pay to allow the Company to investigate any complaint made against you in relation to your employment with the Company. 13.2 Provided you continue to enjoy your full contractual benefits and receive your pay in accordance with this contract, the Company may in its absolute discretion do all or any of the following during the notice period or any part of the notice period, after you or the Company have given notice of termination to the other, without breaching this contract or incurring any liability or giving rise to any claim against it: 13.2.1 Exclude you from the premises of the Company 13.2.2 Require you to carry out only specified duties (consistent with your status, role and experience) or to carry out no duties 13.2.3 Announce to any of its employees, suppliers, customers and business partners that you have been given notice of termination or have resigned (as the case may be) 13.2.4 Prohibit you from communicating in any way with any or all of the suppliers, customers, business partners, employees, agents or representatives of the Company until your employment has terminated except to the extent that you are authorised by your manager in writing 13.2.5 Require you to comply with any other reasonable conditions imposed by the Company. 13.3 You will continue to be bound by all obligations owed to the Company under this contract. 14. CONFIDENTIAL INFORMATION 14.1 You agree during and after the termination of your employment not to use or disclose to any person (and shall use your best endeavours to prevent the use, publication or disclosure of ) any confidential information: 14.1.1 concerning the business of the Company and which comes to your knowledge during the course of or in connection with your employment or your holding office; or 14.1.2 concerning the business of any client or person having dealings with the Company and which is obtained directly or indirectly in circumstances where the Company is subject to a duty of confidentiality. 14.2 For the purposes of paragraph 14.1 above, information of a confidential or secret nature includes but is not limited to information disclosed to you or known, learned, created or observed by you as a consequence of or through your employment, not generally known in the relevant trade or industry, about the Company's business activities, services and processes, including but not limited to information concerning advertising, sales promotion, publicity, sales data, research, programming and plans for programming, finances, accounting, methods, processes, business plans (including prospective or pending licence applications or investments in licence holders or applicants), client or supplier lists and records, potential client or supplier lists, and client or supplier billing. 14.3 This clause shall not apply to information which is: 14.3.1 used or disclosed in the proper performance of your duties or with the consent of the Company; 14.3.2 ordered to be disclosed by a court of competent jurisdiction or otherwise required to be disclosed by law; 14.3.3 comes into the public domain (otherwise than due to a default by you). 15. INTELLECTUAL PROPERTY 15.1 You shall assign with full title your entire interest in any Intellectual Property Right (defined below) to the Company to hold as absolute owner. 15.2 You shall communicate to the Company full particulars of any Intellectual Property Right in any work or thing created by you and you shall not use, assign, purport to assign or disclose to any person or exploit any Intellectual Property Right without the prior written consent of the Company. 15.3 In addition to and without derogation of the covenants imposed by the Law of Property (Miscellaneous Provisions) Act 1994 you shall prepare and execute such instruments and do such other acts and things as may be necessary or desirable (at the request and expense of the Company) to enable the Company (or its nominee) to obtain protection of any Intellectual Property Right vested in the Company in such parts of the world as may be specified by the Company (or its nominee) and to enable the Company to exploit any Intellectual Property Right vested in it to best advantage. 15.4 You hereby irrevocably appoint the Company to be your attorney in your name and on your behalf to sign, execute or do any instrument or thing and generally to use your name for the purpose of giving to the Company (or its nominees) the full benefit of the provisions of this clause and in favour of any third party a certificate in writing signed by any director or the secretary of the Company that any instrument or act falls within the authority conferred by this clause and shall be conclusive evidence that such is the case. 15.5 You hereby waive all of your moral rights (as defined in the Copyright, Designs and Patents Act 1988) in respect of any act by the Company and any act of a third party done with the Company's authority in relation to any Intellectual Property Right which is or becomes the property of the Company. 15.6 "Intellectual Property Right" means a copyright, know-how, trade secret and any other intellectual property right of any nature whatsoever throughout the world (whether registered or unregistered and including all applications and rights to apply for the same) which: 15.6.1 relates to or is useful in connection with the business or any product or service of the Company; and 15.6.2 is invented, developed, created or acquired by you (whether alone or jointly with any other person) during the period of your employment with the Company; and for these purposes and for the purposes of the other provisions of this clause 15, references to the Company shall be deemed to include references to any Associated Company, as defined in Section 16.6 below. 16. POST-EMPLOYMENT RESTRICTIONS 16.1 You agree for a period of twelve (12) months after the termination of your employment that you shall not either on your own account or on behalf of any other person, firm or company directly or indirectly, carry on or be engaged, concerned or interested in any business which is competitive with the business of securing television licenses, operating television stations and programming services in which the CME Group is engaged and with which you were actively involved in the twelve months preceding the termination of your employment (the "Restricted Business") within the territories of operation of the CME Group. 16.2 You agree, in connection with the carrying on of the Restricted Business that for a period of twelve (12) months after the termination of your employment, you shall not, either on your own account or on behalf of any other person, firm or company, directly or indirectly, seek to do business and/or do business with any person, firm or company who at any time during the twelve months preceding the termination of your employment was a customer of the Company or any Associated Company and with whom during that period you had material dealings. 16.3 You agree for a period of twelve (12) months following the termination of your employment, that you shall not solicit or employ or cause to be employed, whether directly or indirectly, any employee of the Company who has substantial knowledge of confidential aspects of the business of the Company, and with whom at any time during the period of twelve months prior to such termination you had material dealings. 16.4 Each of the restrictions in this clause shall be enforceable independently of each other and its validity shall not be affected if any of the others is invalid. If any of the restrictions is void but would be valid if some part of the restriction were deleted, the restriction in question shall apply with such modification as may be necessary to make it valid. 16.5 The restrictions set forth in this Article 16 shall not apply if the Company is in breach of this contract. 16.6 For the purposes of this clause and clause 16, "Associated Company" shall mean a subsidiary (as defined by the Companies Act 1985 as amended) and any other company which is for the time being a holding company (as defined by the Companies Act 1985 as amended) of the Company or another subsidiary of any holding company. 17. DISCIPLINARY AND GRIEVANCE PROCEDURES The Company's disciplinary and grievance procedure is set out in the Company's employee handbook and in Section 12.3 of this agreement. It does not form part of your contract of employment and may be applied at the Company's sole discretion. 18. COLLECTIVE AGREEMENTS/WORKFORCE AGREEMENTS There are no collective agreements or workforce agreements applicable to you or which affect your terms of employment. 19. DATA PROTECTION 19.1 You acknowledge that the Company will hold personal data relating to you. Such data will include your employment application, address, references, bank details, performance appraisals, work, holiday and sickness records, next of kin, salary reviews, remuneration details and other records (which may, where necessary, include sensitive data relating to your health and data held for equal opportunities purposes). The Company will hold such personal data for personnel administration and management purposes and to comply with its obligations regarding the retention of your records. Your right of access to such data is as prescribed by law. 19.2 By signing this contract, you agree that the Company may process personal data relating to you for personnel administration and management purposes and may, when necessary for those purposes, make such data available to its advisers, to third parties providing products and/or services to the Company and as required by law. 19.3 Other than as set forth above, the Company shall not use, make available or distribute any personal data relating to you without your prior written consent. 20. MONITORING OF COMPUTER SYSTEMS 20.1 The Company will monitor messages sent and received via the email and voicemail system to ensure that employees are complying with the Company's Information Technology policy. 20.2 The Company reserves the right to retrieve the contents of messages for the purpose of monitoring whether the use of the email system is in accordance with the Company's best practice, for the purpose of performance management, for the purpose of monitoring whether use of the computer system is legitimate, to find lost messages or to retrieve messages lost due to computer failure, to assist in the investigations of wrongful acts or to comply with any legal obligation. 20.3 You should be aware that no email or voice mail sent or received through the Company's system is private. The Company reserves and intends to exercise its right to review, audit, intercept, access and disclose on a random basis all messages created from it or sent over its computer system for any purpose. The contents of email or voice mail so obtained by the Company in the proper exercise of these powers may be disclosed without your permission. You should be aware that the emails or voice mails or any document created on the Company's computer system, however confidential or damaging, may have to be disclosed in court or other proceedings. An email that has been trashed or deleted can still be retrieved. 20.4 The Company further reserves and intends to exercise its right to monitor all use of the Internet through its information technology systems, to the extent authorised by law. By your signature to this contract you consent to any such monitoring. 21. GENERAL 21.1 These terms must be read in conjunction with the Company's staff handbook a copy of which you acknowledge you have received. If the terms of this contract conflict with the terms set forth in the employee handbook, the terms of this contract will prevail. The employee handbook does not form part of your contract. 21.2 You hereby authorise the Company to deduct from any salary payable to you any sums owing by you to the Company. 21.3 As from the effective date of this contract all other agreements, arrangements or contracts between you and the Company relating to the subject matter of this contract shall cease to have effect. 21.4 This contract shall be governed by and construed in accordance with English law. 22. INDEMNITY 22.1 The Company will indemnify you and pay on your behalf all Expenses (as defined below) incurred by you in any Proceeding (as defined below), whether the Proceeding which gave rise to the right of indemnification pursuant to this Agreement occurred prior to or after the date of this Agreement provided that you shall promptly notify the Company of such Proceedings and the Company shall be entitled to participate in such Proceedings and, to the extent that it wishes, jointly with you, assume the defence thereof with counsel of its choice. This indemnification shall not apply if it is determined by a court of competent jurisdiction in a Proceeding that any losses, claims, damages or liabilities arose primarily out of your gross negligence, willful misconduct or bad faith. 22.2 The term "Proceeding" shall include any threatened, pending or completed action, suit or proceeding, or any inquiry or investigation, whether brought in the name of the Company or otherwise and whether of a civil, criminal, administrative or investigative nature, including, but not limited to, actions, suits or proceedings brought under or predicated upon any securities laws, in which you may be or may have been involved as a party or otherwise, and any threatened, pending or completed action, suit or proceeding or any inquiry or investigation that you in good faith believe might lead to the institution of any such action, suit or proceeding or any such inquiry or investigation, by reason of the fact that you are or were a director, officer, employee, agent or fiduciary of the Company, by reason of any action taken by you or of any inaction on your part while acting as such director, officer, employee, agent or fiduciary or by reason of the fact that you are or were serving at the request of the Company as a director, officer, employee, trustee, fiduciary or agent of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, whether or not you are serving in such capacity at the time any liability or expense is incurred for which indemnification or reimbursement can be provided under this Agreement. 22.3 The term "Expenses" shall include, without limitation thereto, expenses (including, without limitation, attorneys' fees and expenses) of investigations, judicial or administrative proceedings or appeals, damages, judgments, fines, penalties or amounts paid in settlement by or on behalf of you and any Expenses of enforcing your right to indemnification under this Agreement. 22.4 The Expenses incurred by you in any Proceeding shall be paid by the Company as incurred and in advance of the final disposition of the Proceeding at your written request. You hereby agree and undertake to repay such amounts if it shall ultimately be decided in a Proceeding that you are not entitled to be indemnified by the Company pursuant to this Agreement or otherwise. 22.5 The indemnification and advancement of Expenses provided by this Agreement shall not be deemed exclusive of any other rights to which you may be entitled under the Company's Articles of Incorporation or Bye-Laws, any agreement, any vote of stockholders or disinterested directors, the laws under which the Company was formed, or otherwise, and may be exercised in any order you elect and prior to, concurrently with or following the exercise of any other such rights to which you may be entitled, including pursuant to directors and officers insurance maintained by the Company, both as to action in official capacity and as to action in another capacity while holding such office, and the exercise of such rights shall not be deemed a waiver of any of the provisions of this Agreement. To the extent that a change in law (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under the Company's Articles of Incorporation, Bye-Laws and this Agreement, it is the intent of the parties hereto that you shall enjoy by this Agreement the greater benefit so afforded by such change. The provisions of this Section 22 shall survive the expiration or termination, for any reason, of this agreement and shall be separately enforceable. The Company and Robert Burke agree to the terms set out above. /s/ Fred T. Klinkhammer Signed for the Company /s/ Robert E. Burke Signed by the Employee   Date July 6, 2001

          SECOND AMENDMENT AND WAIVER, dated as of February 1, 2001 (this “Amendment”), to the Credit Agreement, dated as of November 23, 1999 (as heretofore amended, the “Credit Agreement”), among MERRILL CORPORATION, a Minnesota corporation, as a guarantor (“Holdco”), MERRILL COMMUNICATIONS LLC, a Delaware limited liability company, as the borrower (the “Company”), the various financial institutions from time to time parties to the Credit Agreement (collectively, the “Lenders”), WELLS FARGO BANK, N.A., as documentation agent for the Lenders (the “Documentation Agent”), and U.S. BANK NATIONAL ASSOCIATION, as administrative agent for the Lenders (the “Administrative Agent”). W I T N E S S E T H:           WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to make, and have made, certain loans and other extensions of credit to the Company and its Subsidiaries;           WHEREAS, the Company is not in compliance with the covenants contained in Sections 7.2.4 (a), (b), (c), (d) and (f) of the Credit Agreement as of January 31, 2001 and a Default has resulted from such non-compliance (collectively, the “January 31, 2001 Non-Compliance and Defaults”).           WHEREAS, the Company has requested, and the Required Lenders have agreed, to amend certain provisions of the Credit Agreement and to forbear from the exercise of certain rights and remedies under the Credit Agreement in the manner provided for in this Amendment.           NOW, THEREFORE, in consideration of the premises contained herein, the parties hereto hereby agree as follows:           1.       Defined Terms.  Terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.           2.       Limited Waiver of Clauses (a), (b), (c), (d) and (f) of Section 7.2.4 of the Credit Agreement.  For the period from January 31, 2001 up to and including April 15, 2001 (the "Waiver Period"), the Administrative Agent and the Lenders hereby agree to waive the January 31, 2001 Non-Compliance and Defaults; provided, however, that notwithstanding the foregoing, in the event of any Default, other than the January 31, 2001 Non-Compliance and Defaults, during the Waiver Period, the Administrative Agent and the Lenders reserve the right to exercise any of their rights and remedies under the Credit Agreement or this Amendment and, in such event, Section 2 of this Amendment shall be deemed null and void.           3.       Waiver of Section 7.1.13(b) of the Credit Agreement.  The Lenders hereby waive the provisions of Section 7.1.13(b) of the Credit Agreement through February 23, 2001.           4.       Amendment to Section 7.2.7 of the Credit Agreement.  Section 7.2.7 of the Credit Agreement is hereby amended by adding, at the end thereof, a new subsection (c) to read, in its entirety, as follows: (c)  Notwithstanding anything contained in this Section 7.2.7 to the contrary, during the Waiver Period, Holdco and the Company will not, and will not permit any other Restricted Subsidiaries to, make or commit to make Capital Expenditures that exceed, on a cumulative basis at any time, the cumulative amount at such time set forth in the Weekly Cashflow Analysis delivered to the Administrative Agent and the Lenders on February 27, 2001.           5.       Amendment to Section 7.2.16 of the Credit Agreement.  Section 7.2.16 of the Credit Agreement is hereby amended by deleting such Section in its entirety and restated as follows: SECTION 7.2.16. Limitations on Cash Balances.  From and after March 1, 2001, each of Holdco and the Company will not, and will not permit any other Restricted Subsidiary to: (i)       at any time at which any Revolving Loans are outstanding, maintain cash balances, bank deposits and Cash Equivalent Investments (other than cash balances, bank deposits and Cash Equivalent Investments in an aggregate amount not exceeding $5,700,000 held by Merrill Corporation, Canada and 793473 Ontario Ltd.) in an aggregate amount greater than $12,000,000 for three (3) consecutive days; and (ii)      at any time, except with respect to cash balances, bank deposits and Cash Equivalent Investments in (a) an aggregate amount not exceeding $5,700,000 and held by Merrill Corporation, Canada and 793473 Ontario Ltd. and (b) an aggregate amount not exceeding $1,200,000 and held by non-Canadian Non-U.S. Subsidiaries, maintain cash balances, Cash Equivalent Investments or bank deposits other than with a Lender.           6.       Limitation on Investments.  During the Waiver Period, unless otherwise agreed to in writing by the Required Lenders, Holdco will not, nor permit any of its Restricted Subsidiaries to, make any Investments otherwise permitted under clause (m) of Section 7.2.5 of the Credit Agreement.           7.       Conditions to Effectiveness.                     (a)      This Amendment shall become effective on the date first written above upon the Administrative Agent having received: (i)       counterparts of this Amendment duly executed and delivered by Holdco, the Company and the Required Lenders, together with a consent to this Amendment, duly executed and delivered by the Subsidiary Guarantors; and (ii)      an amendment fee for the account of each Lender in the amount equal to 0.125% of the sum of such Lender’s aggregate outstanding extensions of credit and its unutilized Commitments as of such date.                     (b)      The provisions of Section 2 hereof shall terminate if, no later than ten (10) days after a request by the Administrative Agent, the Company has not delivered to the Administrative Agent, in form and substance satisfactory to the Administrative Agent: (i)       such duly executed additional collateral agreements as the Administrative Agent or any Lender may require from the Company and its Restricted Subsidiaries, including, without limitation, (x) certain irrevocable letters of direction to depository institutions with which the Company or any Restricted Subsidiary maintains accounts providing for remittance of funds to the Administrative Agent and (y) collateral agreements with respect to assets of the Company or any of its Restricted Subsidiaries located in jurisdictions other than the United States; and (ii)      duly executed control agreements and amendments to the Security Agreement and the related financing statements, to include expressly as Collateral investment property and securities accounts of the Company, Holdco and any of the Restricted Subsidiaries.                     8.       Continuing Effect.  Except as expressly amended and modified hereby, the Credit Agreement, including, without limitation, Articles VII and VIII thereof, shall continue to be and shall remain in full force and effect in accordance with its terms.                     9.       Interest Rate.  Notwithstanding any provisions contained in the Credit Agreement to the contrary, the parties hereto hereby agree that, commencing on February 1, 2001, the applicable interest rate for each Loan shall be the rate that would otherwise be applicable to such Loan (without regard to Section 3.2.2 of the Credit Agreement) plus 2%.                     10.     Revolving Loan Availability.  Notwithstanding any provisions contained in the Credit Agreement or in this Amendment to the contrary, the parties hereto hereby agree that, during the Waiver Period, unless the requisite amount of Lenders otherwise agree, the Company may not borrow under the Revolving Loans.                     11.     Representation and Warranties.  On and as of the date hereof, after giving effect to this Amendment, each of Holdco and the Company hereby represents and warrants to the Lenders that (i) each of its representations and warranties contained in Article VI of the Credit Agreement and in each other Loan Document are true and correct in all material respects on and as of such date as if made on and as of such date, except to the extent that (A) such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date or (B) such representations and warranties are untrue or incorrect solely by virtue of the existence of the January 31, 2001 Non-Compliance and Defaults and (ii) no Default, other than the January 31, 2001 Non-Compliance and Defaults, has occurred and is continuing.                      12.     General.  (a)  Payment of Expenses .  The Company agrees to pay or reimburse the Administrative Agent and the Lenders for all of its respective out-of-pocket costs and reasonable expenses incurred in connection with this Amendment, any other documents prepared in connection herewith, including, without limitation, the reasonable fees and disbursements of (x) counsel to the Administrative Agent and (y) counsel to the Lenders.                     (b)      No Other Amendments; Confirmation.  Except as expressly amended, modified and supplemented hereby, the provisions of the Credit Agreement are and shall remain in full force and effect.                     (c)      GOVERNING LAW.  THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.                     (d)      Counterparts.  This Amendment may be executed by one or more of the parties to this Amendment in any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Amendment signed by all the parties shall be lodged with the Company and the Administrative Agent.                     (e)      Successors.  The execution and delivery of this Amendment by any Lender shall be binding upon each of its successors and assigns (including transferees of its commitments and Loans in whole or in part prior to effectiveness hereof) and binding in respect of all of its Commitment and Loans.  [Remainder of page intentionally left blank]   IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written.   MERRILL CORPORATION           By: /s/ Steven J. Machov --------------------------------------------------------------------------------     Name: Steven J. Machov     Title: Vice President, General Counsel & Secretary           MERRILL COMMUNICATIONS LLC           By: /s/ Steven J. Machov --------------------------------------------------------------------------------     Name: Steven J. Machov     Title: Vice President, General Counsel & Secretary           DLJ CAPITAL FUNDING, INC.,     as the Syndication Agent and as a Lender           By: --------------------------------------------------------------------------------     Name:     Title:           U.S. BANK NATIONAL ASSOCIATION,     as the Administrative Agent and as a Lender           By: /s/ Joshua R. Pirozzolo --------------------------------------------------------------------------------     Name: Joshua R. Pirozzolo     Title: Assistant Vice President           WELLS FARGO BANK, N.A.,     as the Documentation Agent and as a Lender           By: /s/ Calvin R. Emerson --------------------------------------------------------------------------------       Name: Calvin R. Emerson     Title: Vice President             LENDERS             CREDIT LYONNAIS NEW YORK BRANCH, as a Lender           By: --------------------------------------------------------------------------------     Name:     Title:           HARRIS TRUST & SAVINGS BANK,     as a Lender           By: /s/ Andrew T. Claar --------------------------------------------------------------------------------     Name: Andrew T. Claar     Title: Vice President           TRANSAMERICA BUSINESS CREDIT CORP., as a Lender           By: --------------------------------------------------------------------------------     Name:     Title:           BANK ONE, N.A., as a Lender           By: /s/ Kevin Christensen --------------------------------------------------------------------------------     Name: Kevin Christensen     Title: First Vice President           COMERICA BANK, as a Lender           By: --------------------------------------------------------------------------------     Name:     Title:           THE FUJI BANK, LIMITED, as a Lender           By: /s/ Peter L. Chinnici --------------------------------------------------------------------------------     Name: Peter L. Chinnici     Title: Senior Vice President & Group Head               GE CAPITAL CORPORATION-SFG, as a Lender           By: --------------------------------------------------------------------------------     Name:     Title:           GENERAL ELECTRIC CAPITAL CORPORATION, as a Lender           By: /s/ Robert M. Kadlick --------------------------------------------------------------------------------     Name: Robert M. Kadlick     Title: Duly Authorized Signatory           FIRST UNION NATIONAL BANK, as a Lender           By: --------------------------------------------------------------------------------     Name:     Title:           APEX (IDM) CDO I, LTD., as a Lender           By: /s/ John Stelwagon --------------------------------------------------------------------------------     Name: John Stelwagon     Title: Director           ELC (CAYMAN) LTD. 1999-II, as a Lender           By: /s/ John Stelwagon --------------------------------------------------------------------------------     Name: John Stelwagon     Title: Director           ELC (CAYMAN) LTD. 1999-III, as a Lender           By: /s/ John Stelwagon --------------------------------------------------------------------------------     Name: John Stelwagon     Title: Director             ELC (CAYMAN) LTD. 2000-I           By: /s/ John Stelwagon --------------------------------------------------------------------------------     Name: John Stelwagon     Title: Director           THE DAI-ICHI KANGYO BANK, LTD.,     as a Lender           By: /s/ Takayuki Kumagai --------------------------------------------------------------------------------     Name: Takayuki Kumagai     Title: Vice President           BALANCED HIGH-YIELD FUND I LTD., as a Lender     By: BHF (USA) Capital Corporation Acting As Attorney-In-Fact           By: /s/ Dave Scheiber --------------------------------------------------------------------------------     Name: Dave Scheiber     Title: Vice President           BALANCED HIGH-YIELD FUND II LTD., as a Lender     By: BHF (USA) Capital Corporation Acting As Attorney-In-Fact           By: /s/ Dave Scheiber --------------------------------------------------------------------------------     Name: Dave Scheiber     Title: Vice President           ARCHIMEDES FUNDING, LLC, as a Lender     By: ING Capital Advisors LLC, as Collateral Manager           By: /s/ Dave Scheiber --------------------------------------------------------------------------------     Name: Dave Scheiber     Title: Vice President             ARCHIMEDES FUNDING III, LTD.,     as a Lender     By ING Capital Advisors LLC, as Collateral Manager           By: /s/ Dave Scheiber --------------------------------------------------------------------------------     Name: Dave Scheiber     Title: Vice President           KZH ING-2 LLC, as a Lender     By: /s/ Kimberly Rowe --------------------------------------------------------------------------------     Name: Kimberly Rowe     Title: Authorized Agent           SEQUILS-ING I (HBDGM), LTD., as a Lender     By ING Capital Advisors LLC, as Collateral Manager           By: /s/ Dave Scheiber --------------------------------------------------------------------------------     Name: Dave Scheiber     Title: Vice President           SWISS LIFE US RAINBOW LIMITED, as a Lender     By: ING Capital Advisors LLC, as Investment Manage r         By: /s/ Dave Scheiber --------------------------------------------------------------------------------       Name: Dave Scheiber     Title: Vice President           CYPRESSTREE INVESTMENT FUND, LLC, as a Lender     By CypressTree Investment Management Company, Inc. its Managing Member           By: /s/ Jeffrey W. Heuer --------------------------------------------------------------------------------     Name: Jeffrey W. Heuer     Title: Principal             CYPRESSTREE SENIOR FLOATING RATE FUND, as a Lender     By: CypressTree Investment Management Company, Inc. as Portfolio Manager     By:  /s/ Jeffrey W. Heuer --------------------------------------------------------------------------------     Name: Jeffrey W. Heuer     Title: Principal           CYPRESSTREE INVESTMENT PARTNERS I, LTD., as a Lender     By: CypressTree Investment Management Company, Inc. as Portfolio Manager     By: /s/ Jeffrey W. Heuer --------------------------------------------------------------------------------     Name:Jeffrey W. Heuer     Title: Principal           CYPRESSTREE INVESTMENT PARTNERS II, LTD., as a Lender     By: CypressTree Investment Management Company, Inc. as Portfolio Manager     By: /s/ Jeffrey W. Heuer --------------------------------------------------------------------------------     Name:Jeffrey W. Heuer     Title: Principal           KZH CYPRESSTREE –1 LLC, as a Lender           By: /s/ Kimberly Rowe --------------------------------------------------------------------------------     Name: Kimberly Rowe     Title: Authorized Agent           CYPRESSTREE INVESTMENT MANAGEMENT COMPANY INC.     As: Attorney-in-Fact and on behalf of First Allmerica Financial Life Insurance Company as Portfolio Manager           By: /s/ Jeffrey W. Heuer --------------------------------------------------------------------------------     Name: Jeffrey W. Heuer     Title Principal           CYPRESSTREE SENIOR. FLOATING RATE FUND, as a Lender     By: CypressTree Investment Management Company, Inc. as Portfolio Manager     By: /s/ Jeffrey W. Heuer --------------------------------------------------------------------------------     Name: Jeffrey W. Heuer     Title: Principal             MORGAN STANLEY DEAN WITTER PRIME INCOME TRUST, as a Lender     By: --------------------------------------------------------------------------------     Name:     Title:           PPM SPYGLASS FUNDING TRUST, as a Lender     By: --------------------------------------------------------------------------------     Name:     Title:           HELLER FINANCIAL, INC., as a Lender     By: /s/ Robert M Reag --------------------------------------------------------------------------------     Name: Robert M Reag     Title: Assistant Vice President           SENIOR DEBT PORTFOLIO, as a Lender     By: --------------------------------------------------------------------------------     Name:     Title:           EATON VANCE SENIOR INCOME TRUST, as a Lender           By: --------------------------------------------------------------------------------     Name:     Title:           OXFORD STRATEGIC INCOME FUND,     as a Lender           By: --------------------------------------------------------------------------------     Name:     Title:             EATON VANCE INSTITUTIONAL SENIOR LOAN FUND, as a Lender           By: --------------------------------------------------------------------------------     Name:     Title:           AVALON CAPITAL LTD., as a Lender     By: INVESCO Senior Secured Management Ins. as Portfolio Manager     By: --------------------------------------------------------------------------------     Name:     Title:           AMARA-1 FINANCE, LTD., as a Lender     By: INVESCO Senior Secured Management, Inc. as Subadviser     By: --------------------------------------------------------------------------------     Name:     Title:           CARLYLE HIGH YIELD PARTNER II, LTD., as a Lender     By: --------------------------------------------------------------------------------     Name:     Title:           STEIN ROE FLOATING RATE LIMITED LIABILITY COMPANY, as a Lender           By: /s/ Kathleen A. Zarn --------------------------------------------------------------------------------     Name: Kathleen A. Zarn     Title: Vice President Stein Rowe & Farnham Incorporated, as Advisor to the Stein Rowe Floating Rate Limited Liability Company             LIBERTY-STEIN ROE ADVISOR FLOATING RATE ADVANTAGE FUND, as a Lender, by Stein Roe & Farnham Incorporated As Advisor           By: /s/ Kathleen A. Zarn --------------------------------------------------------------------------------     Name: Kathleen A. Zarn     Title: Vice President           MAGNETITE ASSET INVESTORS, LLC, as a Lender           By: --------------------------------------------------------------------------------     Name:     Title:           STANFIELD CLO, LTD., as a Lender,     By: Stanfield Capital Partners LLC as its Collateral Manager           By: /s/ Christopher E. Jansen --------------------------------------------------------------------------------     Name: Christopher E. Jansen     Title: Managing Partner      

ELEVENTH AMENDMENT TO FORBEARANCE AGREEMENT AND NINTH AMENDMENT TO POST-CONFIRMATION LOAN AND SECURITY AGREEMENT             THIS ELEVENTH AMENDMENT TO FORBEARANCE AGREEMENT AND NINTH AMENDMENT TO POST-CONFIRMATION LOAN AND SECURITY AGREEMENT (the "Agreement") is effective as of this 8th day of June, 2001, among THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation in its capacity as Agent and Lender ("Agent"), each of the financial institutions party to the Loan Agreement (each is referred to herein as a "Lender" and collectively as the "Lenders"), TRISM, INC., a Delaware corporation ("Trism"), TRISM SECURED TRANSPORTATION, INC., a Delaware corporation ("Trism Secured"), TRI-STATE MOTOR TRANSIT CO., a Delaware corporation ("TSMT"), DIABLO SYSTEMS INCORPORATED D/B/A DIABLO TRANSPORTATION, INC., a California corporation ("Diablo"), TRISM EASTERN, INC. D/B/A C.I. WHITTEN TRANSFER, a Delaware corporation ("CI Whitten"), TRISM HEAVY HAUL, INC., a Delaware corporation ("Heavy Haul"), TRISM SPECIALIZED CARRIERS, INC., a Georgia corporation ("Specialized"), TRISM SPECIAL SERVICES, INC., a Georgia corporation ("Special Services"), TRISM LOGISTICS, INC., a Delaware corporation ("Logistics"), TRISM EQUIPMENT, INC., a Delaware corporation ("TEI") (each of Trism, Trism Secured, TSMT, Diablo, CI Whitten, Heavy Haul, Specialized, Special Services, Logistics and TEI is herein referred to individually as a "Borrower" and collectively as the "Borrowers"), AERO BODY AND TRUCK EQUIPMENT, INC., a Delaware corporation ("Aero Body"), E.L. POWELL & SONS TRUCKING CO., INC., an Oklahoma corporation ("EL Powell"), TRISM TRANSPORT, INC., a Delaware corporation ("Transport"), and TRISM TRANSPORT SERVICES, INC. ("Transport Services") (each of Aero Body, EL Powell, Transport and Transport Services is individually referred to herein as a "Guarantor" and collectively as the "Guarantors"). W I T N E S S E T H:              WHEREAS, Borrowers, Agent and Lenders are party to that certain Post-Confirmation Loan and Security Agreement, dated February 9, 2000 (as the same has been amended from time to time, the "Loan Agreement");             WHEREAS , Borrowers, Agent and Lenders desire to amend the Loan Agreement as set forth herein; and             WHEREAS , Borrowers, Guarantors, Agent and Lenders are party to that certain Forbearance Agreement, dated as of November 8, 2000 (as the same has been amended from time to time, the "Forbearance Agreement;" all capitalized terms used herein and not otherwise expressly defined herein shall have the respective meanings given to such terms in the Forbearance Agreement); and             WHEREAS , Agent, Lenders, Borrowers and Guarantors desire to amend the Forbearance Agreement as set forth herein.   --------------------------------------------------------------------------------               NOW, THEREFORE , in consideration of the foregoing premises, and other good and valuable consideration, the receipt and legal sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:             1.   Amendments to Loan Agreement and Forbearance Agreement. A. Amendments to Loan Agreement. Section 1.1 of Article 1 of the Loan Agreement is hereby amended by deleting therefrom the definition of "Initial Anniversary Date" in its entirety and inserting the following in lieu thereof: "Initial Anniversary Date" shall mean June 15, 2001. B. Amendments to Forbearance Agreement. The Forbearance Agreement is hereby amended as follows:             (i)     Paragraph 2 of the Forbearance Agreement is hereby amended by deleting therefrom the reference to the date "June 8, 2001" and inserting in lieu thereof the date "June 15, 2001."             (ii)     Paragraph 4 of the Forbearance Agreement is hereby amended by adding the following new subsection (i) thereto immediately following the end of subsection (h) thereof:                         (h)     Section 1.1 of Article 1 of the Loan Agreement is hereby further amended by deleting the phrase "; provided that the Borrowers may include in Eligible Receivables, in the aggregate, an amount of up to $500,000 of Foreign Receivables which are not L/C Backed Receivables, if the Account Debtors with respect to such Foreign Receivables are located in Canada, and" from subsection (e) of the definition of "Eligible Receivable."             2.   Representations, Warranties, Covenants and Acknowledgments. To induce Agent and Lenders to enter into this Agreement: Each Borrower and Guarantor does hereby represent and warrant that (i) as of the date hereof, all of the representations and warranties made or deemed to be made under the Forbearance Agreement and the other Loan Documents are true and correct, (ii) as of the date hereof, after giving effect to the terms hereof, there exists no (A) default or breach of the Forbearance Agreement or (B) Default or Event of Default under the Loan Agreement or any of the Loan Documents, other than any Default or Event of Default which may arise from the failure of Borrowers to pay, during the Forbearance Period, certain interest payments with respect to the Senior Notes (as defined below), (iii) such Borrower and Guarantor has the power and is duly authorized to enter into, deliver and perform this Agreement, and (iv) this Agreement and each of the Forbearance Agreement and the other Loan Documents is the legal, valid and binding obligation of the such Borrower and Guarantor enforceable against it in accordance with its terms; and Each Borrower and Guarantor does hereby reaffirm each of the agreements, covenants, and undertakings set forth in the Forbearance Agreement and each and every other Loan Document executed in connection therewith or pursuant thereto as if such Borrower or Guarantor were making said agreements, covenants and undertakings on the date hereof; and -------------------------------------------------------------------------------- Each Borrower and Guarantor does hereby acknowledge and agree that no right of offset, defense, counterclaim, claim, causes of action or objection in favor of any Borrower or Guarantor against Agent or any Lender exists arising out of or with respect to (i) the Secured Obligations, this Agreement, the Forbearance Agreement, the Loan Agreement or any of the other Loan Documents, (ii) any other documents now or heretofore evidencing, securing or in any way relating to the foregoing or (iii) the administration or funding of the Revolving Credit Loans; and Each Borrower and Guarantor does hereby acknowledge and agree that any and all references to the Loan Agreement herein or in the Forbearance Agreement shall mean and refer to the Loan Agreement, as amended by (i) that certain First Amendment to Post-Confirmation Loan and Security Agreement, dated August 31, 2000, (ii) that certain Second Amendment to Post-Confirmation Loan and Security Agreement, dated January 26, 2001, (iii) that certain Third Amendment to Post-Confirmation Loan and Security Agreement, dated February 28, 2001, (iv) that certain Fourth Amendment to Post-Confirmation Loan and Security Agreement, dated March 30, 2001, (v) that certain Fifth Amendment to Post-Confirmation Loan and Security Agreement, dated April 13, 2001, (vi) that certain Sixth Amendment to Post-Confirmation Loan and Security Agreement, dated April 27, 2001, (vii) that certain Seventh Amendment to Post-Confirmation Loan and Security Agreement, dated May 18, 2001, (viii) that certain Eighth Amendment to Post-Confirmation Loan and Security Agreement, dated June 4, 2001, and (ix) that certain Ninth Amendment to Post-Confirmation Loan and Security Agreement, as contained herein.             3.  Releases; Indemnities. In further consideration of Agent's and each Lender's execution of this Agreement, each Borrower and each Guarantor, individually and on behalf of its successors (including, without limitation, any trustees acting on behalf of such Borrower or Guarantor and any debtor-in-possession with respect to such Borrower or Guarantor), assigns, subsidiaries and Affiliates, hereby forever releases Agent and each Lender and their respective successors, assigns, parents, subsidiaries, Affiliates, officers, employees, directors, agents and attorneys (collectively, the "Releasees") from any and all debts, claims, demands, liabilities, responsibilities, disputes, causes, damages, actions and causes of actions (whether at law or in equity) and obligations of every nature whatsoever, whether liquidated or unliquidated, whether known or unknown, matured or unmatured, fixed or contingent (collectively, "Claims") that such Borrower or Guarantor may have against the Releasees which arise from or relate to any actions which the Releasees may have taken or omitted to take in connection with the Forbearance Agreement or other Loan Documents prior to the date this Agreement was executed including without limitation with respect to the Secured Obligations, any Collateral, the Loan Agreement, the Forbearance Agreement, any other Loan Document and any third parties liable in whole or in part for the Secured Obligations. This provision shall survive and continue in full force and effect whether or not such Borrower or Guarantor shall satisfy all other provisions of this Agreement, the Forbearance Agreement, the Loan Documents or the Loan Agreement including payment in full of all Secured Obligations.   --------------------------------------------------------------------------------   B. Each Borrower hereby agrees that its obligation to indemnify and hold the Releasees harmless as set forth in Section 3(a) above shall include an obligation to indemnify and hold the Releasees harmless with respect to any and all liabilities, obligations, losses, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever incurred by the Releasees, or any of them, whether direct, indirect or consequential, as a result of or arising from or relating to any proceeding by, or on behalf of any Person, including, without limitation, officers, directors, agents, trustees, creditors, partners or shareholders of such Borrower or Guarantor any subsidiary or Affiliate of such Borrower, such Guarantor whether threatened or initiated, asserting any claim for legal or equitable remedy under any statutes, regulation or common law principle arising from or in connection with the negotiation, preparation, execution, delivery, performance, administration and enforcement of this Agreement or any other document executed in connection herewith. The foregoing indemnity shall survive the payment in full of the Secured Obligations and the termination of this Agreement, the Forbearance Agreement, the Loan Agreement and the other Loan Documents                 4.   Conditions Precedent. The effectiveness of this Agreement is subject to the following conditions precedent: A. Delivery of Documents. Borrowers and Guarantors shall have delivered to Agent, on behalf of Lenders, all in form and substance acceptable to Agent in its sole discretion, (i) executed counterpart originals of this Agreement, and (ii) such other documentation as Agent may reasonably require in connection herewith; and B. Accuracy of Representations and Warranties. All of the representations and warranties made or deemed to be made in this Agreement and under the Forbearance Agreement and the other Loan Documents shall be true and correct as of the date of this Agreement, except such representations and warranties which, by their terms, are applicable to a prior specific date or period; and C. Expenses. Borrowers and Guarantors shall have agreed to jointly and severally pay to Agent the costs and expenses referred to in Section 6 hereof; and D. Fees. Borrowers and Guarantors shall have paid to Agent, for the ratable benefit of Lenders, an amendment fee in an amount equal to $37,500.00, which amendment fee shall be deemed fully earned as of the date hereof.                 5.  Effect of this Agreement; Relationship of Parties. As expressly amended hereby, the Forbearance Agreement and the other Loan Documents shall be and remain in full force and effect as originally written, and shall constitute the legal, valid, binding and enforceable obligations of Borrowers and Guarantors to Agent and Lenders. The relationship of Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, has been and shall continue to be, at all times, that of creditor and debtor and not as joint venturers or partners. Nothing contained in this Agreement, any instrument, document or agreement delivered in connection herewith or in the Forbearance Agreement, the Loan Agreement or any of the other Loan Documents shall be deemed or construed to create a fiduciary relationship between or among the parties.   --------------------------------------------------------------------------------               6.   Expenses. Borrowers and Guarantors agree to jointly and severally pay on demand all reasonable costs and expenses of Agent and Lenders in connection with the preparation, execution, delivery and enforcement of this Agreement and all other documents and any other transactions contemplated hereby, including, without limitation, the reasonable fees and out-of-pocket expenses of legal counsel to Agent and Lenders. Borrowers authorize Agent to charge the foregoing expenses to the Borrowers' loan account by increasing the principal amount of the Revolving Credit Loans by the amount of such expenses owed by Borrowers in connection herewith.             7.   Miscellaneous. Borrowers and Guarantors agree to take such further action as Agent or any Lender shall reasonably request in connection herewith to evidence the amendments herein contained to the Forbearance Agreement. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same instrument. This Agreement shall be binding upon and inure to the benefit of the successors and permitted assigns of the parties hereto. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Georgia. This Agreement embodies the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior oral or written negotiations, agreements and understandings of the parties with respect to the subject matter hereof, except the agreements embodied in the Forbearance Agreement, the Loan Agreement and the other Loan documents (as modified herein). Time is of the essence of this Agreement and of the Forbearance Agreement and the Loan Agreement.   --------------------------------------------------------------------------------               IN WITNESS WHEREOF , Borrowers, Guarantors, Lenders and Agent have caused this Agreement to be duly executed as of the date first above written.   BORROWERS:       TRISM, INC.                    By:                                                                                 Name:     Ralph Nelson    Title:     Senior Vice President and General Counsel          TRISM SECURED TRANSPORTATION, INC.    By:                                                                                Name:  Ralph Nelson Title: Senior Vice President and General Counsel       TRI-STATE MOTOR TRANSIT CO.    By:                                                                                Name:  Ralph Nelson Title:  Senior Vice President and General Counsel        --------------------------------------------------------------------------------   DIABLO SYSTEMS INCORPORATED,  D/B/A DIABLO TRANSPORTATION, INC.       By:                                                                                Name:     Ralph Nelson Title:     Senior Vice President and General Counsel       TRISM EASTERN, INC., D/B/A C. I. WHITTEN TRANSFER    By:                                                                                Name:     Ralph Nelson Title:     Senior Vice President and General Counsel       TRISM HEAVY HAUL, INC. By:                                                                                Name:  Ralph Nelson Title:  Senior Vice President and General Counsel       TRISM SPECIALIZED CARRIERS, INC.        By:                                                                                Name:  Ralph Nelson Title:  Senior Vice President and General Counsel       TRISM SPECIAL SERVICES, INC. By:                                                                                Name:  Ralph Nelson Title:  Senior Vice President and General Counsel       TRISM LOGISTICS, INC.       By:                                                                                Name:  Ralph Nelson Title:  Senior Vice President and General Counsel                 --------------------------------------------------------------------------------       TRISM EQUIPMENT, INC.    By:                                                                                Name: Ralph Nelson Title:  Senior Vice President and General Counsel GUARANTORS: AERO BODY AND TRUCK EQUIPMENT, INC. By:                                                                                Name: Ralph Nelson Title:  Senior Vice President and General Counsel       E.L. POWELL & SONS TRUCKING, INC. By:                                                                                Name:  Ralph Nelson Title:  Senior Vice President and General Counsel TRISM TRANSPORT, INC. By:                                                                                Name:  Ralph Nelson Title:  Senior Vice President and General Counsel TRISM TRANSPORT SERVICES, INC. By:                                                                                Name:   Ralph Nelson Title:  Senior Vice President and General Counsel     --------------------------------------------------------------------------------   LENDERS:    FLEET CAPITAL CORPORATION                  By:                                                                                  Name:                                                                             Title:                                                                                            THE CIT GROUP/BUSINESS CREDIT,   INC.               By:                                                                                  Name:                                                                             Title:                                                                                            AGENT:         THE CIT GROUP/BUSINESS CREDIT,      INC.                  By:                                                                                  Name:                                                                             Title:                                                                               

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.20 AMENDMENT NO. 5 TO STOCK PURCHASE AGREEMENT     THIS AMENDMENT NO. 5 TO STOCK PURCHASE AGREEMENT (this "Amendment") dated as of July 24, 2001, is made by and among Olympic Property Group LLC, a Washington limited liability company ("OPG"), Olympic Water and Sewer, Inc., a Washington corporation (the "Company"), and Port Ludlow Associates LLC, a Washington limited liability company ("Purchaser"), regarding that certain Stock Purchase Agreement dated May 29, 2001, as amended by Amendment No. 1 dated June 1, 2001, Amendment No. 2 dated June 13, 2001, Amendment No. 3 dated June 22, 2001, and Amendment No. 4 dated June 29, 2001 (as amended, the "Agreement"), among OPG, the Company, and Purchaser, for the purchase and sale of the shares of capital stock of the Company (the "Shares").     I.  EFFECT OF AMENDMENT.  This Amendment amends and modifies the Agreement. In the event of any conflict between the Agreement and this Amendment, this Amendment shall control. Except as contained within the Agreement and this Amendment, there are no other agreements or understandings among OPG, the Company, and Purchase relating to the Shares. Capitalized terms not otherwise defined herein shall have the meanings given them under the Agreement.     II.  REVIVAL.  The Agreement is hereby revived.     III.  EXTENSION OF TIME.  In Section 9.17 of the Agreement, the date "July 13, 2001," is hereby replaced by the date "August 1, 2001."     Except as expressly amended by this Amendment, the Agreement is hereby ratified and confirmed and shall remain in full force and effect. PURCHASER:   PORT LUDLOW ASSOCIATES LLC, a Washington limited liability company     By West Coast Northwest Pacific Partners LLC, a Washington limited liability company, its manager     By:   /s/ TROY D. CROSBY    --------------------------------------------------------------------------------     Print Name:   Troy D. Crosby --------------------------------------------------------------------------------     Its:   Authorized Representative --------------------------------------------------------------------------------     Date:   8/1/01 -------------------------------------------------------------------------------- OPG:   OLYMPIC PROPERTY GROUP LLC, a Washington limited liability company     By:   /s/ GREGORY M. MCCARRY    --------------------------------------------------------------------------------     Print Name:   Gregory M. McCarry --------------------------------------------------------------------------------     Its:   C.O.O. --------------------------------------------------------------------------------     Date:   8/1/01 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- COMPANY:   OLYMPIC WATER AND SEWER, INC., a Washington corporation     By:   /s/ TOM GRIFFIN    --------------------------------------------------------------------------------     Print Name:   Tom Griffin --------------------------------------------------------------------------------     Its:   President --------------------------------------------------------------------------------     Date:   8/1/01 -------------------------------------------------------------------------------- 2 -------------------------------------------------------------------------------- QuickLinks Exhibit 10.20 AMENDMENT NO. 5 TO STOCK PURCHASE AGREEMENT

Exhibit 10-32 FIRST AMENDMENT TO EMPLOYMENT AGREEMENT           This FIRST AMENDMENT to the EMPLOYMENT AGREEMENT, dated as of May 19, 2000, (the "Agreement"), by and between Energy East Corporation, a New York corporation ("Energy East") and Kenneth M. Jasinski (the "Executive") is dated as of August 1, 2001. Capitalized terms used and not defined herein shall have the meanings given to them in the Agreement.           Energy East and the Executive desire to amend the Agreement as set forth below. 1. The Agreement is hereby amended by (i) substituting for the clause "NYSEG's Supplemental Executive Retirement Plan" wherever it appears in the Agreement the clause "the Company's Supplemental Executive Retirement Plan", and (ii) substituting for the clause "NYSEG's Long Term Executive Incentive Share Plan" wherever it appears in the Agreement the clause "the Company's Long Term Executive Incentive Share Plan."   2. The first paragraph of Section 5.1 of the Agreement is hereby amended to read in its entirety as follows:           5.1 Base Salary. The Company shall pay the Executive a base salary ("Base Salary") during the period of the Executive's employment hereunder, which shall be at an initial rate of Four Hundred Twenty-Five Thousand Dollars ($425,000.00) per annum. The Base Salary shall be paid in substantially equal bi-weekly installments, in arrears. The Base Salary may be discretionarily increased by the Board from time to time as the Board deems appropriate in its reasonable business judgment. The Base Salary in effect from time to time shall not be less than the Base Salary of any other Executive Vice President of the Company and shall not be decreased during the Term. During the period of the Executive's employment hereunder, the Board shall make an annual review of the Executive's compensation. 3. The second sentence of the second paragraph of Section 5.2 of the Agreement is hereby amended to read in its entirety as follows: Notwithstanding the foregoing sentence of this Section 5.2, and any provision of the Company's Supplemental Executive Retirement Plan (or any successor plan) that may be to the contrary, if the Executive Retires from the Company subsequent to October 15, 2008, there shall instead be paid to the Executive under the Company's Supplemental Executive Retirement Plan (or any successor plan) an amount that shall be determined by (i) giving the Executive, for purposes of that plan, service credit for 40 years of service, (ii) deeming the Executive to be a "Key Person" as defined in, and for all purposes under, that plan and (iii) deeming the Executive's "highest three consecutive years of earnings within the last five years of employment" for purposes of that plan to be equal to the Executive's Base Salary at the rate in effect at the time he Retires plus the average of the highest three consecutive incentive compensation awards earned by the Executive within the last five years of employment under the AEIP (as hereinafter defined), or any successor annual executive incentive compensation plan. 4. The first and second paragraphs of Section 9.1(C) of the Agreement are hereby amended to read in their entirety as follows: The second paragraph of Section 5.2 hereof shall be inapplicable, and notwithstanding any provision of the Company's Supplemental Executive Retirement Plan (or any successor plan) that may be to the contrary, the Company shall pay to the Executive under the Company's Supplemental Executive Retirement Plan (or any successor plan) an amount that shall be determined by (i) deeming the Executive (a) to have 40 years of service credit, for purposes of that plan, (b) to be at least 60 years of age and (c) to be a "Key Person" as defined in, and for all purposes under, that plan and (ii) deeming the Executive's "highest three consecutive years of earnings within the last five years of employment" for purposes of that plan to be equal to the Executive's Base Salary as determined pursuant to Section 9.1(A)(i) hereof plus the average of the highest three consecutive incentive compensation awards earned by the Executive within the last five years of employment under the AEIP, or any successor annual executive incentive compensation plan, and such benefits shall be determined without regard to any amendment to the Company's Supplemental Executive Retirement Plan (or any successor plan) made subsequent to a Change-in-Control and on or prior to the Date of Termination, which amendment adversely affects in any manner the computation of retirement benefits thereunder; provided that the award earned by the Executive for 1998, if applicable, shall be divided by the number of full months that the Executive was employed in such year and multiplied by twelve and such annualized amount shall be used for purposes of determining such average. Notwithstanding any provision in the Company's Supplemental Executive Retirement Plan (or any successor plan) that may be to the contrary, the benefits otherwise payable to the Executive pursuant to this Section 9.1(C) shall be paid to the Executive in a lump sum payment that is equal in amount to the present value (determined in accordance with the methodology used to calculate the "Actuarial Equivalent" pursuant to Section 6(C) of the Company's Supplemental Executive Retirement Plan (or any successor plan)) of such benefits and such payments shall be in lieu of payments to which the Executive otherwise would have been entitled under the Company's Supplemental Executive Retirement Plan (or any successor plan) and shall satisfy any obligations that the Company would otherwise have to the Executive under the Company's Supplemental Executive Retirement Plan (or any successor plan). Such lump sum payment shall be paid to the Executive no later than the due date of the first payment that is or would be due to the Executive under the Company's Supplemental Executive Retirement Plan (or any successor Plan) assuming that the Executive were entitled to receive payments thereunder. 5. Section 19(F) of the Agreement is hereby amended to read in its entirety as follows:           (F)  A "Change-in-Control" shall be deemed to have occurred if the conditions set forth in any one of the following paragraphs (i), (ii), (iii) or (iv) shall have been satisfied during the Term: (i)     an acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of either (l) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); excluding, however, the following: (1) any acquisition directly from the Company, other than an acquisition by virtue of the exercise of a conversion privilege unless the security being so converted was itself acquired directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company, or (4) any acquisition pursuant to a transaction which complies with clauses (1), (2) and (3) of subsection (iii) of this definition; or (ii)     a change in the composition of the Board such that the individuals who, as of August1, 2001, constitute the Board (such Board shall be hereinafter referred to as the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, for purposes of this Section 19(F), that any individual who becomes a member of the Board subsequent to August 1, 2001, whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least two-thirds of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be considered as though such individual were a member of the Incumbent Board, but, provided, further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall not be so considered as a member of the Incumbent Board; or (iii)     consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company ("Corporate Transaction"); excluding, however, such a Corporate Transaction pursuant to which (1) all or substantially all of the individuals and entities who are the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Corporate Transaction will beneficially own, directly or indirectly, more than 60% of, respectively, the outstanding shares of common stock, and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (2) no Person (other than the Company, any employee benefit plan (or related trust) of the Company or any entity controlled by the Company or such corporation resulting from such Corporate Transaction) will beneficially own, directly or indirectly, 25% or more of, respectively, the outstanding shares of common stock of the Company resulting from such Corporate Transaction or the combined voting power of the outstanding voting securities of such corporation entitled to vote generally in the election of directors except to the extent that such ownership existed prior to the Corporate Transaction, and (3) individuals who were members of the Incumbent Board will constitute at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction; or (iv)     the approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. 6. Subparagraph (III) of Section 19(O) of the Agreement is hereby amended to read in its entirety as follows:           (III)  requiring the Executive to be based anywhere that is not within a 50-mile radius of his current address (145 Corlies Avenue, Pelham, New York 10803), except for required travel on the Company's business to an extent substantially consistent with the Executive's present business travel obligations; 7. Section 19(S) of the Agreement is hereby amended to read in its entirety "Intentionally Left Blank".   8. The Agreement is in all other aspects ratified and confirmed without amendment.           IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written. ENERGY EAST CORPORATION By:   /s/ Wesley W. von Schack                      Wesley W. von Schack       Chairman, President and       Chief Executive Officer     EXECUTIVE   /s/ Kenneth M. Jasinski                       KENNETH M. JASINSKI

DEFERRAL AGREEMENT UNDER THE ALLIANCE CAPITAL MANAGEMENT L.P. ANNUAL ELECTIVE DEFERRAL PLAN FOR YEAR 2000 BONUS OR YEAR END COMMISSION PAYMENTS           This agreement (the “Plan Agreement”) is entered between John Carifa (“you”) and Alliance Capital Management L.P. (the “Company”) with respect to your elective deferral of a portion of your Bonus or Year End Commission Payments for the year 2000 under the Alliance Capital Management L.P. Annual Elective Deferral Plan (the “Plan”).  You have elected to defer a portion of your year 2000 Bonus or Year End Commission Payments as set forth in the Deferral Election signed by you and submitted with this Plan Agreement (your “Elective Deferral”) and in connection with that deferral you agree to the terms set forth in this Plan Agreement.  The Plan provides a description of the terms and conditions governing your Elective Deferral and all other aspects of your participation in the Plan.  If there is any inconsistency between the terms of this Plan Agreement and the terms of the Plan, the Plan’s terms completely supersede and replace the conflicting terms of this Plan Agreement.  All capitalized terms have the meanings given them in the Plan, unless specifically stated otherwise in this Plan Agreement.           1.       Crediting of Your Elective Deferral.  Your Elective Deferral will be credited to you under the Plan as of the date such amount(s) would otherwise have been paid to you absent your Deferral Election.           2.       Crediting of Your Company Matching Contribution.  As of the date that you are credited with the amount(s) constituting your Elective Deferral, you shall also be credited with an additional amount equal to 20% of those amount(s) (the “Company Matching Contribution”).           3.       Conversion to Units.  Your Elective Deferral and related Company Matching Contribution shall be converted into Units as soon as practicable after such amounts are credited to you.  The price per Unit used for such conversion shall be based on: (i) For Units purchased from one or more holders of outstanding Units, the cost paid by the Company for such Units as determined pursuant to the purchase and pricing methodologies generally used under the Partners Plan, reduced, at the discretion of the Committee, by the applicable commissions and purchase transaction fees; and (ii) For Units newly issued and acquired directly from Holding, a price equal to the average regular session closing price of the Units reflected on the NYSE composite tape for the December 31 following the relevant Deferral Election Date (or, if such date is not a trading day on the NYSE, then the last preceding trading day).             4.       Distributions on Units.  Any quarterly or special distribution paid with respect to Units credited to you shall also be credited to you and shall be converted into additional Units at such intervals as may be established by the Committee, but in any event no less frequently that annually.  The price per Unit used for such conversion shall be based on: (i) For Units purchased from one or more holders of outstanding Units, the cost paid by the Company for such Units as determined pursuant to the purchase and pricing methodologies generally used under the Partners Plan, reduced, at the discretion of the Committee, by the applicable commissions and purchase transaction fees; and (ii) For Units newly issued and acquired directly from Holding, a price equal to the average regular session closing price of the Units reflected on the NYSE composite tape for the date such distributions are paid.           5.       Your Account.  As of the date that you are credited with cash amounts in respect of your Elective Deferral, Company Matching Contribution or any distribution on Units credited to you in respect of your Elective Deferral or Company Matching Contribution, those amounts shall be posted to a bookkeeping account established under the Plan in your name (your “Plan Account”).  As of the date that any such amounts are converted into Units, your Plan Account shall be amended to reflect such conversion to Units.           6.       Vesting.           (a)      Elective Deferrals. Your Elective Deferral and all distributions credited with respect to Units into which your Elective Deferral has been converted, shall be 100% vested and non-forfeitable from and after the date such Elective Deferral and distributions are credited to you.            (b)     Company Match.  You shall become vested in your Company Matching Contribution and all distributions credited with respect to Units into which your Company Matching Contribution has been converted, in installments of one-third of the amount of your Company Matching Contribution and such distributions as of December 31 of each of 2001, 2002 and 2003, provided that you remain in the employ of the Company or an affiliate as of each such December 31, except that the entire amount of your Company Matching Contribution and the related distributions credited to you will fully vest if, prior to your Termination of Employment, you die, incur a Disability or attain age 62.  In the event of your Termination of Employment prior to age 62 other than due to death or Disability, to the extent that any portion of your Company Matching Contribution and related distributions is not vested as of the date of your Termination of Employment, such unvested portion shall be forfeited by you.           7.       Distribution.           (a)      Distribution Election.  You are required to complete the distribution section of your Deferral Election to designate the time and method of distribution for the amounts covered by your Deferral Election and the Company Matching Contribution and distributions relating to such amounts.  The distribution instructions set forth in your Deferral Election shall be irrevocable as to the amounts covered by such election; provided, however, that, if you so request, the Committee may, in its sole discretion, allow you to amend your distribution instructions to extend the deferral of the amounts covered by your Deferral Election and the Company Matching Contribution and related distributions, if such amendment is made at least one year prior to the scheduled distribution commencement date for such amounts and the amendment defers commencement of such distribution for at least three years beyond the scheduled distribution commencement date.           (b)      Uncertainty as to Distribution Commencement Date.  If, with respect to amounts covered by your Deferral Election, you have failed to elect a distribution commencement date or there exists any ambiguity as to the distribution commencement date you have elected, such amounts (including the relevant vested Company Matching Contribution) may be distributed to you after the earlier of the date of your Termination of Employment or the third anniversary of your Deferral Election Date, unless determined otherwise by the Committee, in its sole discretion.           (c)      Uncertainty as to Method of Payment.  If, with respect to amounts covered by your Deferral Election, you have failed to elect a method of payment or there exists any ambiguity as to the method of payment you elected, the method of payment for such amounts (including the relevant vested Company Matching Contribution) shall be lump sum, unless determined otherwise by the Committee, in its sole discretion.           (d)      Form of Distributions.  All distributions shall be paid in-kind in the form of Units.           8.       Financial Emergencies.  If you experience an Unforseeable Financial Emergency, you may petition the Committee to (i) suspend any deferrals required but not yet made under your Deferral Election and/or (ii) receive a partial or full payout of you Account Balance.  The Committee shall have complete discretion to accept or reject your petition and to determine the amounts, if any, which may be paid out to you; provided, however, that the payout shall not exceed the lesser of your Account Balance, or the amount reasonably needed to satisfy the Unforseeable Financial Emergency.           9.       Withdrawal Election.  You (or, after your death, your Beneficiary) may elect, at any time, to withdraw all of your Account Balance, less a withdrawal penalty equal to 10% of such amount.  This election can be made at any time before or after your Retirement, Disability, death or Termination of Employment, and whether or not you (or your Beneficiary) is in the process of being paid pursuant to an installment payment schedule.  No partial withdrawals of your Account Balance shall be allowed.  You (or your Beneficiary) shall make this election by giving the Committee advance written notice of the election in a form determined from time to time by the Committee.  Once you have withdrawn your Account Balance your participation in the Plan shall terminate and you shall not be eligible to participate in the Plan in the future.           10.     Beneficiary Designation.  You are encouraged to designate a Beneficiary to receive your Account Balance under the Plan in the event of your death.  You may do so by completing and signing a Beneficiary Designation Form provided by the Committee and returning it to the Committee.  You shall have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the Beneficiary Designation Form and the Committee’s rules and procedures, as in effect from time to time.  Upon the acceptance by the Committee of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be canceled.  The Committee shall be entitled to rely on the last Beneficiary Designation Form filed by you and accepted by the Committee prior to your death.  No designation or change in designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Committee or its designated agent.  In the event of your death, the amounts relating to your Elective Deferral and the related Company Matching Contribution as well as all other amounts comprising your Account Balance will be distributed in accordance with your last Beneficiary Designation Form submitted and acknowledged by the Committee.  If you fail to designate a Beneficiary by way of a properly completed Beneficiary Designation Form acknowledged by the Committee or if all your designated Beneficiaries predecease you or die prior to complete distribution of your Account Balance, then your designated Beneficiary shall be deemed to be your estate.  If the Committee has any doubt as to the proper Beneficiary to receive payments pursuant to this Plan, the Committee shall have the right, exercisable in its discretion, to withhold such payments until this matter is resolved to the Committee’s satisfaction.           11.     Tax Withholding.  As and when any federal, state or local tax or any other charge is required by law to be withheld with respect to the vesting of amounts credited to you, the payment of distributions on any Units credited to you and the distribution of Units or other amounts from your Plan Account (a “Withholding Amount”), you agree promptly to pay the Withholding Amount to the Company in cash.  You agree that if you do not pay the Withholding Amount to the Company, the Company may withhold any unpaid portion of the Withholding Amount from any amount otherwise due to you.  Notwithstanding the foregoing, the Company may, in its sole discretion, establish and amend policies from time to time for the satisfaction of Withholding Amounts by the deduction of a portion of the Units credited to you under the Plan.           12.     Administration.  It is expressly understood that the Committee is authorized to administer, construe, and make all determinations necessary or appropriate to the administration of the Plan and this Plan Agreement, all of which shall be binding upon you.  The Committee is under no obligation to treat you or your interest under the Plan with the treatment provided for other participants in the Plan.           13.     Miscellaneous.           (a)      This Plan Agreement does not confer upon you any right to continuation of employment by the Company, nor does this Plan Agreement interfere in any way with the Company=s right to terminate your employment at any time.           (b)      Nothing in this Plan Agreement is intended or should be construed as a guarantee or assurance that you will receive any amounts in respect of a Bonus or Year End Commission Payments or any award under the Partners Plan, and all such entitlements remain in the sole discretion of the Company.           (c)      This Plan Agreement will be governed by, and construed in accordance with, the laws of the state of New York (without regard to conflict of law provisions).           (d)      This Plan Agreement and the Plan constitute the entire understanding between you and the Company regarding your year 2000 Elective Deferral and the related Company Matching Contribution.  Any prior agreements, commitments or negotiations concerning the same are superseded.  This Plan Agreement may be amended only by another written agreement, signed by both parties.             BY SIGNING BELOW, YOU AGREE TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.           IN WITNESS WHEREOF, the parties hereto have caused this Plan Agreement to be executed effective as of November 13, 2000.   Alliance Capital Management L.P.   By:      Alliance Capital Management              Corporation, General Partner       Participant Signature:       /s/ John Carifa --------------------------------------------------------------------------------   John Carifa  

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.4      INVITROGEN CORPORATION 1997 STOCK OPTION PLAN (as amended) 1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.     1.1  ESTABLISHMENT.  The Invitrogen Corporation 1997 Stock Option Plan (the "PLAN") is hereby established effective as of May 28, 1997 (the "EFFECTIVE DATE").     1.2  PURPOSE.  The purpose of the Plan is to advance the interests of the Participating Company Group and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Participating Company Group and by motivating such persons to contribute to the growth and profitability of the Participating Company Group.     1.3  TERM OF PLAN.  The Plan shall continue in effect until the earlier of its termination by the Board or the date on which all of the shares of Stock available for issuance under the Plan have been issued and all restrictions on such shares under the terms of the Plan and the agreements evidencing Options granted under the Plan have lapsed. However, all options shall be granted, if at all, within ten (10) years from the earlier of the date the Plan is adopted by the Board or the date the Plan is duly approved by the stockholders of the Company. 2. DEFINITIONS AND CONSTRUCTION.     2.1  DEFINITIONS.  Whenever used herein, the following terms shall have their respective meanings set forth below:     (a) "BOARD" means the Board of Directors of the Company. If one or more Committees have been appointed by the Board to administer the Plan, "Board" also means such Committee(s).     (b) "CODE" means the Internal Revenue Code of 1986, as amended, and any applicable regulations promulgated thereunder.     (c) "COMMITTEE" means the Compensation Committee or other committee of the Board duly appointed to administer the Plan and having,.such powers as shall be specified by the Board. Unless the powers of the Committee have been specifically limited, the Committee shall have all of the powers of the Board granted herein, including, without limitation, the power to amend or terminate the Plan at any time, subject to the terms of the Plan and any applicable limitations imposed by law.     (d) "COMPANY" means Invitrogen Corporation, a Delaware corporation, or any successor corporation thereto.     (e) "CONSULTANT" means any person, including an advisor, engaged by a Participating Company to render services other than as an Employee or a Director.     (f)  "DIRECTOR" means a member of the Board or of the board of directors of any other Participating Company.     (g) "EMPLOYEE" means any person treated as an employee (including an officer or a Director who is also treated as an employee) in the records of a Participating Company, and, with respect to any Incentive Stock Option granted to such person, who is an employee for purposes of Section 422 of the Code; provided, however, that neither service as a Director nor payment of a director's fee shall be sufficient to constitute employment for purposes of the Plan. 1 --------------------------------------------------------------------------------     (h) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.     (i)  "FAIR MARKET VALUE" means, as of any date, the value of a share of Stock or other property as determined by the Board, in its sole discretion, or by the Company, in its sole discretion, if such determination is expressly allocated to the Company herein, subject to the following:     (i)  If, on such date, there is a public market for the Stock, the Fair Market Value of a share of Stock shall be the closing sale price of a share of Stock (or the mean of the closing bid and asked prices of a share of Stock if the Stock is so quoted instead) as quoted on the Nasdaq National Market, the Nasdaq Small-Cap Market or such other national or regional securities exchange or market system constituting the primary market for the Stock, as reported in the WALL STREET JOURNAL or such other source as the Company deems reliable. If the relevant date does not fall on a day on which the Stock has traded on such securities exchange or market system, the date on which the Fair Market Value shall be established shall be the last day on which the Stock was so traded prior to the relevant date, or such other appropriate day as shall be determined by the Board, in its sole discretion.     (ii) If, on such date, there is no public market for the Stock, the Fair Market Value of a share of Stock shall be as determined by the Board without regard to any restriction other than a restriction which, by its terms, will never lapse.     (j)  "INCENTIVE STOCK OPTION" means an Option intended to be (as set forth in the Option Agreement) and which qualifies as an incentive stock option within the meaning of Section 422(b) of the Code.     (k) "INSIDER" means an officer or a Director of the Company or any other person whose transactions in Stock are subject to Section 16 of the Exchange Act.     (l)  "NONEMPLOYEE DIRECTOR" means a Director of the Company who is not an Employee.     (m) "NONEMPLOYEE DIRECTOR OPTION" means a right to purchase Stock (subject to adjustment as provided in Section 4.2) pursuant to the terms and conditions of Section 6.5 below. Nonemployee Director Options shall be Nonstatutory Stock Options.     (n) "NONSTATUTORY STOCK OPTION" means an option not intended to be (as set forth in the Option Agreement) or which does not qualify as an Incentive Stock Option.     (o) "OPTION" means a right to purchase Stock (subject to adjustment as provided in Section 4.2) pursuant to the terms and conditions of the Plan. An Option may be either an Incentive Stock Option or a Nonstatutory Stock Option.     (p) "OPTION AGREEMENT" means a written agreement between the Company and an Optionee setting forth the terms, conditions and restrictions of the Option granted to the Optionee and any shares acquired upon the exercise thereof.     (q) "OPTIONEE" means a person who has been granted one or more Options.     (r) "PARENT CORPORATION" means any present or future "parent corporation" of the Company, as defined in Section 424(e) of the Code.     (s) "PARTICIPATING COMPANY" means the Company or any Parent Corporation or Subsidiary Corporation.     (t)  "PARTICIPATING COMPANY GROUP" means, at any point in time, all corporations collectively which are then Participating Companies. 2 --------------------------------------------------------------------------------     (u) "RULE 16b-3" means Rule 16b-3 under the Exchange Act, as amended from time to time, or any successor rule or regulation.     (v) "STOCK" means the common stock of the Company, as adjusted from time to time in accordance with Section 4.2.     (w) "SUBSIDIARY CORPORATION" means any present or future "subsidiary corporation" of the Company, as defined in Section 424(f) of the Code.     (x) "TEN PERCENT OWNER OPTIONEE" means an Optionee who, at the time an Option is granted to the Optionee, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of a Participating Company within the meaning of Section 422(b)(6) of the Code.     2.2  CONSTRUCTION.  Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term "or" is not intended to be exclusive, unless the context clearly requires otherwise. 3. ADMINISTRATION.     3.1  ADMINISTRATION BY THE BOARD.  The Plan shall be administered by the Board. All questions of interpretation of the Plan or of any Option shall be determined by the Board, and such determinations shall be final and binding upon all persons having an interest in the Plan or such Option. Any officer of a Participating Company shall have the authority to act on behalf of the company with respect to any matter, right, obligation, determination or election which is the responsibility of or which is allocated to the Company herein, provided the officer has apparent authority with respect to such matter, right, obligation, determination or election.     3.2  ADMINISTRATION WITH RESPECT TO INSIDERS.  With respect to participation by Insiders in the Plan, at any time that any class of equity security of the Company is registered pursuant to Section 12 of the Exchange Act, the Plan shall be administered in compliance with the requirements, if any, of Rule 16b-3. In addition, the Board may establish a Committee of "outside directors" within the meaning of Section 162(m) of the Code to approve the grant of any Option which might reasonably be anticipated to result in the payment of employee remuneration that would otherwise exceed the limit on employee remuneration deductible for income tax purposes pursuant to Section 162(m) of the Code.     3.3  POWERS OF THE BOARD.  In addition to any other powers set forth in the Plan and subject to the provisions of the Plan, the Board shall have the full and final power and authority, in its sole discretion:     (a) to determine the persons to whom, and the time or times at which, options shall be granted and the number of shares of Stock to be subject to each Option;     (b) to designate options as Incentive Stock Options or Nonstatutory Stock Options;     (c) to determine the Fair Market Value of shares of Stock or other property;     (d) to determine the terms, conditions and restrictions applicable to each option (which need not be identical) and any shares acquired upon the exercise thereof, including, without limitation, (i) the exercise price of the Option, (ii) the method of payment for shares purchased upon the exercise of the option, (iii) the method for satisfaction of any tax withholding obligation arising in connection with the Option or such shares, including by the withholding or delivery of shares of stock, (iv) the timing, terms and conditions of the exercisability of the option or the vesting of any shares acquired upon the exercise thereof, (v) the time of the expiration of the Option, (vi) the 3 -------------------------------------------------------------------------------- effect of the Optionee's termination of employment or service with the Participating Company Group on any of the foregoing, and (vii) all other terms, conditions and restrictions applicable to the Option or such shares not inconsistent with the terms of the Plan;     (e) to approve one or more forms of Option Agreement;     (f)  to amend, modify, extend, cancel, or renew, any Option or to waive any restrictions or conditions applicable to any Option or any shares acquired upon the exercise thereof; provided, however, that without the approval of the Company's stockholders, the Board shall not reprice, replace, regrant through cancellation, or regrant by lowering the exercise price of any option and/or award previously granted under the Plans;     (g) to accelerate, continue, extend or defer the exercisability of any Option or the vesting of any shares acquired upon the exercise thereof, including with respect to the period following an Optionee's termination of employment or service with the Participating Company Group;     (h) to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to adopt supplements to, or alternative versions of, the Plan, including, without limitation, as the Board deems necessary or desirable to comply with the laws of, or to accommodate the tax policy or custom of, foreign jurisdictions whose citizens may be granted options;     (i)  to correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Option Agreement and to make all other determinations and take such other actions with respect to the Plan or any Option as the Board may deem advisable to the extent consistent with the Plan and applicable law; and     (j)  to delegate the power to grant Options to any Employee or Consultant who is not a Director, Insider, or other officer of the Company in an amount not to exceed options to purchase 25,000 shares of Stock (subject to adjustment to reflect changes in capital structure covered by Section 4.2 below); provided that any such grant shall be made only in accordance with a Stock Option Program or other program, plan, or procedure approved by the Board. 4. SHARES SUBJECT TO PLAN.     4.1  MAXIMUM NUMBER OF SHARES ISSUABLE.  Subject to adjustment as provided in Section 4.2, the maximum aggregate number of shares of Stock that may be issued under the Plan shall be the sum of (a) five million three hundred fifty-nine thousand six hundred eight-five (5,359,685) shares, and (b) the number of shares of Stock, as of the Effective Date, subject to outstanding options or reserved and available for grant pursuant to the Company's 1995 Stock Option Plan (the "1995 PLAN OPTIONS") resulting in an aggregate total of eight million four hundred eight-five thousand four hundred seventy-nine (8,485,479) shares (the "SHARE RESERVE") and shall consist of authorized and unissued or reacquired shares of Stock or any combination thereof. Notwithstanding the foregoing, the Share Reserve, determined at any time, shall be reduced by (a) the number of shares remaining subject to outstanding 1995 Plan Options, and (b) the number of shares issued upon the exercise of 1995 Plan options. If an outstanding option for any reason expires or is terminated or canceled, or if the shares of Stock acquired, subject to repurchase, upon the exercise of an Option are repurchased by the Company, the shares of Stock allocable to the unexercised portion of such option or such repurchased shares of Stock shall again be available for issuance under the Plan.     4.2  ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE.  In the event of any stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification or similar change in the capital structure of the Company, appropriate adjustments shall be made in the number and class of shares subject to the Plan, the individual share limit set forth in Section 4.3 below, the size of the automatic Nonemployee Director Option grants set forth in Section 6.5 below and to any outstanding Options and in the exercise price per share of any outstanding Options. If a majority of the 4 -------------------------------------------------------------------------------- shares which are of the same class as the shares that are subject to outstanding options are exchanged for, converted into, or otherwise become, (whether or not pursuant to an Ownership Change Event, as defined in Section 8.1) shares of another corporation (the "NEW SHARES"), the Board may unilaterally amend the outstanding options to provide that such Options are exercisable for New Shares. In the event of any such amendment, the number of shares subject to, and the exercise price per share of, the outstanding Options shall be adjusted in a fair and equitable manner as determined by the Board, in its sole discretion. Notwithstanding the foregoing, any fractional share resulting from an adjustment pursuant to this Section 4.2 shall be rounded up or down to the nearest whole number, as determined by the Board, and in no event may the exercise price of any option be decreased to an amount less than the par value, if any, of the stock subject to the option. The adjustments determined by the Board pursuant to this Section 4.2 shall be final, binding and conclusive.     4.3  INDIVIDUAL SHARE LIMIT.  The maximum aggregate number of shares of Stock with respect to which Options may be granted during any calendar year to any Employee may not exceed 500,000 shares or, in the case of the calendar year during which an Employee first commences employment with any Participating Company, 1,000,000 shares (subject to adjustment to reflect changes in capital structure covered by Section 4.2 above). 5. ELIGIBILITY AND OPTION LIMITATIONS.     5.1  PERSONS ELIGIBLE FOR OPTIONS.  Options may be granted only to Employees, Consultants, and Directors. For purposes of the foregoing sentence, "Employees," "Consultants," and "Directors" shall include prospective Employees, prospective Consultants and prospective Directors to whom options are granted in connection with written offers of employment or other service relationship with the Participating Company Group. Eligible persons may be granted more than one (1) Option.     5.2  OPTION GRANT RESTRICTIONS.  Any person who is not an Employee on the effective date of the grant of an Option to such person may be granted only a Nonstatutory Stock Option. An Incentive Stock Option granted to a prospective Employee upon the condition that such person become an Employee shall be deemed granted effective on the date such person commences service as an Employee with a Participating Company, with an exercise price determined as of such date in accordance with Section 6.1.     5.3  FAIR MARKET VALUE LIMITATION.  To the extent that options designated as Incentive Stock options (granted under all stock option plans of the Participating Company Group, including the Plan) become exercisable by an Optionee for the first time during any calendar year for stock having an aggregate Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portion of such options which exceeds such amount shall be treated as Nonstatutory Stock Options. For purposes of this Section 5.3, options designated as Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of stock shall be determined as of the time the option with respect to such stock is granted. If the Code is amended to provide for a different limitation from that set forth in this Section 5.3, such different limitation shall be deemed incorporated herein effective as of the date and with respect to such Options as required or permitted by such amendment to the Code. If an Option is treated as an Incentive Stock option in part and as a Nonstatutory Stock option in part by reason of the limitation set forth in this Section 5.3, the Optionee may designate which portion of such Option the Optionee is exercising. In the absence of such designation, the Optionee shall be deemed to have exercised the Incentive Stock Option portion of the option first. Separate certificates representing each such portion shall be issued upon the exercise of the Option. 5 -------------------------------------------------------------------------------- 6. TERMS AND CONDITIONS OF OPTIONS.     Options shall be evidenced by option Agreements specifying the number of shares of Stock covered thereby, in such form as the Board shall from time to time establish. No Option or purported option shall be a valid and binding obligation of the Company unless evidenced by a fully executed Option Agreement. Option Agreements may incorporate all or any of the terms of the Plan by reference, and except as otherwise set forth in Section 6.5 with respect to Nonemployee Director Options, shall comply with and be subject to the following terms and conditions:     6.1  EXERCISE PRICE.  The exercise price for each Option shall be established in the sole discretion of the Board; provided, however, that (a) the exercise price per share for an Incentive Stock Option shall be not less than the Fair Market Value of a share of Stock on the effective date of grant of the option, (b) the exercise price per share for a Nonstatutory Stock option shall be not less than eighty-five percent (85%) of the Fair market Value of a share of Stock on the effective date of grant of theoption, and (c) no Option granted to a Ten Percent Owner Optionee shall have an exercise price per share less than one hundred ten percent (110%) of the Fair Market Value of a share of Stock on the effective date of grant of the Option. Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an exercise price lower than the minimum exercise price set forth above if such option is granted pursuant to an assumption or substitution for another option in a manner qualifying under the provisions of Section 424(a) of the Code.     6.2  EXERCISE PERIOD.  Options shall be exercisable at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria, and restrictions as shall be determined by the Board and set forth in the Option Agreement evidencing such option; provided, however, that (a) no option shall be exercisable after the expiration of ten (10) years after the effective date of grant of such option, (b) no Incentive Stock Option granted to a Ten Percent Owner Optionee shall be exercisable after the expiration of five (5) years after the effective date of grant of such option, and (c) no option granted to a prospective Employee, prospective Consultant or prospective Director may become exercisable prior to the date on which such person commences service with a Participating Company.     6.3  PAYMENT OF EXERCISE PRICE.       (a) FORMS OF CONSIDERATION AUTHORIZED. Except as otherwise provided below, payment of the exercise price for the number of shares of Stock being purchased pursuant to any Option shall be made (i) in cash, by check, or cash equivalent, (ii) by tender to the Company of shares of Stock owned by the Optionee having a Fair Market Value (as determined by the Company without regard to any restrictions on transferability applicable to such stock by reason of federal or state securities laws or agreements with an underwriter for the Company) not less than the exercise price, (iii) by the assignment of the proceeds of a sale or loan with respect to some or all of the shares being acquired upon the exercise of the option (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System) (a "CASHLESS EXERCISE"), (iv) by the Optionee's promissory note in a form approved by the Company, (v) by such other consideration as may be approved by the Board from time to time to the extent permitted by applicable law, or (vi) by any combination thereof. The Board may at any time or from time to time, by adoption of or by amendment to the standard forms of Option Agreement described in Section 7, or by other means,grant options which do not permit all of the foregoing forms of consideration to be used in payment of the exercise price or which otherwise restrict one or more forms of consideration.     (b) TENDER OF STOCK. Notwithstanding the foregoing, an Option may not be exercised by tender to the Company of shares of Stock to the extentsuch tender of would constitute a 6 -------------------------------------------------------------------------------- violation of the provisions of any law, regulation or agreement restricting the redemption of the Company's stock. Unless otherwise provided by the Board, an Option may not be exercised by tender to the Company of shares of Stock unless such shares either have been owned by the Optionee for more than six (6) months or were not acquired, directly or indirectly, from the Company.     (c) CASHLESS EXERCISE. The Company reserves, at any and all times, the right, in the Company's sole and absolute discretion, to establish, decline to approve or terminate any program or procedures for the exercise of options by means of a Cashless Exercise.     (d) PAYMENT BY PROMISSORY NOTE. No promissory note shall be permitted if the exercise of an option using a promissory note would be a violation of any law. Any permitted promissory note shall be on such terms as the Board shall determine at the time the Option is granted. The Board shall have the authority to permit or require the Optionee to secure any promissory note used to exercise an Option with the shares of Stock acquired upon the exercise of the Option or with other collateral acceptable to the Company. Unless otherwise provided by the Board, if the Company at any time is subject to the regulations promulgated by the Board of Governors of the Federal Reserve System or any other governmental entity affecting the extension of credit in connection with the Company's securities, any promissory note shall comply with such applicable regulations, and the Optionee shall pay the unpaid principal and accrued interest, if any, to the extent necessary to comply with such applicable regulations.     6.4  TAX WITHHOLDING.  The Company shall have the right, but not the obligation, to deduct from the shares of Stock issuable upon the exercise of an Option, or to accept from the Optionee the tender of, a number of whole shares of Stock having a Fair Market Value, as determined by the Company, equal to all or any part of the federal, state, local and foreign taxes, if any, required by law to be withheld by the Participating Company Group with respect to such option or the shares acquired upon the exercise thereof. Alternatively or in addition, in its sole discretion, the Company shall have the right to require the Optionee, through payroll withholding, cash payment or otherwise, including by means of a Cashless Exercise, to make adequate provision for any such tax withholding obligations of the Participating Company Group arising in connection with the Option or the shares acquired upon the exercise thereof. The Company shall have no obligation to deliver shares of Stock or to release shares of Stock from an escrow established pursuant to the Option Agreement until the Participating Company Group's tax withholding obligations have been satisfied by the Optionee.     6.5  NONEMPLOYEE DIRECTOR OPTIONS.       (a) AUTOMATIC GRANT. Subject to the execution by a Nonemployee Director of an appropriate Option Agreement, Nonemployee Director Options shall be granted automatically and without further action of the Board, as follows:     (i)  INITIAL OPTION. Each person who first becomes a Nonemployee Director on or after the November 20, 1998 shall be granted on the date such person first becomes a Nonemployee Director a Nonemployee Director Option to purchase ten thousand (10,000) shares of Stock (an "INITIAL OPTION"); provided, however, that an Initial Option shall not be granted to a Director who previously did not qualify as a Nonemployee Director but subsequently becomes a Nonemployee Director as a result of the termination of his or her status as an Employee.     (ii) ANNUAL OPTION. Each Nonemployee Director (including any Director who previously did not qualify as a Nonemployee Director but who subsequently becomes a Nonemployee Director) shall be granted on the date immediately following each annual meeting of the stockholders of the Company which occurs on or after November 20, 1998 (an "ANNUAL MEETING") a Nonemployee Director Option to purchase ten thousand (10,000) 7 -------------------------------------------------------------------------------- shares of Stock (an "ANNUAL OPTION"); provided, however, that a Nonemployee Director granted an Initial Option less than six months prior to date of an Annual Meeting shall not be granted an Annual Option pursuant to this Section on the date immediately following the same Annual Meeting.     (iii) RIGHT TO DECLINE NONEMPLOYEE DIRECTOR OPTION. Notwithstanding the foregoing, any person may elect not to receive a Nonemployee Director option by delivering written notice of such election to the Board no later than the day prior to the date such Nonemployee Director Option would otherwise be granted. A person so declining a Nonemployee Director option shall receive no payment or other consideration in lieu of such declined Nonemployee Director Option. A person who has declined a Nonemployee Director option may revoke such election by delivering written notice of such revocation to the Board no later than the day prior to the date such Nonemployee Director Option would be granted pursuant to Section 6.5(a)(i) or 6.5(a)(ii), as the case may be.     (b) EXERCISE PRICE. The exercise price per share of Stock subject to a Nonemployee Director option shall be the Fair Market Value of a share of Stock on the date the Nonemployee Director Option is granted.     (c) EXERCISE PERIOD. Each Nonemployee Director Option shall terminate and cease to be exercisable on the date ten (10) years after the date of grant of the Nonemployee Director Option unless earlier terminated pursuant to the terms of the Plan or the Option Agreement.     (d) RIGHT TO EXERCISE NONEMPLOYEE DIRECTOR OPTIONS.     (i)  INITIAL OPTIONS. Except as otherwise provided in the Option Agreement, each initial Option shall become vested and exercisable cumulatively for 1/3 of the shares of Stock initially subject to the option on each of the first three (3) anniversaries of the date on which the initial Option was granted, provided that the Optionee's Service has not terminated prior to the relevant date.     (ii) ANNUAL OPTIONS. Except as otherwise provided in the option Agreement, each Annual Option shall become fully vested and exercisable on the first anniversary of the date of grant, provided the Optionee's Service has not terminated prior to such date.     (e) EFFECT OF TERMINATION OF SERVICE ON NONEMPLOYEE DIRECTOR OPTIONS.     (i)  OPTION EXERCISABILITY. Subject to earlier termination of the Nonemployee Director Option as otherwise provided herein, a Nonemployee Director Option shall be exercisable after an Optionee's termination of Service as follows:     (A) DISABILITY. If the Optionee's Service with the Participating Company Group is terminated because of the Disability of the Optionee, the Nonemployee Director Option, to the extent unexercised and exercisable on the date on which the Optionee's Service terminated, may be exercised by the Optionee (or the Optionee's guardian or legal representative) at any time prior to the expiration of twelve (12) months after the date on which the Optionee's Service terminated, but in any event no later than the date of expiration of the Option Expiration Date.     (B) DEATH. If the Optionee's Service with the Participating Company Group is terminated because of the death of the Optionee, the Nonemployee Director Option, to the extent unexercised and exercisable on the date on which the Optionee's Service terminated, may be exercised by the optionee's legal representative or other person who acquired the right to exercise the Nonemployee Director option by reason of the Optionee's death at any time prior to the expiration of twelve (12) months after the date 8 -------------------------------------------------------------------------------- on which the Optionee's Service terminated, but in any event no later than the Option Expiration Date. The Optionee's Service shall be deemed to have terminated on account of death if the Optionee dies within six (6) months after the Optionee's termination of Service.     (C) OTHER TERMINATION OF SERVICE. If the Optionee's Service with the Participating Company Group terminates for any reason, except Disability or death, the Nonemployee Director Option, to the extent unexercised and exercisable by the Optionee on the date on which the Optionee's Service terminated, may be exercised by the Optionee within six (6) months after the date on which the Optionee's Service terminated, but in any event no later than the Option Expiration Date.     (ii) EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b). Notwithstanding the foregoing, if a sale within the applicable time periods set forth in section 6.5(e)(i) of shares acquired upon the exercise of the Nonemployee Director Option would subject the Optionee to suit under Section 16(b) of the Exchange Act, the Nonemployee Director option shall remain exercisable until the earliest to occur of (i) the tenth (10th) day following the date on which a sale of such shares by the Optionee would no longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day after the Optionee's termination of Service, and (iii) the Option Expiration Date. 7. STANDARD FORMS OF OPTION AGREEMENT.     7.1  INCENTIVE STOCK OPTIONS.  Unless otherwise provided by the Board at the time the Option is granted, an Option designated as an "Incentive Stock option" shall comply with and be subject to the terms and conditions set forth in the form of Incentive Stock option Agreement adopted by the Board concurrently with its adoption of the Plan and as amended from time to time.     7.2  NONSTATUTORY STOCK OPTIONS.  Unless otherwise provided by the Board at the time the option is granted, an option designated as a "Nonstatutory Stock Option" shall comply with and be subject to the terms and conditions set forth in the form of Nonstatutory Stock Option Agreement adopted by the Board concurrently with its adoption of the Plan and as amended from time to time.     7.3  STANDARD TERM OF OPTIONS.  Except as otherwise provided in Section 6.2 or by the Board in the grant of an Option, any Option granted hereunder shall have a term of ten (10) years from the effective date of grant of the Option.     7.4  AUTHORITY TO VARY TERMS.  The Board shall have the authority from time to time to vary the terms of any of the standard forms of Option Agreement described in this Section 7 either in connection with the grant or amendment of an individual option or in connection with the authorization of a new standard form or forms; provided, however, that the terms and conditions of any such new, revised or amended standard form or forms of Option Agreement are not inconsistent with the terms of the Plan. 8. TRANSFER OF CONTROL.     8.1  DEFINITIONS.       (a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have occurred if any of the following occurs with respect to the Company:     (i)  the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more than fifty percent (50%) of the voting stock of the Company;     (ii) a merger or consolidation in which the Company is a party; 9 --------------------------------------------------------------------------------     (iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company; or     (iv) a liquidation or dissolution of the Company.     (b) A "TRANSFER OF CONTROL" shall mean an Ownership Change Event or a series of related ownership Change Events (collectively, the "TRANSACTION") wherein the stockholders of the Company immediately before the Transaction do not retain immediately after the Transaction, in substantially the same proportions as their ownership of shares of the Company's voting stock immediately before the Transaction, direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding voting stock of the Company or the corporation or corporations to which the assets of the Company were transferred (the "TRANSFEREE CORPORATION(S)"), as the case may be. For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting stock of one or more corporations which, as a result of the Transaction, own the Company or the Transferee Corporation(s), as the case may be, either directly or through one or more subsidiary corporations. The Board shall have the right to determine whether multiple sales or exchanges of the voting stock of the Company or multiple ownership Change Events are related, and its determination shall be final, binding and conclusive.     8.2  EFFECT OF TRANSFER OF CONTROL ON OPTIONS.  In the event of a Transfer of Control, the percentage of the Option that has vested shall be adjusted to 100% (if not already at that percentage) on the date that the Company mails the Optionee notice of the Transfer of Control at the last address shown on the records of the Company for such Optionee (the "NOTICE"), unless the surviving, continuing, successor, or purchasing corporation or parent corporation thereof, as the case may be (the "ACQUIRING CORPORATION"), either assumes the Company's rights and obligations under outstanding Options or substitutes for outstanding Options substantially equivalent options for the Acquiring Corporation's stock. Any Options which are neither assumed or substituted for by the Acquiring Corporation in connection with the Transfer of Control nor exercised as of the date fifteen days after the Notice of the Transfer of Control shall terminate and cease to be outstanding effective upon the later of (i) the date of the Transfer of Control or (ii) fifteen days after mailing of the Notice. For purposes of this Section 8.2, an option shall be deemed assumed if, following the Transfer of Control, the Option confers the right to purchase in accordance with its terms and conditions, for each share of Stock subject to the Option immediately prior to the Transfer of Control, the consideration (whether stock, cash or other securities or property) to which a holder of a share of Stock on the effective date of the Transfer of Control was entitled. Notwithstanding the foregoing, shares acquired upon exercise of an Option prior to the Transfer of Control and any consideration received pursuant to the Transfer of Control with respect to such shares shall continue to be subject to all applicable provisions of the Option Agreement evidencing such Option except as otherwise provided in such Option Agreement. Furthermore, notwithstanding the foregoing, if the corporation the stock of which is subject to the outstanding options immediately prior to an Ownership Change Event described in Section 8.1(a)(i) constituting a Transfer of Control is the surviving or continuing corporation and immediately after such ownership Change Event less than fifty percent (50%) of the total combined voting power of its voting stock is held by another corporation or by other corporations that are members of an affiliated group within the meaning of Section 1504(a) of the Code without regard to the provisions of Section 1504(b) of the Code, the outstanding options shall not terminate unless the Board otherwise provides in its sole discretion.     9. PROVISION OF INFORMATION. At least annually, copies of the Company's balance sheet and income statement for the just completed fiscal year shall be made available to each Optionee and purchaser of shares of Stock upon the exercise of an option. The Company shall not be required to provide such information to persons whose duties in connection with the Company assure them access to equivalent information. 10 --------------------------------------------------------------------------------     10. NONTRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee, an option shall be exercisable only by the Optionee or the Optionee's guardian or legal representative. No Option shall be assignable or transferable by the optionee, except by will or by the laws of descent and distribution.     11. INDEMNIFICATION. In addition to such other rights of indemnification as they may have as members of the Board or officers or employees of the Participating company Group, members of the Board and any officers or employees of the Participating Company Group to whom authority to act for the Board or the Company is delegated shall be indemnified by the Company against all reasonable expenses, including attorneys' fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any right granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the institution of such action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at its own expense to handle and defend the same.     12. TERMINATION OR AMENDMENT OF PLAN. The Board may terminate or amend the Plan at any time. However, subject to changes in applicable law, regulations or rules that would permit otherwise, without the approval of the Company's stockholders there shall be (a) no increase in the maximum aggregate number of shares of Stock that may be issued under the Plan (except by operation of the provisions of Section 4.2), (b) no change in the class of persons eligible to receive Incentive Stock Options, and (c) no other amendment of the Plan that would require approval of the Company's stockholders under any applicable law, regulation or rule. In any event, no termination or amendment of the Plan may adversely affect any then outstanding Option or any unexercised portion thereof, without the consent of the Optionee, unless such termination or amendment is required to enable an option designated as an Incentive Stock Option to qualify as an Incentive Stock option or is necessary to comply with any applicable law, regulation or rule.     13. STOCKHOLDER APPROVAL. The Plan or any increase in the maximum number of shares of Stock issuable thereunder as provided in Section 4.1 (the "MAXIMUM SHARES") shall be approved by the stockholders of the Company within twelve (12) months of the date of adoption thereof by the Board. Options granted prior to stockholder approval of the Plan or in excess of the maximum Shares previously, approved by the stockholders shall become exercisable no earlier than the date of stockholder approval of the Plan or such increase in the Maximum Shares, as the case may be. 11 -------------------------------------------------------------------------------- QuickLinks Exhibit 10.4

Exhibit 10.5 [Pursuant to Rule 24b-2, certain information has been deleted and filed separately with the Commission.] AMENDMENT TO CONTRACT MANUFACTURING SUPPLY AGREEMENT              THIS AMENDMENT (“Amendment”) to CONTRACT MANUFACTURING SUPPLY AGREEMENT dated September 22, 1999 (“Supply Agreement”), is made effective as of the 22nd day of May, 2001 by and between MBC Holding Company, (f/k/a/ Minnesota Brewing Company), a Minnesota corporation, with its principal executive offices located at 882 West Seventh Street, Saint Paul, Minnesota 55102 ("Supplier") and Mark Anthony Brewing, Inc., with its principal executive offices located at 143 Union Blvd, Suite 850, Lakewood Colorado 80228  (“Buyer” or “Mark Anthony”). WITNESSETH:              WHEREAS, Buyer, as successor to Mark Anthony International SRL, under the Supply Agreement, has retained Supplier to manufacture, blend, produce, process, bottle, label, package, store and load "Mike's Hard Lemonade" (the "Beverage") at its facilities and Supplier has agreed to manufacture the Beverage upon the terms and conditions set out in the Supply Agreement;              WHEREAS, Buyer has requested that Supplier purchase and install certain equipment and make certain improvements in its bottling operations in Saint Paul, Minnesota (the “2001 Bottling Line”) to increase production under the Supply Agreement;              WHEREAS, Supplier has agreed to acquire the 2001 Bottling Line and has entered into an Amended and Restated General Credit and Security Agreement dated as of  March 29, 2001 (the “Credit Agreement”) with Bremer Business Finance Corporation, a Minnesota corporation (“Bremer”) to finance the 2001 Bottling Line;              WHEREAS, Bremer has requested as additional collateral under the Credit Agreement that Mark Anthony cause The Bank of Nova Scotia, a Canadian bank, to issue on Mark Anthony’s behalf in favor of Bremer a Letter of Credit in the amount of $[Confidential Treatment Requested] (“Letter of Credit”);              WHEREAS, Mark Anthony has agreed to provide the Letter of Credit pursuant to the terms of a Financial Assistance and Indemnity Agreement dated as of May 22, 2001 ("Financial Assistance Agreement") and this Amendment;              WHEREAS, Bremer and Mark Anthony are parties to that certain Amended and Restated Intercreditor Agreement dated as of May 22, 2001 (the “Intercreditor Agreement”) with Stearns Bank, National Association, a United States national banking association;              WHEREAS, capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Supply Agreement.              NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements of the parties contained herein, the parties agree as follows:              1.  Priority.   Supplier hereby agrees that, during the terms of the Supply Agreement, it will establish scheduling priority on the 2001 Bottling Line to production of Beverages pursuant to the Supply Agreement over all non-proprietary labels.              2.  Limitation on Production of Competing Products. [Confidential Treatment Requested]              3.  Price Adjustments.  [Confidential Treatment Requested]              4.  Right of Set-Off.              Subject to any limitation on Mark Anthony’s right of set-off agreed to by the parties under the Intercreditor Agreement, in the event Supplier owes any amount to Buyer or its affiliates under the terms of the Financial Assistance Agreement, Buyer shall have the right to set-off against all amounts invoiced from time to time under the Supply Agreement an amount equal to the number of cases invoiced multiplied by [Confidential Treatment Requested]  multiplied by the current balance owed by Supplier to Buyer or its affiliates under the Financial Assistance Agreement divided by [Confidential Treatment Requested]. The set-off provided for in this provision shall apply to the net amount invoiced after any adjustments to the price per case required by Section 3 or otherwise in this Amendment have been applied.  Any set-off taken by Buyer under this shall reduce the amount owed by Supplier under the Financial Assistance Agreement and shall be applied first to unpaid accrued interest and second to reduction of the principle balance owed.  Any amount invoiced and set forth in this manner shall remain an obligation of Buyer, however, subject to normal payment terms.              5.  Survival of Agreement. The right of set-off set forth in Section 4 shall be in addition to all other rights that Buyer has under the Supply Agreement and the election of the right of set-off shall not limit any other rights or remedies of Buyer under the Supply Agreement.  All provisions of the Agreement not expressly modified by this Amendment will remain in full force and effect.              IN WITNESS WHEREOF, the parties have duly executed this Amendment on the date first above written. MBC HOLDING COMPANY, INC.   By: /s/ Charles M. Woodside   --------------------------------------------------------------------------------   Chief Financial Officer   --------------------------------------------------------------------------------   MARK ANTHONY BREWING, INC.   By: /s/ Duncan Johnston   --------------------------------------------------------------------------------   Treasurer   --------------------------------------------------------------------------------    

As amended July 13, 2001       2001 Incentive and Non-Statutory Stock Option Plan of THE J. JILL GROUP, INC.   TABLE OF CONTENTS SECTION 1   PURPOSE   SECTION 2   ADMINISTRATION   2.1   The Committee.   2.2   Powers of the Committee.   SECTION 3   STOCK   3.1   Stock to be Issued.   3.2   Expiration, Cancellation or Termination of Option.   3.3   Limitation on Grants.   SECTION 4   ELIGIBILITY   4.1   Persons Eligible.   4.2   Greater-Than-Ten-Percent Stockholders.   4.3   Maximum Aggregate Fair Market Value.   4.4   Option Grants to Eligible Directors.   SECTION 5   TERMINATION OF EMPLOYMENT OR DEATH OF OPTIONEE   5.1   Termination of Employment.   5.2   Death or Retirement of Optionee.   SECTION 6   TERMS OF THE OPTION AGREEMENTS   6.1   Expiration of Option.   6.2   Exercise.   6.3   Purchase Price.   6.4   Transferability of Options.   6.5   Rights of Optionees.   6.6   Repurchase Right.   6.7   "Lockup" Agreement.   SECTION 7   METHOD OF EXERCISE, PAYMENT OF PURCHASE PRICE   7.1   Method of Exercise.   7.2   Payment of Purchase Price.   SECTION 8   CHANGES IN COMPANY’S CAPITAL STRUCTURE   8.1   Rights of Company.   8.2   Recapitalization, Stock Splits and Dividends.   8.3   Merger without Change of Control.   8.4   Sale or Merger with Change of Control.   8.5   Adjustments to Common Stock Subject to Options.   8.6   Miscellaneous.   SECTION 9   GENERAL RESTRICTION   9.1   Investment Representations.   9.2   Compliance with Securities Laws.   9.3   Employment Obligation.   9.4   Withholding Tax.   SECTION 10   AMENDMENT OR TERMINATION OF THE PLAN   SECTION 11   NONEXCLUSIVITY OF THE PLAN   SECTION 12   EFFECTIVE DATE AND DURATION OF THE PLAN       2001 Incentive and Non-Statutory Stock Option Plan of The J. Jill Group, Inc. Section 1. Purpose              This 2001 Incentive and Non-Statutory Stock Option Plan (the “Plan”) of The J. Jill Group, Inc. (the "Company"), is designed to provide additional incentive to executives and other key employees of the Company, and any parent or subsidiary of the Company, and for certain other individuals providing services to or acting as directors of the Company or any such parent or subsidiary.  The Company intends that this purpose will be effected by the granting of incentive stock options ("Incentive Stock Options") as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and Non-Statutory stock options ("Non-Statutory Options") under the Plan which afford such executives, key employees or other individuals an opportunity to acquire or increase their proprietary interest in the Company through the acquisition of shares of its Common Stock.  The Company intends that Incentive Stock Options issued under the Plan will qualify as "incentive stock options" as defined in Section 422 of the Code and the terms of the Plan shall be interpreted in accordance with this intention.  The terms "parent" and "subsidiary" shall have the respective meanings set forth in Section 424 of the Code. Section 2. Administration              2.1 The Committee.  The Plan shall be administered by the Compensation Committee of the Board of Directors (the "Board") or another committee consisting of at least two members of the Company's Board (in either case, the "Committee").  None of the members of the Committee shall be an officer or other employee of the Company.  It is the intention of the Company that the members of the Committee shall each be a "Non-Employee Director" within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 and an "Outside Director ” (as such term is defined below), but the authority and validity of any act taken or not taken by the Committee shall not be affected if any person administering the Plan is not a "Non-Employee Director" or "outside director."  Except as specifically reserved to the Board under the terms of the Plan, the Committee shall have full and final authority to operate, manage and administer the Plan on behalf of the Company.  Action by the Committee shall require the affirmative vote of a majority of all members thereof.  The term “Outside Director” as used in the Plan (1) shall mean a director who (i) is not an employee of the Company or of any “affiliated group,” as such term is defined in Section 1504(a) of the Code, which includes the Company (an “Affiliate”), (ii) is not a former employee of the Company or any Affiliate who is receiving compensation for prior services (other than benefits under a tax-qualified retirement plan) during the Company’s or any Affiliate’s taxable year, (iii) has not been an officer of the Company or any Affiliate and (iv) does not receive remuneration from the Company or any Affiliate, either directly or indirectly, in any capacity other than as a director, and (2) shall be determined, and amended where necessary, in accordance with Section 162(m) of the Code and the Treasury regulations issued thereunder.              2.2 Powers of the Committee.  Subject to the terms and conditions of the Plan, the Committee shall have the power:              (a)         To determine from time to time the persons eligible to receive options and the options to be granted to such persons under the Plan and to prescribe the terms, conditions, restrictions, if any, and provisions (which need not be identical) of each option granted under the Plan to such persons;              (b)        To construe and interpret the Plan and options granted thereunder and to establish, amend, and revoke rules and regulations for administration of the Plan.  In this connection, the Committee may correct any defect or supply any omission, or reconcile any inconsistency in the Plan, or in any option agreement, in the manner and to the extent it shall deem necessary or expedient to make the Plan fully effective.  All decisions and determinations by the Committee in the exercise of this power shall be final and binding upon the Company and optionees;              (c)         To make, in its sole discretion, changes to any outstanding option granted under the Plan, including:                            (i)             to accelerate the vesting schedule; or                            (ii)             to extend the expiration date; provided, however, that the Committee shall not have the power to reprice any options issued under the Plan, whether by reducing their exercise price or canceling them and issuing replacement options in their stead.              (d)             Generally, to exercise such powers and to perform such acts as are deemed necessary or expedient to promote the best interests of the Company with respect to the Plan. Section 3. Stock              3.1 Stock to be Issued.  The stock subject to the options granted under the Plan shall be shares of the Company's authorized but unissued common stock, $.01 par value (the "Common Stock"), or shares of the Company's Common Stock held in treasury.  The total number of shares that may be issued pursuant to options granted under the Plan shall not exceed an aggregate of 1,000,000 shares of Common Stock; provided, however, that the class and aggregate number of shares which may be subject to options granted under the Plan shall be subject to adjustment as provided in Section 8 hereof.              3.2 Expiration, Cancellation or Termination of Option.  Whenever any outstanding option under the Plan expires, is cancelled or is otherwise terminated (other than by exercise), the shares of Common Stock allocable to the unexercised portion of such option may again be the subject of options under the Plan.              3.3 Limitation on Grants.  In no event may any person be granted options under the Plan in any calendar year to purchase more than 250,000 shares of Common Stock.  The number of shares of Common Stock issuable pursuant to an option granted under the Plan that is subsequently forfeited, cancelled or otherwise terminated shall continue to count toward the foregoing limitation in the calendar year of grant. Section 4. Eligibility              4.1 Persons Eligible.  Incentive Stock Options under the Plan may be granted only to officers and other employees of the Company or any parent or subsidiary of the Company.  Non-Statutory Options may be granted to officers or other employees of the Company or any parent or subsidiary of the Company, and to members of the Board and consultants or other persons who render services to the Company or any such parent or subsidiary (regardless of whether they are also employees), provided, however, that options may be granted to members of the Board who are not employees of the Company or any such parent or subsidiary ("Eligible Directors") only as provided in Section 4.4.              4.2 Greater-Than-Ten-Percent Stockholders.  Except as may otherwise be permitted by the Code or other applicable law or regulation, no Incentive Stock Option shall be granted to an individual who, at the time the option is granted, owns (including ownership attributed pursuant to Section 425 of the Code) more than ten percent of the total combined voting power of all classes of stock of the Company or any parent or subsidiary (a "greater-than-ten-percent stockholder"), unless such Incentive Stock Option provides that (i) the purchase price per share shall not be less than one hundred ten percent of the fair market value of the Common Stock at the time such option is granted, and (ii) that such option shall not be exercisable to any extent after the expiration of five years from the date it is granted.              4.3 Maximum Aggregate Fair Market Value.  The aggregate fair market value (determined at the time the option is granted) of the Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any optionee during any calendar year (under the Plan and any other plans of the Company or any parent or subsidiary for the issuance of incentive stock options) shall not exceed $100,000 (or such greater amount as may from time to time be permitted with respect to incentive stock options by the Code or any other applicable law or regulation).              4.4 Option Grants to Eligible Directors.              (a)             Relation to Prior Plans.  After the date of the meeting of stockholders at which this Plan is approved, the provisions of this Section 4.4 shall supersede those of Section 4.4 of the Company’s Amended and Restated 1993 Incentive and Non-Qualified Stock Option Plan.              (b)             Grant of Options.                            (i)             On the date each new Eligible Director first joins the Board, such Eligible Director shall automatically be granted a Non-Statutory Option to purchase 20,000 shares of Common Stock.  Such Non-Statutory Option shall be immediately vested in full unless otherwise determined by the Committee prior to the grant of such Non-Statutory Option.                            (ii)             On the date of each annual meeting of the Company's stockholders or special meeting in lieu thereof, each Eligible Director who has served for at least six months and continues to serve at that meeting shall automatically be granted a Non-Statutory Option to purchase 7,500 shares of Common Stock.  Such Non-Statutory Option shall be immediately vested in full.              (c)             Purchase Price.  The purchase price per share of Common Stock under each Non-Statutory Option granted pursuant to this Section 4.4 shall be equal to the fair market value of the Common Stock on the date the Non-Statutory Option is granted, such fair market value to be determined in accordance with the provisions of Section 6.3.              (d)             Expiration.  Each Non-Statutory Option granted to an Eligible Director under this Section 4.4 shall expire on the tenth anniversary of the date of grant. Section 5. Termination of Employment or Death of Optionee              5.1 Termination of Employment.  Except as may be otherwise expressly provided herein, options shall terminate on the earlier of:              (a)             the date of expiration thereof;              (b)             immediately upon the termination of the optionee's employment with or performance of services for the Company (or any parent or subsidiary of the Company) by the Company (or any such parent or subsidiary) for cause (as determined by the Company or such parent or subsidiary); or              (c)             thirty days after the date of termination of the optionee's employment with or performance of services for the Company (or any parent or subsidiary of the Company) by the Company (or any such parent or subsidiary) without cause or voluntarily by the optionee; provided, that Non-Statutory Options granted to persons who are not employees of the Company (or any parent or subsidiary of the Company) need not, unless the Committee determines otherwise, be subject to the provisions set forth in clauses (b) and (c) above.              An employment relationship between the Company (or any parent or subsidiary of the Company) and the optionee shall be deemed to exist during any period in which the optionee is employed by the Company (or any such parent or subsidiary).  Whether authorized leave of absence, or absence on military or government service, shall constitute termination of the employment relationship between the Company (or any parent or subsidiary of the Company) and the optionee shall be determined by the Committee at the time thereof.  As used herein, "cause" shall mean (x) any material breach by the optionee of any agreement to which the optionee and the Company (or any parent or subsidiary of the Company) are both parties, (y) any act or omission to act by the optionee which may have a material and adverse effect on the business of the Company (or any such parent or subsidiary) or on the optionee's ability to perform services for the Company (or any such parent or subsidiary), including, without limitation, the commission of any crime (other than ordinary traffic violations), or (z) any material misconduct or material neglect of duties by the optionee in connection with the business or affairs of the Company (or any such parent or subsidiary) or any affiliate of the Company (or any such parent or subsidiary).              5.2 Death or Retirement of Optionee.  In the event of the death of the holder of an option that is subject to clause (b) or (c) of Section 5.1 above prior to termination of the optionee's employment with or performance of services for the Company (or any parent or subsidiary of the Company) and before the date of expiration of such option, such option shall terminate on the earlier of such date of expiration or one year following the date of such death.  After the death of the optionee, his executors, administrators or any person or persons to whom his option may be transferred by will or by the laws of descent and distribution, shall have the right, at any time prior to such termination, to exercise the option to the extent the optionee was entitled to exercise such option at the time of his death.              If, before the date of the expiration of an option that is subject to clause (b) or (c) of Section 5.1 above, the optionee shall be retired in good standing from the Company for reasons of age or disability under the then established rules of the Company, the option shall terminate on the earlier of such date of expiration or ninety (90) days after the date of such retirement.  In the event of such retirement, the optionee shall have the right prior to the termination of such option to exercise the option to the extent to which he was entitled to exercise such option immediately prior to such retirement. Section 6. Terms of the Option Agreements              Each option agreement shall be in writing and shall contain such terms, conditions, restrictions, if any, and provisions as the Committee shall from time to time deem appropriate.  Such provisions or conditions may include without limitation restrictions on transfer, repurchase rights, or such other provisions as shall be determined by the Committee; provided that such additional provisions shall not be inconsistent with any other term or condition of the Plan and such additional provisions shall not cause any Incentive Stock Option granted under the Plan to fail to qualify as an incentive option within the meaning of Section 422 of the Code.  The shares of stock issuable upon exercise of an option by any executive officer, director or beneficial owner of more than ten percent of the Common Stock of the Company may not be sold or transferred (except that such shares may be issued upon exercise of such option) by such officer, director or beneficial owner for a period of six months following the grant of such option.              Option agreements need not be identical, but each option agreement by appropriate language shall include the substance of all of the following provisions:              6.1 Expiration of Option.  Notwithstanding any other provision of the Plan or of any option agreement, each option shall expire on the date specified in the option agreement, which date shall not, in the case of an Incentive Stock Option, be later than the tenth anniversary (fifth anniversary in the case of a greater-than-ten-percent stockholder) of the date on which the option was granted, or as specified in Section 5 of this Plan.              6.2 Exercise.  Each option may be exercised, so long as it is valid and outstanding, from time to time in part or as a whole, subject to any limitations with respect to the number of shares for which the option may be exercised at a particular time and to such other conditions as the Committee in its discretion may specify upon granting the option.              6.3 Purchase Price.  The purchase price per share under  each option shall be determined by the Committee at the time the option is granted; provided, however, that the option price of any option shall not, unless otherwise permitted by the Code or other applicable law or regulation, be less than the fair market value of the Common Stock on the date the option is granted (110% of the fair market value in the case of the grant of an Incentive Stock Option to a greater-than-ten-percent stockholder).  For the purpose of the Plan the fair market value of the Common Stock shall be the closing price per share on the date of grant of the option as reported by a nationally recognized stock exchange, or, if the Common Stock is not listed on such an exchange, as reported by the National Association of Securities Dealers Automated Quotation System ("Nasdaq") National Market System or, if the Common Stock is not listed on the Nasdaq National Market System, the mean of the bid and asked prices per share on the date of grant of the option or, if the Common Stock is not traded over the counter, the fair market value as determined by the Committee.              6.4 Transferability of Options.  Options shall not be transferable by the optionee otherwise than by will or under the laws of descent and distribution, and shall be exercisable, during his lifetime, only by him/her.              6.5 Rights of Optionees. No optionee shall be deemed for any purpose to be the owner of any shares of Common Stock subject to any option unless and until the option shall have been exercised pursuant to the terms thereof, and the Company shall have issued and delivered the shares to the optionee.              6.6 Repurchase Right.  The Committee may in its discretion provide upon the grant of any option hereunder that the Company shall have an option to repurchase upon such terms and conditions as determined by the Committee all or any number of shares purchased upon exercise of such option.  The repurchase price per share payable by the Company shall be such amount or be determined by such formula as is fixed by the Committee at the time the option for the shares subject to repurchase is granted.  In the event the Committee shall grant options subject to the Company's repurchase option, the certificates representing the shares purchased pursuant to such option shall carry a legend satisfactory to counsel for the Company referring to the Company's repurchase option.              6.7 "Lockup" Agreement.  The Committee may in its discretion specify upon granting an option that the optionee shall agree for a period of time (not to exceed 180 days) from the effective date of any registration of securities of the Company (upon request of the Company or the underwriters managing any underwritten offering of the Company's securities), not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any shares issued pursuant to the exercise of such option, without the prior written consent of the Company or such underwriters, as the case may be. Section 7. Method of Exercise, Payment of Purchase Price              7.1 Method of Exercise.  Any option granted under the Plan may be exercised by the optionee by delivering to the Company on any business day a written notice specifying the number of shares of Common Stock the optionee then desires to purchase and specifying the address to which the certificates for such shares are to be mailed (the "Notice"), accompanied by payment for such shares.              7.2 Payment of Purchase Price.  Payment for the shares of Common Stock purchased pursuant to the exercise of an option shall be made by one or more of the following methods: (i) in cash, by certified or bank check or other instrument acceptable to the Committee; (ii) by the optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the purchase price; provided that in the event the optionee chooses to pay the purchase price as so provided, the optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Committee shall prescribe as a condition of such payment procedure; and provided further that the Company need not act upon such exercise notice until the Company receives full payment of the exercise price; or (iii) by any other means (including, without limitation, by delivery of a promissory note of the optionee payable on such terms as are specified by the Committee; provided, however, that the interest rate borne by such note shall not be less than the lowest applicable federal rate, as defined in Section 1247(d) of the Code) which the Committee determines are consistent with the purpose of the Plan and with applicable laws and regulations.  As promptly as practicable after receipt of the Notice and accompanying payment, the Company shall deliver to the optionee certificates for the number of shares with respect to which such option has been so exercised, issued in the optionee's name; provided, however, that such delivery shall be deemed effected for all purposes when the Company or a stock transfer agent of the Company shall have deposited such certificates in the United States mail, addressed to the optionee, at the address specified in the Notice. Section 8. Changes in Company’s Capital Structure              8.1 Rights of Company.  The existence of outstanding options shall not affect in any way the right or power of the Company or its stockholders to make or authorize, without limitation, any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issue of Common Stock, or any issue of bonds, debentures, preferred or prior preference stock or other capital stock ahead of or affecting the Common Stock or the rights thereof, or the dissolution or liquidation of the Company, or any  sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.              8.2 Recapitalization, Stock Splits and Dividends.  If the Company shall effect a subdivision or consolidation of shares or other capital readjustment, the payment of a stock dividend, or other increase or reduction of the number of shares of the Common Stock outstanding, in any such case without receiving compensation therefor in money, services or property, then (i) the number, class, and price per share of shares of stock subject to outstanding options hereunder shall automatically be appropriately adjusted in such a manner as to entitle an optionee to receive upon exercise of an option, for the same aggregate cash consideration, the same total number and class of shares as he would have received as a result of the event requiring the adjustment had he exercised his option in full immediately prior to such event; and (ii) the number and class of shares set forth in Sections 3.1, 3.3 and 4.4 shall be adjusted by substituting therefor that number and class of shares of stock that the owner of an equal number of outstanding shares of Common Stock would own as the result of the event requiring the adjustment.              8.3 Merger without Change of Control.  After a merger of one or more corporations into the Company, or after a consolidation of the Company and one or more corporations in which (i) the Company shall be the surviving corporation, and (ii) the stockholders of the Company immediately prior to such merger or consolidation own after such merger or consolidation shares representing at least fifty percent of the voting power of the Company, each holder of an outstanding option shall, at no additional cost, be entitled upon exercise of such option to receive in lieu of the number of shares as to which such option shall then be so exercisable, the number and class of shares of stock or other securities to which such holder would have been entitled pursuant to the terms of the agreement of merger or consolidation if, immediately prior to such merger or consolidation, such holder had been the holder of record of a number of shares of Common Stock equal to the number of shares for which such option was exercisable.              8.4 Sale or Merger with Change of Control.  If the Company is merged into or consolidated with another corporation under circumstances where the Company is not the surviving corporation, or if there is a merger or consolidation where the Company is the surviving corporation but the stockholders of the Company immediately prior to such merger or consolidation do not own after such merger or consolidation shares representing at least fifty percent of the voting power of the Company, or if the Company is liquidated, or sells or otherwise disposes of substantially all of its assets to another corporation while unexercised options remain outstanding under the Plan, (i) subject to the provisions of clause (iii) below, after the  effective date of such merger, consolidation, liquidation, sale or disposition, as the case may be, each holder of an outstanding option shall be entitled, upon exercise of such option, to receive, in lieu of shares of Common Stock, shares of such stock or other securities, cash or property as the holders of shares of Common Stock received pursuant to the terms of the merger, consolidation, liquidation, sale or disposition; (ii) the Committee may accelerate the time for exercise of all unexercised and unexpired options to and after a date prior to the effective date of such merger, consolidation, liquidation, sale or disposition, as the case may be, specified by the Committee; or (iii) all outstanding options may be cancelled by the Committee as of the effective date of any such merger, consolidation, liquidation, sale or disposition, provided that (x) notice of such cancellation shall be given to each holder of an option and (y) each holder of an option shall have the right to exercise such option to the extent that the same is then exercisable or, if the Committee shall have accelerated the time for exercise of all unexercised and unexpired options, in full during the 30-day period preceding the effective date of such merger, consolidation, liquidation, sale or disposition.              8.5 Adjustments to Common Stock Subject to Options.  Except as hereinbefore expressly provided, the issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, for cash or property, or for labor or services, either upon direct sale or upon the exercise of  rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock then subject to outstanding options.              8.6 Miscellaneous.  Adjustments under this Section 8 shall be determined by the Committee, and such determinations shall be conclusive.  No fractional shares of Common Stock shall be issued under the Plan on account of any adjustment specified above. Section 9. General Restriction              9.1 Investment Representations.  The Company may require any person to whom an option is granted, as a condition of exercising such option, to give written assurances in substance and form satisfactory to the Company to the effect that such person is acquiring the Common Stock subject to the option for his own account for investment and not with any present intention of selling or otherwise distributing the same, and to such other effects as the Company deems necessary or appropriate in order to comply with federal and applicable state securities laws.              9.2 Compliance with Securities Laws.  The Company shall not be required to sell or issue any shares under any option if the issuance of such shares shall constitute a violation by the optionee or by the Company of any provisions of any law or regulation of any governmental authority.  In addition, in  connection with the Securities Act of 1933, as now in effect or hereafter amended (the "Act"), upon exercise of any option, the Company shall not be required to issue such shares unless the Committee has received evidence satisfactory to it to the effect that the holder of such option will not transfer such shares except pursuant to a registration statement in effect under such Act or unless an opinion of counsel satisfactory to the Company has been received by the Company to the effect that such registration is not required.  Any determination in this connection by the Committee shall be final, binding and conclusive.  In the event the shares issuable on exercise of an option are not registered under the Act, the Company may imprint upon any certificate representing shares so issued the following legend or any other legend which counsel for the Company considers necessary or advisable to comply with the Act and with applicable state securities laws: The shares of stock represented by this certificate have not been registered under the Securities Act of 1933 or under the securities laws of any State and may not be sold or transferred except upon such registration or upon receipt by the Corporation of an opinion of counsel satisfactory to the Corporation, in form and substance satisfactory to the Corporation, that registration is not required for such sale or transfer.              The Company may, but shall in no event be obligated to, register any securities covered hereby pursuant to the Act; and in the event any shares are so registered the Company may remove any legend on certificates representing such shares.  The Company shall not be obligated to take any other affirmative action in  order to cause the exercise of an option or the issuance of shares pursuant thereto to comply with any law or regulation of any governmental authority.              9.3 Employment Obligation.  The granting of any option shall not impose upon the Company (or any parent or subsidiary of the Company) any obligation to employ or continue to employ any optionee; and the right of the Company (or any such parent or subsidiary) to terminate the employment of any officer or other employee shall not be diminished or affected by reason of the fact that an option has been granted to him/her.              9.4 Withholding Tax.  Whenever under the Plan shares of Common Stock are to be delivered upon exercise of an option, the Company shall be entitled to require as a condition of delivery that the optionee remit an amount sufficient to satisfy all federal, state and other governmental withholding tax requirements related thereto. Section 10. Amendment or Termination of the Plan              The Board of Directors may modify, revise or terminate this Plan at any time and from time to time, except that (i) the class of persons eligible to receive options and the aggregate number of shares issuable pursuant to this Plan shall not be changed or increased, other than by operation of Section 8 hereof, without the consent of the stockholders of the Company, other than to comport with changes in the Code, the Employee Retirement Income Security Act, or the rules thereunder. Section 11. Nonexclusivity of the Plan              Neither the adoption of the Plan by the Board of Directors nor the submission of the Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board of Directors to adopt such other incentive arrangements as it may deem desirable, including, without  limitation, the granting of stock options otherwise than under the Plan, and such arrangements may be either applicable generally or only in specific cases. Section 12. Effective Date and Duration of the Plan              The Plan shall become effective upon its adoption by the Board of Directors, provided that the stockholders of the Company shall have approved the Plan within twelve months prior to or following the adoption of the Plan by the Board.  No option may be granted under the Plan after the tenth anniversary of the effective date.  The Plan shall terminate (i) when the total amount of Common Stock with respect to which options may be granted shall have been issued upon the exercise of options or (ii) by action of the Board of Directors pursuant to Section 10 hereof, whichever shall first occur.

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.02 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- EIGHTH AMENDMENT TO CREDIT AGREEMENT Dated as of July 30, 2001, effective as of June 30, 2001 (amending the Credit Agreement, dated as of February 26, 1998) between ALADDIN GAMING, LLC, as the Borrower, and THE BANK OF NOVA SCOTIA, as the Administrative Agent for Various Financial Institutions. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- EIGHTH AMENDMENT TO CREDIT AGREEMENT     THIS EIGHTH AMENDMENT TO CREDIT AGREEMENT (this "Eighth Amendment to Credit Agreement") is dated as of July 30, 2001, effective as of June 30, 2001 by and between ALADDIN GAMING, LLC, a Nevada limited-liability company (the "Borrower") and THE BANK OF NOVA SCOTIA, as administrative agent (together with any successor thereto in such capacity, the "Administrative Agent") for the various financial institutions as are or may become parties hereto (collectively, the "Lenders").     In consideration of the mutual agreements herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: W I T N E S S E T H:     WHEREAS, the Borrower, the Lenders, the Administrative Agent, Merrill Lynch Capital Corporation, as the syndication agent for the Lenders, and CIBC Oppenheimer Corp., as the documentation agent for the Lenders, have heretofore entered into (s) that certain Credit Agreement (the "CA") dated as of February 26, 1998, (t) that certain First Amendment to Credit Agreement (the "First Amendment to Credit Agreement") dated as of January 29, 1999, (u) that certain Second Amendment to Credit Agreement (the "Second Amendment to Credit Agreement") dated as of April 5, 1999, effective as of March 10, 1999, (v) that certain Third Amendment to Credit Agreement (the "Third Amendment to Credit Agreement") dated as of June 2, 2000, (w) that certain Fourth Amendment to Credit Agreement (the "Fourth Amendment to Credit Agreement") dated as of July 27, 2000, (x) that certain Fifth Amendment to Credit Agreement (the "Fifth Amendment to Credit Agreement") dated as of December 29, 2000, (y) that certain Sixth Amendment to Credit Agreement (the "Sixth Amendment to Credit Agreement") dated as of March 30, 2001 and (z) that certain Seventh Amendment to Credit Agreement (the "Seventh Amendment to Credit Agreement") dated as of June 15, 2001, effective as of May 29, 2001 (the CA, as amended by the First Amendment to Credit Agreement, the Second Amendment to Credit Agreement, the Third Amendment to Credit Agreement, the Fourth Amendment to Credit Agreement, the Fifth Amendment to Credit Agreement, the Sixth Amendment to Credit Agreement and the Seventh Amendment to Credit Agreement shall be referred to herein as the "Credit Agreement"); and     WHEREAS, the Borrower has requested the Lenders to enter into certain additional amendments of the Credit Agreement; and     WHEREAS, each of the parties hereto is willing, on the terms and subject to the conditions hereinafter set forth, to so amend the Credit Agreement, but only upon the terms and conditions set forth below.     NOW, THEREFORE, in consideration of the agreements contained herein, the parties hereto agree as follows: ARTICLE I DEFINITIONS     SECTION 1.1. Certain Defined Terms. The following terms (whether or not italicized) when used in this Eighth Amendment to Credit Agreement and the Credit Agreement, as amended by this Eighth Amendment to Credit Agreement, including all preambles and recitals, shall, except where the context otherwise requires, have the following meanings:     "Effective Date" is defined in Section 4.1.     "Eighth Amended to Credit Agreement" is defined in the preamble. 2 --------------------------------------------------------------------------------     "Fifth Amendment to Credit Agreement" is defined in the first recital.     "First Amendment to Credit Agreement" is defined in the first recital.     "Fourth Amendment to Credit Agreement" is defined in the first recital.     "Second Amendment to Credit Agreement" is defined in the first recital.     "Seventh Amendment to Credit Agreement" is defined in the first recital.     "Sixth Amendment to Credit Agreement" is defined in the first recital.     "Third Amendment to Credit Agreement" is defined in the first recital.     "Third Amendment to Keep-Well Agreement" is defined in clause (a) of Section 4.1.     SECTION 1.2. Other Defined Terms; Construction. For purposes of this Eighth Amendment to Credit Agreement, capitalized terms used but not defined herein shall have the meanings assigned to them in the Credit Agreement, as amended by this Eighth Amendment to Credit Agreement, and the rules of construction set forth in Article I of the CA shall apply to this Eighth Amendment to Credit Agreement. ARTICLE II AMENDMENTS     SECTION 2.1. Amendments. The parties hereto hereby agree that from and after the Effective Date, the following amendments shall be made to the Credit Agreement: (a)From and after the Effective Date, the definition of Applicable Base Rate Margin (as defined in the Sixth Amendment to Credit Agreement) shall be deleted in its entirety and the following definition of Applicable Base Rate Margin shall be substituted in its place:     "Applicable Base Rate Margin" means, (w) relative to any Term B Loan, (1) on any date prior to June 30, 2001, 2.50% per annum, (2) on any date from and after the Effective Date of the Eight Amendment to Credit Agreement and prior to June 30, 2002, 10.00% per annum, as such rate may be reduced from time to time upon the occurrence of an Interest Reduction Event as set forth on Schedule I annexed to the Eighth Amendment to Credit Agreement, and (3) on any date from and after June 30, 2002, 2.50% per annum, (x) relative to any Term C Loan, (1) on any date prior to June 30, 2001, 3.00% per annum, (2) on any date from and after the Effective Date of the Eighth Amendment to Credit Agreement and prior to June 30, 2002, 10.00% per annum, as such rate may be reduced from time to time upon the occurrence of an Interest Reduction Event as set forth on Schedule I annexed to the Eighth Amendment to Credit Agreement, and (3) on any date from and after June 30, 2002, 3.00% per annum; (y) relative to any Term D Loan, (1) on any date prior to June 30, 2001, 3.50% per annum, (2) on any date from and after the Effective Date of the Eighth Amendment to Credit Agreement and prior to June 30, 2002, 10.50% per annum, as such rate may be reduced from time to time upon the occurrence of an Interest Reduction Event as set forth on Schedule I annexed to the Eighth Amendment to Credit Agreement, and (3) on any date from and after June 30, 2002, 3.50% per annum; and (z) relative to any Term A Loan, (1) on any date prior to February 18, 2001, 2.00% per annum, (2) on any date from and after February 18, 2001 and prior to June 30, 2001, the per annum percentage set forth below opposite the Total Debt to EBITDA Ratio set forth in the Current Compliance Certificate, (3) on any date from and after the Effective Date of the Eighth Amendment to Credit Agreement and prior to June 30, 2002, 10.00% per annum, as such rate may be reduced from time to time upon the occurrence of an Interest Reduction Event as set forth on Schedule I annexed to the Eighth Amendment to Credit Agreement, and (4) on any date from and 3 -------------------------------------------------------------------------------- after June 30, 2002, the per annum percentage set forth below opposite the Total Debt to EBITDA Ratio set forth in the Current Compliance Certificate: Total Debt to EBITDA Ratio --------------------------------------------------------------------------------   Applicable Base Rate Margin --------------------------------------------------------------------------------   a 4.5:1   2.00 % a 4.0:1 and < 4.5:1   1.75 % a 3.5:1 and < 4.0:1   1.50 % a 3.0:1 and < 3.5:1   1.00 % a 2.5:1 and < 3.0:1   0.75 % < 2.5:1   0.50 %" (b)From and after the Effective Date, the definition of Applicable LIBO Rate Margin (as defined in the Sixth Amendment to Credit Agreement) shall be deleted in its entirety and the following definition of Applicable LIBO Rate Margin shall be substituted in its place:     "Applicable LIBO Rate Margin" means, (w) relative to any Term B Loan, (1) on any date prior to June 30, 2001, 3.50% per annum, (2) on any date from and after the Effective Date of the Eighth Amendment to Credit Agreement and prior to June 30, 2002, 11.00% per annum, as such rate may be reduced from time to time upon the occurrence of an Interest Reduction Event, and (3) on any date from and after June 30, 2002, 3.50% per annum, (x) relative to any Term C Loan, (1) on any date prior to June 30, 2001, 4.00% per annum, (2) on any date from and after the Effective Date of the Eighth Amendment to Credit Agreement and prior to June 30, 2002, 11.00% per annum, as such rate may be reduced from time to time upon the occurrence of an Interest Reduction Event, and (3) on any date from and after June 30, 2002, 4.00% per annum; (y) relative to any Term D Loan, (1) on any date prior to June 30, 2001, 4.50% per annum, (2) on any date from and after the Effective Date of the Eighth Amendment to Credit Agreement and prior to June 30, 2002, 11.50% per annum, as such rate may be reduced from time to time upon the occurrence of an Interest Reduction Event, and (3) on any date from and after June 30, 2002, 4.5%; and (z) relative to any Term A Loan, (1) on any date prior to February 18, 2001, 3.00% per annum, (2) on any date from and after February 18, 2001 and prior to June 30, 2001, the per annum percentage set forth below opposite the Total Debt to EBITDA Ratio set forth in the Current Compliance Certificate, (3) on any date from and after the Effective Date of the Eighth Amendment to Credit Agreement and prior to June 30, 2002, 11.00% per annum, as such rate may be reduced from time to time upon the occurrence of an Interest Reduction Event, and (4) on any date from and after June 30, 2002, the per annum percentage set forth below opposite the Total Debt to EBITDA Ratio set forth in the Current Compliance Certificate: Total Debt to EBITDA Ratio --------------------------------------------------------------------------------   Applicable LIBO Rate Margin --------------------------------------------------------------------------------   a 4.5:1   3.00 % a 4.0:1 and < 4.5:1   2.75 % a 3.5:1 and < 4.0:1   2.50 % a 3.0:1 and < 3.5:1   2.00 % a 2.5:1 and < 3.0:1   1.75 % < 2.5:1   1.50 %" (c)From and after the Effective Date, the definition of Deemed Cash Equity Contribution (as defined in the Seventh Amendment to Credit Agreement) shall be deleted in its entirety and the following definition of Deemed Cash Equity Contribution shall be substituted in its place:     "Deemed Cash Equity Contribution" shall mean, for the sole purpose of calculating EBITDA (i) for the Fiscal Quarter closing on March 31, 2001 and for no other purpose, a Cash Equity Contribution in the amount of $13,300,000 and (ii) for the Fiscal Quarters closing on June 30, 2001, September 30, 2001, December 31, 2001 and March 31, 2002, and for no other purpose, a Cash Equity Contribution in the amount which, when added to the Borrower's EBITDA for the four quarter period ending on the 4 -------------------------------------------------------------------------------- last day of such Fiscal Quarter, will result in the Borrower being in compliance with the Minimum Fixed Charge Coverage Ratio, but only if the Sponsors have made Cash Equity Contributions in the amount of the FQ2 Cash Equity Contributions (for the Fiscal Quarter closing on March 31, 2001) and in the amount of the FQ Cash Equity Contributions (for the Fiscal Quarters closing on June 30, 2001, September 30, 2001, December 31, 2001 or March 31, 2002 as the case may be), in accordance with the Keep-Well Agreement, as amended by the First Amendment to Keep-Well Agreement, the Second Amendment to Keep-Well Agreement, and the Third Amendment to Keep-Well Agreement. If such FQ2 Cash Equity Contributions or any FQ Cash Equity Contributions have not been made in accordance with the Keep-Well Agreement, as so amended, then the Deemed Cash Equity Contributions for the Fiscal Quarter ending (x) March 31, 2001 shall be the Cash Equity Contributions actually made by the Sponsors in accordance with the Keep-Well Agreement, as amended by the First Amendment to Keep-Well Agreement, on or before May 30, 2001 or (y) June 30, 2001, September 30, 2001, December 31, 2001 or March 31, 2002 shall be the Cash Equity Contributions actually made by the Sponsors for such Fiscal Quarter in accordance with the Keep-Well Agreement, as amended by the First Amendment to Keep-Well Agreement, the Second Amendment to Keep-Well Agreement and the Third Amendment to Keep-Well Agreement. In no event shall the Deemed Cash Equity Contribution apply to or in any way limit any obligation of the Sponsors under the Keep-Well Agreement, as amended by the First Amendment to Keep-Well Agreement, the Second Amendment to Keep-Well Agreement and the Third Amendment to Keep-Well Agreement." (d)From and after the Effective Date, the definition of EBITDA in the Credit Agreement shall be deleted in its entirety and the following definition of EBITDA shall be substituted in its place:     " 'EBITDA' means, for the Borrower only, for any applicable period, the sum (without duplication) of (a)Net Income for such period, plus (b)the amount deducted by the Borrower, in determining Net Income for such period, representing: (i)Interest Expense of the Borrower; plus (ii)the amount deducted, in determining Net Income, of all federal, state and local income taxes (whether paid in cash or deferred) of the Borrower or, if the Borrower is treated as a pass-through entity or is not treated as a separate entity for United States federal income tax purposes, the amount of Restricted Payments made by the Borrower in accordance with clause (c) of Section 7.2.6, subject to the terms thereof; plus (iii)depreciation of assets of the Borrower; plus (iv)amortization; 5 -------------------------------------------------------------------------------- plus (v)non-cash expense or income items of the Borrower under any Rate Protection Agreement; plus (c)the amount of Cash Equity Contributions (as defined in the Keep-Well Agreement) made by one or more of the Sponsors in accordance with the Keep-Well Agreement attributable to such period; plus (d)the amount of Cash Contributions to Capital; provided, however, that in computing EBITDA (i) for purposes of determining the 'Total Debt to EBITDA Ratio' in clause (h)(i)(B) of Section 7.2.6 or the amount of 'Excess Cash Flow', the 'Applicable Base Rate Margin' or the 'Applicable LIBO Rate Margin', subclauses (c) and (d) shall be excluded from such computation, (ii) for purposes of determining the amount of Cash Equity Contributions made by the Sponsors with respect to the Fiscal Quarters ending March 31, 2001, June 30, 2001, September 30, 2001, December 31, 2001 and March 31, 2002, the amount thereof shall be the Deemed Cash Equity Contributions, (iii) for any period of four consecutive Fiscal Quarters ending on or prior to June 30, 2001 for purposes of determining compliance with respect to the covenants in clauses (a), (b) and (d) of Section 7.2.4, EBITDA for such period shall equal the product of (x) the sum of the amounts determined pursuant to clauses (a), (b), (c) and (d) for all Post-Conversion Fiscal Quarters that have then been completed multiplied by (y) a fraction, the numerator of which is equal to 4 and the denominator of which is equal to the number of Post-Conversion Fiscal Quarters which have then been completed, and (iv) for purposes of determining compliance with the covenant in clause (e) of Section 7.2.4 for any Fiscal Quarter ending on or prior to June 30, 2001, EBITDA shall be calculated for the period beginning on August 18, 2000 and ending on the date of the most recently completed Post-Conversion Fiscal Quarter." (e)From and after the Effective Date, the following definition shall be added to the Credit Agreement:     "Interest Reduction Event" is defined on Schedule I annexed to the Eighth Amendment to Credit Agreement. (f)From and after the Effective Date, the words "Schedule II annexed to the Sixth Amendment to Credit Agreement" in clause (b) of Section 3.1.1 of the Credit Agreement, as amended by clause (gg) of Section 3.1 of the Fourth Amendment to Credit Agreement and clause (d) of Section 2.1 of the Fifth Amendment to Credit Agreement, shall be deemed to be deleted in their entirety and the words "Schedule II annexed to the Eighth Amendment to Credit Agreement" shall be substituted in their place. (g)From and after the Effective Date, clause (c) of Section 3.1.1 of the Credit Agreement, as amended by clause (b) of Section 2.1 of the Sixth Amendment to Credit Agreement, shall be deemed to be deleted in its entirety and the following clause (c) shall be substituted in its place:     "(c) (i) From and after the Conversion Date, the Borrower shall make mandatory prepayments of principal (the 'Mandatory Prepayments') of all Loans in addition to the Scheduled Amortization on the dates and in the amounts set forth in Section 7.1.19 of the Credit Agreement and Schedule III annexed to the Eighth Amendment to Credit Agreement, the application of which shall be as set forth in items (ii) and (iii) of this clause (c). 6 -------------------------------------------------------------------------------- (ii)On any date on which a Mandatory Prepayment consisting of Excess Cash is to be made, any Term B Lender, any Term C Lender or any Term D Lender may elect not to receive its portion of such Mandatory Prepayment in which case 50% of the portion of such Mandatory Prepayment which was to have been made to such Lender shall be paid pro rata to (x) the Term B Lenders, the Term C Lenders and the Term D Lenders which have elected to receive their portions of such Mandatory Prepayment and (y) the Term A Lenders which have made a Term A Loan (up to the outstanding amount of the Term A Loans), and upon the payment of such 50% portion of such Mandatory Prepayment, the Borrower shall be deemed to have satisfied its obligations to make such Mandatory Prepayment. Except as set forth in the proviso of the immediately preceding sentence, Mandatory Prepayments will be applied pro rata in forward order among the Term A Loan, the Term B Loan, the Term C Loan and the Term D Loan. (iii)On any date on which a Mandatory Prepayment consisting of the "Release Price" is to be made, any Term B Lender, any Term C Lender or any Term D Lender may elect not to receive its portion of such Mandatory Prepayment in which case such Mandatory Payment shall be paid pro rata to (x) the Term B Lenders, the Term C Lenders and the Term D Lenders which have elected to receive their portions of the Release Price and (y) the Term A Lenders which have made a Term A Loan (up to the outstanding amount of the Term A Loans). Except as set forth in the proviso of the immediately preceding sentence, Mandatory Prepayments will be applied pro rata in forward order among the Term A Loan, the Term B Loan, the Term C Loan and the Term D Loan." (h)From and after the Effective Date, Section 3.2.3 of the Credit Agreement shall be deemed to be deleted in its entirety and the following Section 3.2.3 shall be substituted in its place:     "SECTION 3.2.3. Payment Dates. Interest accrued on each Loan shall be payable, without duplication: (a)on the Stated Maturity Date therefor; (b)on the date of any payment or prepayment, in whole or in part, of principal outstanding on such Loan on the principal amount so paid or prepaid; provided, however, that from and after the Effective Date of the Eighth Amendment to Credit Agreement and prior to June 30, 2002, the minimum interest payable in cash with respect to any such prepayment shall be the applicable amount set forth in the proviso in clauses (c) and (d) on the principal amount so paid or prepaid and the balance of accrued and unpaid interest shall be added to the principal amount of the Loans as payment of such interest; (c)with respect to Base Rate Loans, on each Quarterly Payment Date occurring after the Effective Date; provided, however, that from and after the Effective Date of the Eighth Amendment to Credit Agreement and prior to June 30, 2002, (w) interest shall be due and payable on the first day of each and every calendar month, (x) the minimum interest payable in cash on Base Rate Loans that are Term A Loans, Term B Loans or Term C Loans shall be an calculated as though the Applicable Base Rate Margin was 3.00% per annum, (y) the minimum interest payable in cash on Base Rate Loans that are Term D Loans shall be an calculated as though the Applicable Base Rate Margin was 3.50% per annum, and (z) the balance of accrued and unpaid interest shall be added to the principal amount of the Loans as payment of such interest. (d)with respect to LIBO Rate Loans, on the last day of each applicable Interest Period (and, if such Interest Period shall exceed three months, on each Quarterly Payment Date during such Interest Period); provided, however, that from and after June 30, 2001 and prior to June 30, 2002, (w) interest shall be due and payable on the first day of each and every calendar month, 7 -------------------------------------------------------------------------------- (x) the minimum interest payable in cash on LIBO Rate Loans that are Term A Loans, Term B Loans or Term C Loans shall be an calculated as though the Applicable LIBO Rate Margin was 4.00% per annum, (y) the minimum interest payable in cash on LIBO Rate Loans that are Term D Loans shall be an calculated as though the Applicable LIBO Rate Margin was 4.50% per annum and (z) the balance of accrued and unpaid interest shall be added to the principal amount of the Loans as payment of such interest; (e)with respect to any Base Rate Loans converted into LIBO Rate Loans on a day when interest would not otherwise have been payable pursuant to clause (c), on the date of such conversion; provided, however, that from and after June 30, 2001 and prior to June 30, 2002, (x) the minimum interest payable in cash on Base Rate Loans that are Term A Loans, Term B Loans or Term C Loans shall be an calculated as though the Applicable Base Rate Margin was 3.00% per annum, (y) the minimum interest payable in cash on Base Rate Loans that are Term D Loans shall be an calculated as though the Applicable Base Rate Margin was 3.50% per annum and (z) the balance of accrued and unpaid interest shall be added to the principal amount of the Loans as payment of such interest; and (f)on that portion of any Loan the Stated Maturity Date of which is accelerated pursuant to Section 8.2 or Section 8.3, immediately upon such acceleration. Interest accrued on Loans or other monetary Obligations arising under this Agreement or any other Loan Document after the date such amount is due and payable (whether on the Stated Maturity Date, upon acceleration or otherwise) shall be payable upon demand and not added to principal." ARTICLE III WAIVERS BY THE LENDERS     SECTION 3.1. Waivers Pertaining to Financial Condition and Operations. The Borrower has not performed its covenants under clause (a), clause (b) and clause (d) of Section 7.2.4 of the Credit Agreement, as amended by the Sixth Amendment to Credit Agreement and as further amended by this Eighth Amendment to Credit Agreement, with respect to the Fiscal Quarters ending on or prior to June 30, 2001. The Borrower does not expect to perform its covenants under clause (a), clause (b), and clause (d) of Section 7.2.4 of the Credit Agreement, as amended by the Sixth Amendment to Credit Agreement and as further amended by this Eighth Amendment to Credit Agreement, with respect to the Fiscal Quarters ending on or prior to June 30, 2002. As of the Effective Date, the Lenders agree that the Borrower's failure to perform its covenants (x) under clause (a), clause (b) and clause  (d) of Section 7.2.4 of the Credit Agreement, as amended by the Sixth Amendment to Credit Agreement and further amended by this Eighth Amendment to Credit Agreement, are hereby waived with respect to the Fiscal Quarters ending on or prior to June 30, 2002. ARTICLE IV CONDITIONS PRECEDENT AND COVENANT; AMENDMENT FEE     SECTION 4.1. Conditions to Effectiveness. This Eighth Amendment to Credit Agreement shall be and become effective on the date (the "Effective Date") on which each of the following conditions precedent shall have been satisfied. (a)Deliveries. The Administrative Agent shall have received counterparts of (i) this Eighth Amendment to Credit Agreement executed by Authorized Representatives of the Borrower and the Administrative Agent; (ii) the Ratification and Reaffirmation executed by Authorized Representatives of each of the parties thereto; (iii) if required, the Third Amendment to Deed of Trust, (iv) the Third Amendment to Keep-Well Agreement of even date (the "Third Amendment to Keep-Well Agreement") from London Clubs, the Trust, ABH and AHL; (v) an 8 -------------------------------------------------------------------------------- amendment to the GECC Facilities Agreement which amends the GECC Facilities Agreement substantially in accordance with the terms hereof; (vi) a consent, if required, from the Discount Note Indenture Trustee to the execution and delivery hereof in form and content reasonably satisfactory to the Administrative Agent; and (vii) such other documents reasonably required by the Administrative Agent or any of the Lenders. (b)Third Amendment to Keep-Well Agreement. The Third Amendment to Keep-Well Agreement shall be effective in accordance with its terms. (c)Incumbency, etc. The Administrative Agent shall have received (with copies for each Lender) a certificate, dated as of the date of the Eighth Amendment to Credit Agreement, of an Authorized Representative of (i)the Borrower certifying (x)as to the incumbency and signatures of the Person or Persons authorized to execute and deliver this Eighth Amendment to Credit Agreement and any instruments or agreements required hereunder, (y)as to an attached copy of one or more resolutions or other authorizations of the manager of the Borrower certified by the Authorized Representative of such manager as being in full force and effect on the date hereof, authorizing the execution, delivery and performance of this Eighth Amendment to Credit Agreement and any instruments or agreements required hereunder, and (z)that the Organizational Documents of the Borrower have not been modified since the date on which they were last delivered to the Administrative Agent, and (ii)each signatory to the Third Amendment to Keep-Well Agreement and the Ratification and Reaffirmation certifying (x)as to the incumbency and signatures of the Person or Persons authorized to execute and deliver such Instrument on behalf of such signatory, (y)as to an attached copy of one or more resolutions or other authorizations of (A) the Board of Directors certified by the Authorized Representative of such signatory or (B) the manager of such signatory certified by the Authorized Representative of such manager, as applicable, each as being in full force and effect on the date hereof, authorizing the execution, delivery and performance of such Instrument, and (z)that the Organizational Documents of such signatory have not been modified since the date on which they were last delivered to the Administrative Agent, upon which certificate the Administrative Agent and each Lender (collectively, the "Financing Parties") may conclusively rely until it shall have received a further certificate of an Authorized Representative of such Person canceling or amending such prior certificate. (d)Costs and Expenses. All reasonable fees and costs and expenses of Mayer, Brown & Platt and other professionals employed by the Administrative Agent and all other reasonable expenses of the Administrative Agent in connection with the negotiation, execution and delivery of this Eighth Amendment to Credit Agreement and the transactions contemplated herein shall have been paid in full. (e)Satisfactory Legal Form. Each Financing Party shall have received all information, approvals, opinions, documents or instruments as each Financing Party may have reasonably requested, and all documents executed or submitted pursuant hereto by or on behalf of the Borrower shall be reasonably satisfactory in form and substance to each Financing Party. 9 -------------------------------------------------------------------------------- (f)Default. After giving effect to this Eighth Amendment to Credit Agreement the following statements shall be true and correct: (i) to the best knowledge of the Borrower, no act or condition exists which, with the giving of notice or passage of time, would constitute a "Default" or "Event of Default" (as defined in the Credit Agreement, the GECC Facilities Agreement and the Discount Note Indenture) and (ii) no material adverse change has occurred in the financial condition, business, property, prospects or ability of the Borrower to perform in all material respects its obligations under any Operative Document or any of the documents evidencing and securing the FF&E Financing to which it is a party. (g)Consents and Approvals. All approvals and consents required to be taken, given or obtained, as the case may be, by or from any Governmental Instrumentality or another Person, or by or from any trustee (including, without limitation, GECC and the Discount Note Indenture Trustee) or holder of any Indebtedness or Obligation of the Borrower or any other Obligor, that are necessary or, in the reasonable opinion of the Administrative Agent, advisable in connection with the execution, delivery and performance of the Credit Agreement, as amended by this Eighth Amendment to Credit Agreement, by all parties hereto or thereto, shall have been taken, given or obtained, as the case may be, shall be in full force and effect and the time for appeal with respect to any thereof shall have expired (or, if an appeal shall have been taken, the same shall have been dismissed) and shall not be subject to any pending proceedings or appeals (administrative, judicial or otherwise) and shall be in form and substance reasonably satisfactory to the Administrative Agent. (h)Delivery of Eighth Amendment to Credit Agreement, etc. The Borrower shall have delivered this Eighth Amendment to Credit Agreement to all Persons entitled under the Operative Documents to receive delivery hereof and arranged for or caused the recording and/or filing thereof, if required. (i)Opinions. The Administrative Agent shall have received such opinions of counsel as it deems necessary, dated as of the date of the Eighth Amendment to Credit Agreement and addressed to the Administrative Agent, the Lenders and, if applicable, the Disbursement Agent, which shall provide, in relevant part, that the amendment in clause (h) of Section 2.1 of this Eighth Amendment does not violate any applicable usury law or public policy, no approvals, waivers, amendments or modifications are required under the GECC Intercreditor Agreement or the Discount Note Indenture for the approvals, waivers, amendments or modifications set forth in this Eighth Amendment to Credit Agreement and shall otherwise be in form and substance reasonably satisfactory to the Administrative Agent. ARTICLE V REPRESENTATIONS AND WARRANTIES     In order to induce the Administrative Agent to enter into this Eighth Amendment to Credit Agreement on behalf of the Lenders, the Borrower hereby reaffirms, as of the date of this Eighth Amendment to Credit Agreement, its representations and warranties contained in Article VI of the Credit Agreement and the Disbursement Agreement and additionally represents and warrants unto each Financing Party as set forth in this Article IV.     SECTION 5.1. Matters Pertaining to the GECC Facilities Agreement and the Discount Note Indenture. The Borrower has performed in all material respects its obligations under the GECC Facilities Agreement and the Discount Note Indenture. To the best knowledge of the Borrower, no act or condition exists which, with the giving of notice or passage of time, would constitute a "Default" or "Event of Default" (as defined in the Credit Agreement, the GECC Facilities Agreement and the Discount Note Indenture). No material adverse change has occurred with respect to the financial condition, business, property, prospects or ability of the Borrower to perform in all material respects its 10 -------------------------------------------------------------------------------- obligations under any Operative Document or any of the documents evidencing and securing the FF&E Financing to which it is a party.     SECTION 5.2. Due Authorization, Non-Contravention, etc. The execution, delivery and performance by the Borrower of this Eighth Amendment to Credit Agreement and each other document executed or to be executed by it in connection with this Eighth Amendment to Credit Agreement are within the Borrower's powers, have been duly authorized by all necessary action, and do not (a)contravene the Borrower's Organizational Documents; (b)contravene any contractual restriction binding on or affecting any of the Aladdin Parties and/or the London Clubs Parties; (c)contravene any court decree or order or Legal Requirement binding on or affecting any of the Aladdin Parties and/or the London Clubs Parties; or (d)result in, or require the creation or imposition of, any Lien on any property of the Borrower, any of the other Aladdin Parties, any other Person which executes and delivers documents with respect to the Eighth Amendment to Credit Agreement in favor of the Lenders, except as expressly permitted by the Operative Documents, the GECC Facilities Agreement, the Discount Note Indenture and other Instruments binding on such Persons, as the case may be, and the Financing Parties may conclusively rely on such representation and warranty.     SECTION 5.3. Government Approval, Regulation, etc. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or other Person is required for the due execution, delivery or performance by the Borrower or any other Person of this Eighth Amendment to Credit Agreement or any other document to be executed by it or any other Person in connection with this Eighth Amendment to Credit Agreement.     SECTION 5.4. Validity, etc. This Eighth Amendment to Credit Agreement constitutes, and each other document executed by the Borrower in connection with this Eighth Amendment to Credit Agreement, on the due execution and delivery thereof, will constitute, the legal, valid and binding obligations of the Borrower enforceable in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors rights generally and by general principles of equity.     SECTION 5.5. Limitation. Except as expressly provided hereby, all of the representations, warranties, terms, covenants and conditions of the Credit Agreement and each other Operative Document shall remain unamended and unwaived and shall continue to be, and shall remain, in full force and effect in accordance with their respective terms. The amendments and modifications set forth herein shall be limited precisely as provided for herein, and shall not be deemed to be a waiver of, amendment of, consent to or modification of any other term or provision of the Credit Agreement, the GECC Facilities Agreement, any Operative Document, the Discount Note Indenture or other Instrument referred to therein or herein, or of any transaction or further or future action on the part of the Borrower or any other Person which would require the consent of the Agents, the Lenders, GECC or the Discount Note Indenture Trustee or any other Person.     SECTION 5.6. Offsets and Defenses. The Borrower has no offsets or defenses to its obligations under the Loan Documents and no claims or counterclaims against any of the Agents or the Lenders.     SECTION 5.7. Release by the Borrower. (a) As an inducement to the Administrative Agent to enter into this Eighth Amendment to Credit Agreement on behalf of the Lenders, the Borrower hereby releases and discharges the Lenders and the Agents, and their respective successors and assigns, and all officers, directors, employees, agents, representatives, insurers and attorneys of each of them from all actions, counterclaims, causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, 11 -------------------------------------------------------------------------------- bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, executions, claims, and demands whatsoever, in law, admiralty or equity, against the Lenders, the Agents and/or their successors and assigns which the Borrower ever had, now has or hereafter can, shall or may, have for, upon, or by reason of any matter, cause or thing whatsoever from the beginning of the world to the day of the date of this Eighth Amendment to Credit Agreement (the "Released Claims"). (b)In order to induce the Administrative Agent to accept the release set forth herein on behalf of the Lenders, the Borrower represents that: (i)such release constitutes a legal, valid and binding obligation of the Borrower, enforceable against it in accordance with its terms. The execution and delivery of, and the performance and compliance by the Borrower with, such release will not conflict with, or constitute on the part of the Borrower a violation or breach of, or a default under, and will not require any authorization, consent, approval or other action by, or any notice to, or filing with any court or administrative body or any other Person pursuant to, any mortgage, deed of trust, loan agreement, trust agreement or other agreement or instrument to which the Borrower or any of its property is subject or any laws and other governmental requirements; and (ii)the Borrower (A) has not sold, transferred, conveyed, abandoned or otherwise disposed of any of the Released Claims, whether or not known, suspected or claimed that the Borrower has, had or may have, against the Lenders, any Agent and/or any of their successors, predecessors (including, without limitation, all predecessors by virtue of merger) and assigns, as the case may be and (B) has sought the advice of counsel with respect to the execution and delivery of this Eighth Amendment to Credit Agreement and the Borrower understands the legal implications with respect to the release set forth herein and the other documents executed by the Borrower in connection herewith. (c)The Borrower hereby acknowledges that it may hereafter discover facts in addition to or different from those which it now knows or believes to be true with respect to the subject matter of the release set forth herein, but that it is the Borrower's intention to, and it does, hereby fully, finally and forever settle the Released Claims; in furtherance of such intention, the Borrower acknowledges that the release set forth herein shall be and remain in effect as a full and complete release, notwithstanding the subsequent discovery or existence of any such additional or different facts. ARTICLE VI MISCELLANEOUS PROVISIONS     SECTION 6.1. Reservation of Rights. The Borrower agrees that neither this Eighth Amendment to Credit Agreement nor the making of any Advance by the Disbursement Agent and the Administrative Agent's consent thereto either before or after the Effective Date shall constitute (w) an approval of all or any portion of any Advance Request, (x) a waiver or forbearance by the Disbursement Agent or the Administrative Agent under any of the Loan Documents, (y) the acceptance by the Disbursement Agent or the Administrative Agent of any course of conduct by the Borrower, the Sponsors, the Completion Guarantors or any other Person or (z) an agreement by the Administrative Agent to amend any of the Loan Documents without all required approvals including, without limitation, approval from the Required Lenders. The Borrower further agrees that the Administrative Agent and the Disbursement Agent reserve all rights, remedies and options under the Loan Documents to require the Borrower to satisfy in all respects the conditions relating to each Advance and perform all of its obligations under the Loan Documents which are then due and owing or are susceptible of performance, as the case may be. 12 --------------------------------------------------------------------------------     SECTION 6.2. Ratification of and References to the Credit Agreement. This Eighth Amendment to Credit Agreement shall be deemed to be an amendment to the Credit Agreement, and the Credit Agreement, as amended by this Eighth Amendment to Credit Agreement, shall continue in full force and effect and is hereby ratified, approved and confirmed in each and every respect. All references to the Credit Agreement in any other document, instrument, agreement or writing shall hereafter be deemed to refer to the Credit Agreement, as amended by this Eighth Amendment to Credit Agreement.     SECTION 6.3. Headings. The various headings of this Eighth Amendment to Credit Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Eighth Amendment to Credit Agreement or any provisions hereof.     SECTION 6.4. Applicable Law. THIS EIGHTH AMENDMENT TO CREDIT AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS EIGHTH AMENDMENT TO CREDIT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, BUT EXCLUDING ALL OTHER CHOICE OF LAW AND CONFLICTS OF LAW RULES OF SUCH STATE.     SECTION 6.5. Cross-References. References in this Eighth Amendment to Credit Agreement to any Article or Section are, unless otherwise specified, to such Article or Section of this Eighth Amendment to Credit Agreement.     SECTION 6.6. Loan Document. This Eighth Amendment to Credit Agreement is a Loan Document executed pursuant to the Credit Agreement and shall (unless otherwise expressly indicated therein) be construed, administered and applied in accordance with the terms and provisions of the Credit Agreement.     SECTION 6.7. Successors and Assigns. This Eighth Amendment to Credit Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.     SECTION 6.8. Counterparts. This Eighth Amendment to Credit Agreement may be executed by the parties hereto in any number of counterparts and on separate counterparts, each of which shall be an original but all of which together shall constitute one and the same instrument. 13 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties hereto have executed this Eighth Amendment to Credit Agreement as of the day and year first above written. ALADDIN GAMING, LLC By:      --------------------------------------------------------------------------------     Name:     Title: 14 -------------------------------------------------------------------------------- THE BANK OF NOVA SCOTIA, as the Administrative Agent By:      --------------------------------------------------------------------------------     Name: Alan Pendergast     Title: Managing Director 15 -------------------------------------------------------------------------------- SCHEDULE I To Eighth Amendment to Credit Agreement     The Applicable Base Rate Margin and the Applicable LIBO Rate Margin relative to any Term A Loan, Term B Loan, Term C Loan and Term D Loan shall be reduced from time to time by the percentage set forth below opposite the applicable event (each, an "Interest Reduction Event") upon the occurrence of any Interest Reduction Event from and after the Effective Date of the Eighth Amendment to Credit Agreement and prior to June 30, 2002: Interest Reduction Event --------------------------------------------------------------------------------   Percentage Reduction --------------------------------------------------------------------------------   The date on which LCNI directly owns, free and clear of all Liens (other than Liens in favor of the Administrative Agent for the benefit of the Secured Parties), approximately 85% of the Holdings Common Membership Interests.   2.00 % The Applicable Base Rate Margin shall be further reduced on the date on which the Administrative Agent shall deliver on behalf of the Lenders a release of the Music Project Parcel from the Deed of Trust in accordance with Section 7.1.19 and a Mandatory Prepayment is made in accordance with item (ii) of clause (c) of Section 3.1.1 provided that the Release Price is greater than or equal to $15,000,000.   1.00 % The Applicable Base Rate Margin shall be further reduced on the date on which contributions to the Borrower made by or on behalf of the Sponsors from and after the Effective Date of the Eighth Amendment to Credit Agreement aggregate $15,000,000 or more, which contributions shall be in cash, not made as a loan and made on terms and conditions satisfactory to the Administrative Agent as determined on good faith in its sole discretion.   0.50 % 16 -------------------------------------------------------------------------------- SCHEDULE II To Eighth Amendment to Credit Agreement Date --------------------------------------------------------------------------------   Scheduled Repayment of Term A Loan ($136MM) --------------------------------------------------------------------------------   Scheduled Repayment of Term B Loan ($114MM) --------------------------------------------------------------------------------   Scheduled Repayment of Term C Loan ($160MM) --------------------------------------------------------------------------------   Scheduled Repayment of Term D Loan ($50MM) -------------------------------------------------------------------------------- End of First Fiscal Quarter following the Conversion Date   4.00   0.30   0.40   None End of Second Fiscal Quarter thereafter   4.0   0.30   0.40   0.125 End of Third Fiscal Quarter thereafter   4.0   0.30   0.40   0.125 End of Fourth Fiscal Quarter thereafter   0.0   0.0   0.0   0.0 End of Fifth Fiscal Quarter thereafter   0.0   0.0   0.0   0.0 End of Sixth Fiscal Quarter thereafter   0.0   0.0   0.0   0.0 End of Seventh Fiscal Quarter thereafter   0.0   0.0   0.0   0.0 End of Eighth Fiscal Quarter thereafter   24.00   1.5   2.0   0.625 End of Ninth Fiscal Quarter thereafter   7.00   0.30   0.40   0.125 End of Tenth Fiscal Quarter thereafter   7.00   0.30   0.40   0.125 End of Eleventh Fiscal Quarter thereafter   7.00   0.30   0.40   0.125 End of Twelfth Fiscal Quarter thereafter   7.00   0.30   0.40   0.125 End of Thirteenth Fiscal Quarter thereafter   8.00   0.30   0.40   0.125 End of Fourteenth Fiscal Quarter thereafter   8.00   0.30   0.40   0.125 End of Fifteenth Fiscal Quarter thereafter   8.00   0.30   0.40   0.125 End of Sixteenth Fiscal Quarter thereafter   8.00   0.30   0.40   0.125 End of Seventeenth Fiscal Quarter thereafter   10.00   0.30   0.40   0.125 End of Eighteenth Fiscal Quarter thereafter   10.00   0.30   0.40   0.125 End of Nineteenth Fiscal Quarter thereafter   10.00   0.30   0.40   0.125 End of Twentieth Fiscal Quarter thereafter   8.75   0.30   0.40   0.125 End of Twenty-First Fiscal Quarter thereafter       17.00   0.40   0.125 End of Twenty-Second Fiscal Quarter thereafter       17.00   0.40   0.125 End of Twenty-Third Fiscal Quarter thereafter       17.00   0.40   0.125 End of Twenty-Fourth Fiscal Quarter thereafter       17.00   0.40   0.125 End of Twenty-Fifth Fiscal Quarter thereafter       20.00   0.40   0.125 End of Twenty-Sixth Fiscal Quarter thereafter       20.00   0.40   0.125 End of Twenty-Seventh Fiscal Quarter thereafter           23.80   0.125 End of Twenty-Eighth Fiscal Quarter thereafter           23.80   0.125 End of Twenty-Ninth Fiscal Quarter thereafter           25.50   0.125 End of Thirtieth Fiscal Quarter thereafter           25.50   0.125 End of Thirty-First Fiscal Quarter thereafter           25.50   0.125 End of Thirty-Second Fiscal Quarter thereafter           25.50   0.125 End of Thirty-Third Fiscal Quarter therea               25.50 End of Thirty-Fourth Fiscal Quarter thereafter               20.625 17 -------------------------------------------------------------------------------- SCHEDULE III To Eighth Amendment to Credit Agreement MANDATORY PAYMENTS AND PREPAYMENTS Date --------------------------------------------------------------------------------   Percentage of Excess Cash Flow --------------------------------------------------------------------------------       End of each of the First Fiscal Quarter following the Conversion Date (October 31, 2000) and the Second Fiscal Quarter following the Conversion Date   75% of Excess Cash Flow shall be paid as a Mandatory Prepayment in accordance with clause (c) of Section 3.1.1 unless the Total Debt to EBITDA Ratio is greater than 3.50:1.0 in which case such percentage shall be 100%. End of Third Fiscal Quarter following the Conversion Date   100% of Excess Cash Flow shall be paid first to the Consenting Lenders (as defined in the Sixth Amendment to Credit Agreement) in accordance with Section 5.2 of the Sixth Amendment to Credit Agreement until the Sixth Amendment Fee has been paid in full; thereafter 75% of remaining Excess Cash Flow shall be paid as a Mandatory Prepayment in accordance with clause (c) of Section 3.1.1 unless the Total Debt to EBITDA Ratio is greater than 3.50:1.0 in which case such percentage shall be 100% End of each of the Fourth Fiscal Quarter following the Conversion Date and the end of each Fiscal Quarter thereafter through the End of the Eighth Fiscal Quarter following the Conversion Date   100% of Excess Cash Flow shall be paid first to the Consenting Lenders in accordance with Section 5.2 of the Sixth Amendment to Credit Agreement until the Sixth Amendment Fee has been paid in full; thereafter 60% of remaining Excess Cash Flow shall be paid as a Mandatory Prepayment in accordance with clause (c) of Section 3.1.1 unless the Total Debt to EBITDA Ratio is greater than 3.50:1.0 in which case such percentage shall be 100%. End of Ninth Fiscal Quarter following the Conversion Date and the end of each Fiscal Quarter thereafter   100% of Excess Cash Flow shall be paid first to the Consenting Lenders in accordance with Section 5.2 of the Sixth Amendment to Credit Agreement until the Sixth Amendment Fee has been paid in full; thereafter 55% of remaining Excess Cash Flow shall be paid as a Mandatory Prepayment in accordance with clause (c) of Section 3.1.1 unless the Total Debt to EBITDA Ratio is greater than 3.50:1.0 in which case such percentage shall be 100%. 18 -------------------------------------------------------------------------------- QuickLinks EIGHTH AMENDMENT TO CREDIT AGREEMENT EIGHTH AMENDMENT TO CREDIT AGREEMENT W I T N E S S E T H ARTICLE I DEFINITIONS ARTICLE II AMENDMENTS ARTICLE III WAIVERS BY THE LENDERS ARTICLE IV CONDITIONS PRECEDENT AND COVENANT; AMENDMENT FEE ARTICLE V REPRESENTATIONS AND WARRANTIES ARTICLE VI MISCELLANEOUS PROVISIONS

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.12 FOURTH AMENDMENT TO OFFICE LEASE     THIS FOURTH AMENDMENT TO OFFICE LEASE dated as of February 5, 2001 (this "Fourth Amendment"), is entered into by and between COLONNADE WILSHIRE CORP., a California corporation ("Landlord"), and TICKETMASTER L.L.C., a Delaware limited liability company ("Tenant"), with reference to the following: R E C I T A L S     WHEREAS, Landlord and Ticketmaster – California, Inc., a California corporation, Tenant's Predecessor in interest, entered into that certain Office Lease dated November 5, 1998 (the "Original Lease"), as amended by that certain First Amendment to Office Lease dated January 12, 1999 (the "First Amendment"), that certain Second Amendment to Office Lease dated as of June 22, 1999 (the "Second Amendment") and that certain Third Amendment to Office Lease dated as of December 11, 2000 (the "Third Amendment"; the Original Lease, as amended by the First Amendment, the Second Amendment, and the Third Amendment is hereinafter referred to as the "Lease"), for the lease of certain premises (the "Original Premises"), commonly known as Suites 401, 403, 405, 600, 601, 700, 900, 1050 and 1060, consisting of approximately 64,018 rentable square feet of space located on the fourth (4th), sixth (6th), seventh (7th), ninth (9th) and tenth (10th) floors of that certain office building (the "Building") commonly known as The Wilshire Colonnade and located at 3701 Wilshire Boulevard, Los Angeles, California. All capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Lease; and     WHEREAS, Landlord and Tenant desire by this Fourth Amendment to amend the Lease in order to, among other things, (a) expand the Original Premises to include (i) certain premises commonly known as Suite 530 consisting of approximately 3,230 rentable square feet of space located on the fifth (5th) floor of the Building (the "Suite 530") and (ii) certain premises commonly known as Suite 870 consisting of approximately 1,226 rentable square feet located on the eighth (8th) floor of the Building ("Suite 870"; Suite 530 and Suite 870 are collectively hereinafter referred to as the "Expansion Space"), (b) provide for the amount of Base Rent Tenant shall pay to Landlord for the Expansion Space, and (c) to further amend, modify and supplement the Lease as set forth herein.     NOW, THEREFORE, in consideration of the Premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged. Landlord and Tenant hereby agree as follows:     1.  Recitals. The Recitals set forth above are incorporated herein as though set forth in full hereat.     2.  Expansion; Description of Premises. Commencing on February 7, 2001 (the "Expansion Space Commencement Date"), Landlord shall lease to Tenant and Tenant shall lease from Landlord the Expansion Space, as outlined on Exhibit "A" attached hereto and incorporated herein by this reference, upon all of the terms and conditions of the Lease except as otherwise set forth herein. The term of Tenant's lease of the Expansion Space shall be approximately twenty-two (22) months and twenty-two (22) days ending on December 31, 2002 (the "Expansion Space Termination Date"). From and after the Expansion Space Commencement Date until the Expansion Space Termination Date, all references to the "Premises" contained in the Lease shall be amended to mean and refer to the entirety of the space in the Original Premises and the Expansion Space, which is approximately 68,474 rentable square feet of space (the entirety of such space is referred to herein as the "Expanded Premises"). Landlord and Tenant hereby acknowledge and agree that the foregoing statement of the rentable square footage of the Expanded Premises is not a representation or warranty of the exact number of square feet 1 -------------------------------------------------------------------------------- therein but rather is only a reasonable approximation and that the Base Rent payable under the Lease (as amended hereby) is not subject to revision whether or not the actual square footage is more or less than such approximation. Effective on the Expansion Space Commencement Date the floor plan attached hereto as Exhibit "A" and incorporated therein by this reference shall be added to the floor plan of the Original Premises attached to the Lease as Exhibit A.     3.  Base Rent for Expansion Space. Landlord and Tenant agree that, in addition to paying all other amounts due under the Lease, Tenant shall pay the following Base Rent for the Expansion Space, in accordance with Article 3 of the Lease: Period --------------------------------------------------------------------------------   Monthly Installment of Base Rent --------------------------------------------------------------------------------   Monthly Rental Rate -------------------------------------------------------------------------------- 2/1/01 – 1/31/02   $ 5,570.00   $ 1.25 per rsf 2/1/02 – 12/31/02   $ 5,792.80   $ 1.30 per rsf     4.  Tenant's Share of Direct Expenses for Expansion Space. In addition to paying all other amounts due under the Lease and the Base Rent for the Expansion Space set forth in Section 3 above, commencing on the Expansion Space Commencement Date and continuing until the Expansion Space Termination Date or, if earlier, the expiration or earlier termination of the Lease Term, Tenant shall pay Tenant's Share of the annual Direct Expenses for the Expansion Space in excess of the Direct Expenses for the Base Year in accordance with Article 4 of the Lease. For purposes hereof, Tenant's Share of Direct Expenses for the Expansion Space shall be 1.206% and the Base Year shall mean the year set forth in Section 9.1 of the Summary of Basic Lease Information attached to the Lease.     5.  Security Deposit. Lessee shall not be required to increase the security deposit being held by Landlord under the Lease in connection herewith. The security deposit under the Lease shall remain $57,190.37.     6.  Tenant Improvement Allowance. In connection with Tenant's lease of the Expansion Space, Landlord will provide Tenant with an improvement allowance (the "Tenant Improvement Allowance") of Three and 50/100 Dollars ($3.50) per rentable square foot of the Expansion Space ($15,596.00) to complete, subject to the terms and conditions set forth in this Section 7, certain improvements (the "Tenant Improvements") to the Expansion Space desired to be made by Tenant. Prior to commencement of the Tenant Improvements, Tenant will furnish Landlord with all plans and specifications, if any, for Landlord's approval (which approval shall not be unreasonably withheld or delayed). If Tenant elects to use its own contractor to construct the Tenant Improvements, such contractor shall be licensed and approved by Landlord (approval not to be unreasonably withheld or delayed) prior to commencement of the Tenant Improvements. Upon Landlord's approval of the plans and specifications for the Tenant Improvements and Tenant's contractor, Tenant may commence the Tenant Improvements. The Tenant Improvements shall be performed and completed in compliance with all applicable laws, codes, rules and regulations, without any unpaid claims for material, labor or supplies. Tenant shall furnish to Landlord executed construction permits and such invoices, affidavits, releases, and other documentation as Landlord may reasonably request, to be assured, to Landlord's satisfaction, that the Tenant Improvements have been completed in accordance with the plans and specifications, if any, approved by Landlord and have been paid for by Tenant. Provided Tenant complies with all of the terms and conditions of this Section 7, including but not limited to, proof of payment of all bills and delivery to Landlord of unconditional lien releases from all contractors, subcontractors and material suppliers, Landlord shall reimburse Tenant within thirty (30) days after completion of the Tenant Improvements for Tenant's costs incurred in connection with the Tenant Improvements up to an amount not to exceed the amount of the Tenant Improvement Allowance. Tenant will be responsible for paying all costs of the Tenant Improvements in excess of the Tenant Improvement Allowance. If the cost of the Tenant Improvements is less than the Tenant Improvement 2 -------------------------------------------------------------------------------- Allowance, Tenant shall receive a credit against the Base Rent next becoming due under the Lease in the amount of any unused portion of the Tenant Improvement Allowance.     8.  Parking Spaces. In addition to the parking spaces set forth in Section 11 of the Summary of Basic Lease Information attached to the Lease, in connection with Tenant's lease of the Expansion Space, Tenant shall have the right to rent, on a month-to-month basis, up to two (2) unreserved parking spaces per 1,000 rentable square feet of the Expansion Space in the Building Parking Facility at such rate as is established by Landlord for the Building Parking Facility, from time to time.     9.  Directory Board. In connection with Tenant's lease of the Expansion Space, Tenant shall be entitled to designate up to one (1) name per 1,000 rentable square feet of the Expansion Space on the directory board in the lobby of the Building.     10. First Offer Right.     (a) Grant of Right. Landlord hereby grants to Tenant a right of first offer with respect to certain premises commonly known as Suite 880 consisting of approximately 2,525 rentable square feet of space located on the eighth (8th) floor of the Building ("First Offer Space") outlined on Exhibit "B" attached hereto and made a part hereof. Notwithstanding the foregoing, (i) such first offer right of Tenant shall commence only following the expiration or earlier termination of (A) any existing lease pertaining to the First Offer Space, and (B) as to any First Offer Space which is vacant as of the date of this Fourth Amendment, the first lease pertaining to any portion of such First Offer Space entered into by Landlord after the date of this Fourth Amendment (collectively, the "Superior Leases"), including any renewal of such existing or future lease, whether or not such renewal is pursuant to an express written provision in such lease, and regardless of whether any such renewal is consummated pursuant to a lease amendment or a new lease, and (ii) such first offer right shall be subordinate and secondary to all rights of expansion, first refusal, first offer or similar rights existing prior to the date of this Fourth Amendment granted to (A) the tenants of the Superior Leases and (B) any other tenant of the Building (the rights described in items (i) and (ii), above to be known collectively as "Superior Rights"). Tenant's right of first offer shall be on the terms and conditions set forth in this Section 10.     (b) Procedure for Offer. Landlord shall notify Tenant in writing ("First Offer Notice") from time to time when Landlord determines that Landlord shall commence the marketing of any First Offer Space because such space shall become available for lease to third parties, where no holder of a Superior Right desires to lease such space. The First Offer Notice shall describe the space so offered to Tenant and shall set forth Landlord's proposed economic terms and conditions applicable to Tenant's lease of such space (coIlectively, the "Economic Terms").     (c) Procedure for Acceptance. If Tenant wishes to exercise Tenant's right of first offer with respect to the space described in the First Offer Notice, then within seven (7) business days after delivery of the First Offer Notice to Tenant, Tenant shall deliver notice to Landlord of Tenant's intention to exercise its right of first offer with respect to the entire space described in the First Offer Notice. If concurrently with Tenant's exercise of the first offer right, Tenant notifies Landlord that it does not accept the Economic Terms set forth in the First Offer Notice, Landlord and Tenant shall, for a period of fifteen (15) days after Tenant's exercise, negotiate in good faith to reach agreement as to such Economic Terms. If Tenant does not so notify Landlord that it does not accept the Economic Terms set forth in the First Offer Notice concurrently with Tenant's exercise of the first offer right, the Economic Terms shall be as set forth in the First Offer Notice. In addition, if Tenant does not exercise its right of first offer within the seven (7) business day period, or, if Tenant exercises its first offer right but timely objects to Landlord's determination of the Economic Terms and if Landlord and Tenant are unable to reach agreement on such Economic Terms within said fifteen (15) day period, then Landlord shall be free to lease the space described in the First Offer Notice to anyone to whom Landlord desires on any terms Landlord desires and 3 -------------------------------------------------------------------------------- Tenant's right of first offer shall terminate as to the First Offer Space described in the First Offer Notice. Notwithstanding anything to the contrary contained herein, Tenant must elect to exercise its right of first offer, if at all, with respect to all of the space offered by Landlord to Tenant at any particular time, and Tenant may not elect to lease only a portion thereof.     (d) Lease of First Offer Space. If Tenant timely exercises Tenant's right to lease the First Offer Space as set forth herein, Landlord and Tenant shall execute an amendment adding such First Offer Space to the Lease upon the same non-economic terms and conditions as applicable to the Original Premises, and the economic terms and conditions as provided in this Section 10; provided that Landlord's obligations with respect to the Base, Shell and Core of the First Offer Space shall not exceed those improvements necessary to bring the First Offer Space up to Building standard. Tenant shall commence payment of rent for the First Offer Space and the Lease Term of the First Offer Space shall commence upon the date of delivery, of such space to Tenant. The Lease Term for the First Offer Space shall expire co-terminously with Tenant's lease of the Expansion Space.     (e) No Defaults. The rights contained in this Section 10 shall be personal to Ticketmaster L.L.C., a Delaware limited liability company ("Ticketmaster L.L.C."), or any of Ticketmaster L.L.C.'s parent companies or wholly owned subsidiaries, provided that such parent or subsidiary has a tangible net worth equal to or greater than Ticketmaster L.L.C.'s tangible net worth as of the date of this Fourth Amendment (for purposes of this Section 10(e), the "Original Tenant"), and may only be exercised by the Original Tenant (and not any assignee, sublessee or other transferee of the Original Tenant's interest in the Lease) if Tenant occupies the entire Premises as of the date of the First Offer Notice. Tenant shall not have the right to lease First Offer Space as provided in this Section 10 if, as of the date of the First Offer Notice, or, at Landlord's option, as of the scheduled date of delivery of such First Offer Space to Tenant, Tenant is in default under the Lease or Tenant has previously been in default under the Lease more than once with all applicable notice and cure periods having expired.     11. Estoppel. Tenant hereby certifies and acknowledges, that as of the date hereof (a) Landlord is not in default in any respect under the Lease, (b) Tenant does not have any defenses to its obligations under the Lease, (c) Landlord is holding Tenant's Security Deposit under the Lease in the amount of $57,190.37, and (d) there are no offsets against rent payable under the Lease. Tenant acknowledges and agrees that: (i) the representations herein set forth constitute a material consideration to Landlord in entering into this Fourth Amendment; (ii) such representations are being made by Tenant for purposes of inducing Landlord to enter into this Fourth Amendment; and (iii) Landlord is relying on such representations in entering into this Fourth Amendment.     12. Brokers/Consultants. Landlord and Tenant hereby warrant to each other that they have had no dealings with any real estate broker, consultant or agent in connection with the negotiation of this Fourth Amendment, excepting only Insignia/ESG and The Levy Organization (the "Brokers/Consultants"), and that they know of no other real estate broker, consultant or agent who is entitled to a commission or consulting fee in connection with this Fourth Amendment. Each party agrees to indemnify and defend the other party against and hold the other party harmless from any and all claims, demands, losses, liabilities, lawsuits, judgments, and costs and expenses (including without limitation reasonable attorneys' fees) with respect to any leasing commission or equivalent compensation alleged to be owing on account of the indemnifying party's dealings with any real estate broker, consultant or agent other than the Brokers/Consultants.     13. Ratification. Except as specifically herein amended, the Lease is and shall remain in full force and effect according to the terms thereof. In the event of any conflict between the Lease and this Fourth Amendment, this Fourth Amendment shall control.     14. Counterparts. This Fourth Amendment may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. 4 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, this Fourth Amendment has been executed by the parties as of the date first referenced above. "Landlord"   COLONNADE WlLSHIRE CORP., a California corporation     By: /s/ ILLEGIBLE    -------------------------------------------------------------------------------- ILLEGIBLE Vice President     By: -------------------------------------------------------------------------------- "Tenant"   TICKETMASTER L.L.C., a Delaware limited liability company     By: /s/ SUSAN BRACEY    -------------------------------------------------------------------------------- Susan Bracey Senior Vice President—Finance     By: /s/ VICTORIA RISHWAIN    -------------------------------------------------------------------------------- Victoria Rishwain Vice President & Assistant General Counsel 5 -------------------------------------------------------------------------------- EXHIBIT "A" Expansion Space Floor Plan [EXHIBIT "A" ARTWORK] SUITE 530 EAST THE WILSHIRE COLONNADE 3701 WILSHIRE BOULEVARD LOS ANGELES, CA 90010 -------------------------------------------------------------------------------- EXHIBIT "A" Expansion Space Floor Plan [EXHIBIT "A" ARTWORK] SUITE 870 EAST THE WILSHIRE COLONNADE 3701 WILSHIRE BOULEVARD LOS ANGELES, CA 90010 -------------------------------------------------------------------------------- EXHIBIT "B" First Offer Space Floor Plan [EXHIBIT "B" ARTWORK] SUITE 880 EAST THE WILSHIRE COLONNADE 3701 WILSHIRE BOULEVARD LOS ANGELES, CA 90010 -------------------------------------------------------------------------------- THIRD AMENDMENT TO OFFICE LEASE     THIS THIRD AMENDMENT TO OFFICE LEASE dated as of December 11, 2000 (this "Third Amendment"), is entered into by and between COLONNADE WlLSHIRE CORP., a California corporation ("Landlord"), and TICKETMASTER L.L.C., a Delaware limited liability company ("Tenant"), with reference to the following: R E C I T A L S     WHEREAS, Landlord and Ticketmaster – California, Inc., a California corporation, Tenant's predecessor in interest, entered into that certain Office Lease dated November 5, 1998 (the "Original Lease"), as amended by that certain First Amendment to Office Lease dated January 12, 1999 (the "First Amendment"), and that certain Second Amendment to Office Lease dated as of June 22, 1999 (the "Second Amendment"; the Original Lease, as amended by the First Amendment and the Second Amendment is hereinafter referred to as the "Lease"), for the lease of certain premises (the "Original Premises"), commonly known as Suites 403, 600, 601, 700, 900 and 1050, consisting of approximately 58,202 rentable square feet of space located on the fourth (4th), sixth (6th), seventh (7th), ninth (9th) and tenth (10th) floors of that certain office building (the "Building") commonly known as The Wilshire Colonnade and located at 3701 Wilshire Boulevard, Los Angeles, California. All capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Lease; and     WHEREAS, Landlord and Tenant desire by this Third Amendment to amend the Lease in order to, among other things, (a) expand the Original Premises to include (i) certain premises commonly known as Suite 1060 consisting of approximately 2,636 rentable square feet of space located on the tenth (10th) floor of the Building (the "Suite 1060"), (ii) certain premises commonly known as Suites 401 consisting of approximately 1,305 rentable square feet located on the fourth (4th) floor of the Building ("Suite 401"), and (iii) certain premises commonly known as Suite 405 consisting of approximately 1,875 rentable square feet of space located on the fourth (4th) floor of the Building ("Suite 405") (Suite 1060, Suite 401 and Suite 405 are collectively hereinafter referred to as the "Expansion Space"), (b) provide for the amount of Base Rent Tenant shall pay to Landlord for the Expansion Space, and (c) to further amend, modify and supplement the Lease as set forth herein.     NOW, THEREFORE, in consideration of the Premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:     1.  Recitals. The Recitals set forth above are incorporated herein as though set forth in full hereat.     2.  Expansion; Description of Premises. Commencing on January 1, 2001 (the "Expansion Space Commencement Date"), Landlord shall lease to Tenant and Tenant shall lease from Landlord the Expansion Space, as outlined on Exhibit "A" attached hereto and incorporated herein by this reference, upon all of the terms and conditions of the Lease except as otherwise set forth herein. The term of Tenant's lease of the Expansion Space shall be two (2) years ending on December 31, 2002 (the "Expansion Space Termination Date"). From and after the Expansion Space Commencement Date until the Expansion Space Termination Date, all references to the "Premises" contained in the Lease shall be amended to mean and refer to the entirety of the space in the Original Premises and the Expansion Space, which is approximately 64,018 rentable square feet of space (the entirety of such space is referred to herein as the "Expanded Premises"). Landlord and Tenant hereby acknowledge and agree that the foregoing statement of the rentable square footage of the Expanded Premises is not a representation or warranty of the exact number of square feet therein but rather is only a reasonable approximation and that the Base Rent payable under the Lease (as amended hereby) is not subject to 1 -------------------------------------------------------------------------------- revision whether or not the actual square footage is more or less than such approximation. Effective on the Expansion Space Commencement Date the floor plan attached hereto as Exhibit "A" and incorporated therein by this reference shall be added to the floor plan of the Original Premises attached to the Lease as Exhibit A.     3.  Base Rent for Expansion Space. Landlord and Tenant agree that, in addition to paying all other amounts due under the Lease, Tenant shall pay the following Base Rent for the Expansion Space, in accordance with Article 3 of the Lease: Period --------------------------------------------------------------------------------   Monthly Installment of Base Rent --------------------------------------------------------------------------------   Monthly Rental Rate -------------------------------------------------------------------------------- 01/01/01 – 12/31/01   $ 7,270.00   $ 1.25 per rsf 01/01/02 – 12/31/02   $ 7,560.80   $ 1.30 per rsf     4.  Tenant's Share of Direct Expenses for Expansion Space. In addition to paying all other amounts due under the Lease and the Base Rent for the Expansion Space set forth in Section 4 above, commencing on the Expansion Space Commencement Date and continuing until the expiration of earlier termination of the Lease Term, Tenant shall pay Tenant's Share of the annual Direct Expenses for the Expansion Space in excess of the Direct Expenses for the Base Year in accordance with Article 4 of the Lease. For purposes hereof, Tenant's Share of Direct Expenses for the Expansion Space shall be 1.57% and the Base Year shall mean the year set forth in Section 9.1 of the Summary of Basic Lease Information attached to the Lease.     5.  Security Deposit. Lessee shall not be required to increase the security deposit being held by Landlord under the Lease in connection herewith. The security deposit under the Lease shall remain $57,190.37.     6.  Tenant Improvement Allowance. In connection with Tenant's lease of the Expansion Space, Landlord will provide Tenant with an improvement allowance (the "Tenant Improvement Allowance") of Three and 50/100 Dollars ($3.50) per rentable square foot of the Expansion Space ($20,356.00) to complete, subject to the terms and conditions set forth in this Section 6, certain improvements (the "Tenant Improvements") to the Expansion Space desired to be made by Tenant. Prior to commencement of the Tenant Improvements, Tenant will furnish Landlord with all plans and specifications, if any, for Landlord's approval (which approval shall not be unreasonably withheld or delayed). If Tenant elects to use its own contractor to construct the Tenant Improvements, such contractor shall be licensed and approved by Landlord (approval not to be unreasonably withheld or delayed) prior to commencement of the Tenant Improvements. Upon Landlord's approval of the plans and specifications for the Tenant Improvements and Tenant's contractor, Tenant may commence the Tenant Improvements. The Tenant Improvements shall be performed and completed in compliance with all applicable laws, codes, rules and regulations, without any unpaid claims for material, labor or supplies. Tenant shall furnish to Landlord executed construction permits and such invoices, affidavits, releases, and other documentation as Landlord may reasonably request, to be assured, to Landlord's satisfaction, that the Tenant Improvements have been completed in accordance with the plans and specifications, if any, approved by Landlord and have been paid for by Tenant. Provided Tenant complies with all of the terms and conditions of this Section 6, including but not limited to, proof of payment of all bills and delivery to Landlord of unconditional lien releases from all contractors, subcontractors and material suppliers, Landlord shall reimburse Tenant within thirty (30) days after completion of the Tenant Improvements for Tenant's costs incurred in connection with the Tenant Improvements up to an amount not to exceed the amount of the Tenant Improvement Allowance. Tenant will be responsible for paying all costs of the Tenant Improvements in excess of the Tenant Improvement Allowance. If the cost of the Tenant Improvements is less than the Tenant Improvement Allowance, Tenant shall receive a credit against the Base Rent next becoming due under the Lease in the amount of any unused portion of the Tenant Improvement Allowance. 2 --------------------------------------------------------------------------------     In the event that Tenant demolishes any walls between any portion of the Expansion Space and any suite(s) adjacent to the Expansion Space (e.g., the demising wall between Suites 1050 and 1060), Tenant shall replace such walls upon the expiration or earlier termination of Tenant's lease of the Expansion Space unless Tenant extends Tenant's lease of the Expansion Space for a term of not less than three (3) years beyond the Expansion Space Termination Date, in which event Tenant shall not be required to replace any demolished walls.     7.  Parking Spaces. In addition to the parking spaces set forth in Section 11 of the Summary of Basic Lease Information attached to the Lease, in connection with Tenant's lease of the Expansion Space, Tenant shall have the right to rent, on a month-to-month basis, up to two (2) unreserved parking spaces per 1,000 rentable square feet of the Expansion Space in the Building Parking Facility at such rate as is established by Landlord for the Building Parking Facility from time to time.     8.  Directory Board. In connection with Tenant's lease of the Expansion Space, Tenant shall be entitled to designate up to one (1) name per 1,000 rentable square feet of the Expansion Space on the directory board in the lobby of the Building.     9.  Estoppel. Tenant hereby certifies and acknowledges, that as of the date hereof (a) Landlord is not in default in any respect under the Lease, (b) Tenant does not have any defenses to its obligations under the Lease, (c) Landlord is holding Tenant's Security Deposit under the Lease in the amount of $57,190.37, and (d) there are no offsets against rent payable under the Lease. Tenant acknowledges and agrees that: (i) the representations herein set forth constitute a material consideration to Landlord in entering into this Third Amendment; (ii) such representations are being made by Tenant for purposes of inducing Landlord to enter into this Third Amendment; and (iii) Landlord is relying on such representations in entering into this Third Amendment.     10. Brokers/Consultants. Landlord and Tenant hereby warrant to each other that they have had no dealings with any real estate broker, consultant or agent in connection with the negotiation of this Third Amendment, excepting only Insignia/ESG and The Levy Organization (the "Brokers/Consultants"), and that they know of no other real estate broker, consultant or agent who is entified to a commission or consulting fee in connection with this Third Amendment. Each party agrees to indemnify and defend the other party against and hold the other party harmless from any and all claims, demands, losses, liabilities, lawsuits, judgments, and costs and expenses (including without limitation reasonable attorneys' fees) with respect to any leasing commission or equivalent compensation alleged to be owing on account of the indemnifying party's dealings with any real estate broker, consultant or agent other than the Brokers/Consultants.     11. Ratification. Except as specifically herein amended, the Lease is and shall remain in full force and effect according to the terms thereof. In the event of any conflict between the Lease and this Third Amendment, this Third Amendment shall control.     12. Counterparts. This Third Amendment may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. 3 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, this Third Amendment has been executed by the parties as of the date first referenced above. "Landlord"   COLONNADE WlLSHIRE CORP., a California corporation     By: /s/ ILLEGIBLE    -------------------------------------------------------------------------------- ILLEGIBLE     By: -------------------------------------------------------------------------------- "Tenant"   TICKETMASTER L.L.C., a Delaware limited liability company     By: /s/ SUSAN BRACEY    -------------------------------------------------------------------------------- Susan Bracey Senior Vice President—Finance     By: /s/ VICTORIA RISHWAIN    -------------------------------------------------------------------------------- Victoria Rishwain Vice President & Assistant General Counsel 4 -------------------------------------------------------------------------------- EXHIBIT "A" Expansion Space Floor Plan [EXHIBIT "A" ARTWORK] SUITE 405 EAST THE WILSHIRE COLONNADE 3701 WILSHIRE BOULEVARD LOS ANGELES, CA 90010 -------------------------------------------------------------------------------- EXHIBIT "A" Expansion Space Floor Plan [EXHIBIT "A" ARTWORK] SUITE 1060 EAST THE WILSHIRE COLONNADE 3701 WILSHIRE BOULEVARD LOS ANGELES, CA 90010 -------------------------------------------------------------------------------- SECOND AMENDMENT TO OFFICE LEASE     THIS SECOND AMENDMENT TO OFFICE LEASE dated as of June 22, 1999 (this "Second Amendment"), is entered into by and between COLONNADE WILSHIRE CORP., a California corporation ("Landlord"), and TICKETMASTER L.L.C., a Delaware limited liability company ("Tenant"), with reference to the following: R E C I T A L S     WHEREAS, Landlord and Ticketmaster – California, Inc., a California corporation, Tenant's predecessor in interest, entered into that certain Office Lease dated November 5, 1998 (the "Original Lease"), as amended by a certain First Amendment to Office Lease dated January 12, 1999 (the "First Amendment"), for the lease of certain premises (the "Premises"), commonly known as Suites 403, 600, 601, 700, 900 and 1050, consisting of approximately 58,202 rentable square feet of space located on the fourth (4th), sixth (6th), seventh (7th), ninth (9th) and tenth (10th) floors of that certain office building (the "Building") commonly known as The Wilshire Colonnade and located at 3701 Wilshire Boulevard, Los Angeles, California. The Original Lease and First Amendment are sometimes collectively referred to herein as the "Lease." All capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Lease; and     WHEREAS, Landlord and Tenant desire by this Second Amendment to amend the Lease in order to, among other things, (a) extend the effective date and notice date for Tenant's right of early termination for a portion of the Premises under Section 2.3 of the Original Lease and Section 3 of the First Amendment; and (b) further amend, modify and supplement the Lease as set forth herein.     NOW, THEREFORE, in consideration of the Premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:     1.  Recitals. The Recitals set forth above are incorporated herein as though set forth in full hereat.     2.  Extension of Time for Exercise of Tenant's Right of Early Termination. Section 2.3 of the Original Lease and Section 3 of the First Amendment are hereby amended by (a) replacing the date "January 31, 2000" each time such date appears in said sections with the date "April 30, 2000," and (b) replacing the date "June 30, 1999" with the date "September 30, 1999."     3.  Estoppel. Tenant hereby certifies and acknowledges, that as of the date hereof (a) Landlord is not in default in any respect under the Lease, (b) Tenant does not have any defenses to its obligations under the Lease, (c) Landlord is holding Tenant's Security Deposit under the Lease in the amount of $57,190.37, and (d) there are no offsets against rent payable under the Lease. Tenant acknowledges and agrees that: (i) the representations herein set forth constitute a material consideration to Landlord in entering into this Second Amendment; (ii) such representations are being made by Tenant for purposes of inducing Landlord to enter into this Second Amendment; and (iii) Landlord is relying on such representations in entering into this Second Amendment.     4.  Landlord's Attorneys' Fees. It shall be a condition precedent to the effectiveness of this Second Amendment that Tenant shall have paid to Landlord upon demand Landlord's reasonable attorneys' fees incurred in connection with this Second Amendment.     5.  Ratification. Except as specifically herein amended, the Lease is and shall remain in full force and effect according to the terms thereof. In the event of any conflict between the Lease and this Second Amendment, this Second Amendment shall control.     6.  Counterparts. This Second Amendment may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. 1 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, this Second Amendment has been executed by the parties as of the date first referenced above. "Landlord"   COLONNADE WlLSHIRE CORP., a California corporation     By: /s/ ILLEGIBLE    -------------------------------------------------------------------------------- "Tenant"   TICKETMASTER L.L.C., a Delaware limited liability company     By: /s/ TIMOTHY F. WOOD    -------------------------------------------------------------------------------- Timothy F. Wood Executive Vice President     By: /s/ VICTORIA RISHWAIN    -------------------------------------------------------------------------------- Victoria Rishwain Vice President & Assistant General Counsel 2 -------------------------------------------------------------------------------- FIRST AMENDMENT TO OFFICE LEASE     THIS FIRST AMENDMENT TO OFFICE LEASE dated as of January 12, 1999 (this "First Amendment"), is entered into by and between COLONNADE WILSHIRE CORP., a California corporation ("Landlord"), and TICKETMASTER L.L.C., a Delaware limited liability company ("Tenant"), with reference to the following: R E C I T A L S     WHEREAS, Landlord and Ticketmaster – California, Inc., a California corporation, Tenant's predecessor in interest, entered into that certain Office Lease dated November 5, 1998 (the "Lease"), for the lease of certain premises (the "Original Premises"), commonly known as Suites 600, 601, 700, 900 and 1050, consisting of approximately 56,782 rentable square feet of space located on the sixth (6th), seventh (7th), ninth (9th) and tenth (10th) floors of that certain office building (the "Building") commonly known as The Wilshire Colonnade and located at 3701 Wilshire Boulevard, Los Angeles, California. All capitalized terms used herein and not otherwise determined herein shall have the meanings ascribed to such terms in the Lease; and     WHEREAS, Landlord and Tenant desire by this First Amendment to amend the Lease in order to, among other things, (a) expand the Original Premises leased by Tenant under the Lease to include Suite 403 in the Building consisting of approximately 1,420 rentable square feet of space ("Suite 403"); (b) provide for the Base Rent to be paid by Tenant for Suite 403, and (c) further amend, modify and supplement the Lease as set forth herein.     NOW, THEREFORE, in consideration of the Premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:     1.  Recitals. The Recitals set forth above are incorporated herein as though set forth in full hereat.     2.  Expansion of Premises. Effective January 15, 1999 (the "Suite 403 Commencement Date"), the Original Premises shall be expanded to include Suite 403, which consists of approximately 1,420 rentable square feet of space, as shown on the floor plan attached hereto as Exhibit "A" and incorporated herein by this reference. Therefore, the Lease is hereby amended such that, from and after the Suite 403 Commencement Date, all references in the Lease to the "Premises" shall mean and refer to the entirety of the space in the Original Premises and Suite 403, which is a total of approximately 58,202 rentable square feet of space. Landlord and Tenant hereby acknowledge and agree that the foregoing statement of the rentable square footage of the Premises, as expanded to include Suite 403, is not a representation or warranty of the exact number of rentable square feet therein but rather is only a reasonable approximation and that the Base Rent payable under the Lease (as amended hereby) is not subject to revision whether or not the actual square footage is more or less than such approximation. Tenant shall accept Suite 403 in its presently existing, "as is" condition subject to latent defects, and Landlord shall not be obligated to provide or pay for any improvement work or services related to the improvement of Suite 403.     3.  Early Termination. Notwithstanding anything to the contrary contained in the Lease or this First Amendment, Tenant may terminate its lease of all or any portion of Suite 403 effective January 31, 2000, by giving Landlord seven (7) months prior written notice. Failure of Tenant to deliver such notice to Landlord by June 30, 1999 shall be deemed Tenant's election to remain in Suite 403 and Tenant shall have no further right hereunder to terminate the Lease with respect to such space. If Tenant does not terminate its lease of Suite 403 in accordance herewith, then prior to January 31, 2000, Landlord shall provide Tenant with an improvement allowance (the "Suite 403 T.I. Allowance") in the amount of Fifteen and No/100 Dollars ($15.00) per rentable square foot of Suite 403 for costs relating 1 -------------------------------------------------------------------------------- to the initial design and construction of Tenant's improvements which are permanently affixed to the Premises and with respect to which improvements Tenant shall have delivered to Landlord the items required under the first sentence of Section 2.2.2 of the Work Letter attached to the Lease as Exhibit B. The improvements to the Premises shall be constructed in accordance with the terms and conditions of the Work Letter attached to the Lease as Exhibit B, except that the Suite 403 T.I. Allowance shall be disbursed as provided under this Section 3. In the event that the actual cost of the improvements to the Premises is less than the Suite 403 T.I. Allowance, Tenant shall be entitled to such excess or a credit, deduction or offset against rent or any other amounts due under the terms of the Lease.     4.  Base Rent. Commencing on the Suite 403 Commencement Date, in addition to the Base Rent set forth in Section 8 of the Summary of Basic Lease Information contained in the Lease, Tenant shall pay Base Rent for Suite 403 as follows: Period --------------------------------------------------------------------------------   Monthly Installment of Base Rent --------------------------------------------------------------------------------   Monthly Rental Rate -------------------------------------------------------------------------------- Suite 403 Commencement Date through 48th month after the Suite 403 Commencement Date   $ 1,704   $ 1.20 49th month after the Suite 403 Commencement Date through 60th month after the Suite 403 Commencement Date   $ 1,846   $ 1.30 61st month after the Suite 403 Commencement Date through Lease Expiration Date   $ 1,988   $ 1.40     5.  Tenant's Share of Direct Expenses. The Lease is hereby amended such that from and after the Suite 403 Commencement Date, in addition to Tenant's Share of Direct Expenses set forth in Section 9.2 of the Summary of Basic Lease Information contained in the Lease, Tenant shall pay Tenant's Share of Direct Expenses for Suite 403 which is approximately .40%, increasing Tenant's Total Share of Direct Expenses to 15.721%.     6.  Estoppel. Tenant hereby certifies and acknowledges, that as of the date hereof (a) landlord is not in default in any respect under the Lease, (b) Tenant does not have any defenses to its obligations under the Lease, (c) Landlord is holding Tenant's Security Deposit under the Lease in the amount of $57,190.37, and (d) there are no offsets against rent payable under the Lease. Tenant acknowledges and agrees that: (i) the representations herein set forth constitute a material consideration to Landlord in entering into this First Amendment; (ii) such representations are being made by Tenant for purposes of inducing Landlord to enter into this First Amendment; and (iii) Landlord is relying on such representations in entering into this First Amendment.     7.  Ratification. Except as otherwise specifically herein amended, the Lease is and shall remain in full force and effect according to the terms thereof. In the event of any conflict between the Lease and this First Amendment, this First Amendment shall control.     8.  Counterparts. This First Amendment may be executed in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. 2 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, this First Amendment has been executed by the parties as of the date first referenced above. "Landlord"   COLONNADE WlLSHIRE CORP., a California corporation     By: /s/ INSIGNIA/E.S.G., INC., AGENT          By: --------------------------------------------------------------------------------         Its: -------------------------------------------------------------------------------- "Tenant"   TICKETMASTER L.L.C., a Delaware limited liability company     By: /s/ STUART DEPINA    -------------------------------------------------------------------------------- Stuart DePina Senior V.P., Treasurer & CFO     By: /s/ VICTORIA RISHWAIN    -------------------------------------------------------------------------------- Victoria Rishwain V.P., Assistant General Counsel 3 -------------------------------------------------------------------------------- THE WILSHIRE COLONNADE 3701 WILSHIRE BOULEVARD, LOS ANGELES, CALIFORNIA 90010 [EXHIBIT "A" ARTWORK] EXHIBIT "A" SUITES 403 & 405 EAST 4 -------------------------------------------------------------------------------- OFFICE LEASE WILSHIRE COLONNADE COLONNADE WILSHIRE CORP., a California corporation, as Landlord, and TICKETMASTER – CALIFORNIA, INC., a California corporation, as Tenant. -------------------------------------------------------------------------------- WILSHIRE COLONNADE SUMMARY OF BASIC LEASE INFORMATION     The undersigned hereby agree to the following terms of this Summary of Basic Lease Information (the "Summary"). This Summary is hereby incorporated into and made a part of the attached Office Lease (this Summary and the Office Lease to he known collectively as the "Lease") which pertains to the office building described in Section 6.1 of this Summary (the "Building"). Each reference in the Office Lease to any term of this Summary shall have the meaning as set forth in this Summary for such term. In the event of a conflict between the terms of this Summary and the Office Lease, the terms of the Office Lease shall prevail. Any capitalized terms used herein and not otherwise defined herein shall have the meaning as set forth in the Office Lease.     TERMS OF LEASE (References are to the Office Lease) --------------------------------------------------------------------------------   DESCRIPTION -------------------------------------------------------------------------------- 1.   Date:   November 5, 1998. 2.   Landlord:   COLONNADE WILSHIRE CORP., a California corporation 3.   Address of Landlord (Section 30.19):   c/o Insignia/E.S.G., Inc. 3701 Wilshire Boulevard, Suite 407 Los Angeles, California 90010 Attention: Property Manager 4.   Tenant:   TICKETMASTER – CALIFORNIA, INC., a California corporation 5.   Address of Tenant (Section 30.19):   8800 Sunset Boulevard West Hollywood, California 90069 Attention: Victoria Rishwain, Esq. (Prior to Lease Commencement Date)         and:         3701 Wilshire Boulevard Suite 900 Los Angeles, California 90010 Attention: Mr. Eugene Cobuzzi and Victoria Rishwain, Esq., (After Lease Commencement Date) 6.   Building and Premises (Article 1):         6.1  Building:   The office building located at 3701 Wilshire Boulevard, Los Angeles, California. i --------------------------------------------------------------------------------     6.2  Premises:   Approximately 56,782 rentable square feet of space comprised of approximately 10,966 rentable square feet of space located on the sixth (6th) floor of the Building, commonly known as Suite 600, approximately 7,801 rentable square feet of space on the sixth (6th) floor of the Building, commonly known as Suite 601, approximately 19,250 rentable square feet of space of the seventh (7th) floor of the Building, commonly known as Suite 700, approximately 14,620 rentable square feet of space of the ninth (9th) floor of the Building, commonly known as Suite 900, and approximately 4,145 rentable square feet of space on the tenth (10th) floor of the Building, commonly known as Suite 1050, as set forth in Exhibit A attached hereto. Suites 600, 601 and 700 are collectively referred to herein as the "Original Premises", and Suites 900 and 1050 are collectively referred to herein as the "New Premises". The Original Premises and the New Premises are collectively referred to herein as the "Premises". 7.   Term (Article 2):         7.1  Lease Term:   Seven (7) years, with one (l), five (5) year option to extend.     7.2  Lease Commencement Date:   Upon mutual execution of this Lease.     7.3  Rent Commencement Dates:         Original Premises:   Upon mutual execution of this Lease. Tenant has been occupying the Original Premises pursuant to (a) that certain Office Lease dated January 20, 1988, by and between State Street Bank and Trust Company, a Massachusetts banking corporation, not personally but solely as Trustee for Telephone Real Estate Equity Trust, predecessor in interest to Landlord, and Ticketmaster – Southern California, Inc., predecessor-in-interest to Tenant, as amended, and (b) that certain Office Lease dated August 8, 1997, by and between Landlord and Tenant (collectively, the "Original Leases"). ii --------------------------------------------------------------------------------     Suite 900:   Upon the earlier of (i) substantial completion of the Tenant Improvements (as defined in the Work Letter attached to this Lease, as Exhibit B), and (ii) ninety (90) days after the date Landlord delivers the New Premises to Tenant (with Landlord's Work (as defined in the Work Letter) completed) for construction of the Tenant Improvements, as such ninety (90) day period may be extended for Force Majeure Delays and Landlord Delays (as defined in the Work Letter) ("Suite 900 RCD"); provided, that solely for the purposes of the Suite 900 RCD, to the extent Tenant is unable, through no fault of Tenant, to obtain (A) customary labor for tenant improvements consistent with those customarily built by tenants in Comparable Buildings (as hereinafter defined); or (B) building standard materials (or other reasonably comparable materials) for those Suite 900 Tenant Improvements essential for the operation of Tenant's business in the Premises (and such materials are not readily available generally), then Tenant shall provide Landlord with written notice of such inability and to the extent such inability causes a delay in substantial completion of the Tenant Improvements to be constructed in Suite 900 only, the Suite 900 RCD shall be extended by the number of days of such delay.     Suite 1050:   Upon the earlier of (i) substantial completion of the Tenant Improvements (as defined in the Work Letter attached to this Lease as Exhibit B), and (ii) ninety (90) days after the date Landlord delivers the New Premises to Tenant (with Landlord's Work (as defined in the Work Letter) completed) for construction of the Tenant Improvements, as such ninety (90) day period may be extended for Force Majeure Delays and Landlord Delays (as defined in the Work Letter) ("Suite 1050 RCD").     7.4  Lease Expiration Date:   The last day of the month in which the 7th anniversary of the Suite 900 RCD occurs. 8.   Base Rent (Article3):             Period --------------------------------------------------------------------------------   Monthly Installment   of Base Rent --------------------------------------------------------------------------------     Suite 600:   Lease Commencement Date – 4/30/99   $20,287.10         5/1/99 – 1/31/00   $21,932.00 iii --------------------------------------------------------------------------------         2/1/00 – Lease Expiration Date   Monthly Base Rent shall be calculated by multiplying the square footage of Suite 600 (10,966 s.f.) by the Monthly Rental Rate then in effect for Suites 900 and 1050, subject to increase in accordance with the Monthly Rental Rate increases scheduled for Suites 900 and 1050 as set forth below.     Suite 601:   Lease Commencement Date – 1/31/00   $9,751.25         2/1/00 – Lease Expiration Date   Monthly Base Rent shall be calculated by multiplying the square footage of Suite 601 (7,801 s.f.) by the Monthly Rental Rate then in effect for Suites 900 and 1050, subject to increase in accordance with the Monthly Rental Rate increases scheduled for Suites 900 and 1050 as set forth below.     Suite 700:   Lease Commencement Date – 4/30/99   $37,730.00         5/1/99 – 1/31/00   $40,617.50         2/1/00 – Lease Expiration Date   Monthly Base Rent shall be calculated by multiplying the square footage of Suite 700 (19,250 s.f.) by the Monthly Rental Rate then in effect for Suites 900 and 1050, subject to increase in accordance with the Monthly Rental Rate increases scheduled for Suites 900 and 1050 as set forth below.         Period --------------------------------------------------------------------------------   Monthly Installment of Base Rent --------------------------------------------------------------------------------   Monthly Rental Rate --------------------------------------------------------------------------------     Suite 900:   Suite 900 RCD – 48th month after Suite 900 RCD   $ 17,544.00   $ 1.20         49th month after Suite 900 RCD – 60th month after Suite 900 RCD   $ 19,006.00   $ 1.30         61st month after Suite 900 RCD – Lease Expiration Date   $ 20,468.00   $ 1.40     Suite 1050:   Suite 1050 RCD – 48th month after Suite 900 RCD   $ 4,974.00   $ 1.20         49th month after Suite 900 RCD – 60th month after Suite 900 RCD   $ 5,388.50   $ 1.30         61st month after Suite 900 RCD – Lease Expiration Date   $ 5,803.00   $ 1.40           9.   Additional Rent (Article 4):         9.1  Base Year:   Calendar year 1999. iv --------------------------------------------------------------------------------     9.2  Tenant's Share of Direct Expenses:   Suite 600: Approximately 2.988% Suite 601: Approximately 2.123% Suite 700: Approximately 5.245% Suite 900: Approximately 3.865% Suite 1050: Approximately 1.100% Total: Approximately 15.321% 10.   Security Deposit (Article 21):   Landlord is currently holding Tenant's security deposit in the amount of $57,190.37 under the Original Leases and shall continue to hold such amount as the Security Deposit hereunder. 11.   Parking Spaces (Article 28):   Tenant shall have the right to rent, on a month-to-month basis, a total of up to one hundred ninety-five (195) parking spaces in the Building Parking Facility, of which eighteen (18) spaces (the "P-1 Reserved Spaces") shall be reserved, single car spaces located as close as possible to the Building elevators on the parking level closest to street level based on current availability, eleven (11) spaces (the "Additional Reserved Spaces") shall be reserved, single car spaces the location of which shall be determined by Landlord, and the remaining one hundred sixty-six (166) spaces (the "Unreserved Spaces") shall be unreserved spaces, all at such rates as are established by Landlord for the Building Parking Facility from time to time. Notwithstanding anything to the contrary contained herein, (i) six (6) of the Reserved P-1 Spaces shall be provided to Tenant free of charge during the initial Lease Term only, after which time Tenant shall pay Landlord's established rate, as such rate may be adjusted by Landlord from time to time, (ii) the eleven (11) Additional Reserved Spaces shall be rented at a discount rate, during the initial Lease Term only, of ten percent (10%) off Landlord's established rate (currently $125.00), as such rate may be adjusted by Landlord from time to time, and (iii) eighty (80) of the Unreserved Spaces shall be rented at a discount rate, during the initial Lease Term only, of twenty percent (20%) off Landlord's established rate (currently $75.00), as such rate may be adjusted from time to time. To the extent that additional parking may be available, then Tenant may lease on a month-to-month basis parking spaces in excess of the one hundred ninety-five (195) spaces provided above until such time as Landlord provides Tenant thirty (30) days prior written notice of Landlord's need for such excess parking spaces, in which case Tenant shall have no right to lease such excess spaces. v -------------------------------------------------------------------------------- 12.   Landlord's Broker (Section 29.25):   Insignia/E.S.G., Inc. 3701 Wilshire Boulevard, Suite 407 Los Angeles, California 90010 13.   Tenant's Broker (Section 29.25):   None     The foregoing terms of this Summary are hereby agreed to by Landlord and Tenant. "Landlord"   COLONNADE WlLSHIRE CORP., a California corporation     By: /s/ INSIGNIA/E.S.G., INC., AGENT          By: --------------------------------------------------------------------------------         Its: /s/ ILLEGIBLE    -------------------------------------------------------------------------------- ILLEGIBLE President "Tenant"   TICKETMASTER L.L.C., a Delaware limited liability company     By: /s/ EUGENE COBUZZI    -------------------------------------------------------------------------------- Eugene Cobuzzi COO     By: /s/ VICTORIA RISHWAIN    -------------------------------------------------------------------------------- Victoria Rishwain Assistant Secretary vi -------------------------------------------------------------------------------- WILSHIRE COLONNADE INDEX ARTICLE --------------------------------------------------------------------------------   SUBJECT MATTER --------------------------------------------------------------------------------   PAGE -------------------------------------------------------------------------------- ARTICLE 1.   REAL PROPERTY, BUILDING AND PREMISES   1 ARTICLE 2.   INITIAL LEASE TERM   2 ARTICLE 3.   BASE RENT   5 ARTICLE 4.   ADDITIONAL RENT   5 ARTICLE 5.   USE OF PREMISES   12 ARTICLE 6   SERVICES AND UTILITIES   12 ARTICLE 7.   REPAIRS   14 ARTICLE 8.   ADDITIONS AND ALTERATIONS   15 ARTICLE 9.   COVENANT AGAINST LIENS   18 ARTICLE 10.   INSURANCE   18 ARTICLE 11.   DAMAGE AND DESTRUCTION   20 ARTICLE 12.   NONWAIVER   22 ARTICLE 13.   CONDEMNATION   22 ARTICLE 14.   ASSIGNMENT AND SUBLETTING   23 ARTICLE 15.   SURRENDER OF PREMISES; OWNERSHIP AND REMOVAL OF TRADE FIXTURES   26 ARTICLE 16.   HOLDING OVER   27 ARTICLE 17.   ESTOPPEL CERTIFICATES   28 ARTICLE 18.   SUBORDINATION   28 ARTICLE 19.   DEFAULTS; REMEDIES   28 ARTICLE 20.   COVENANT OF QUIET ENJOYMENT   31 ARTICLE 21.   SECURITY DEPOSIT   31 ARTICLE 22.   SUBSTITUTION OF OTHER PREMISES   33 ARTICLE 23.   SIGNS   33 ARTICLE 24.   COMPLIANCE WITH LAW   33 ARTICLE 25.   LATE CHARGES   34 ARTICLE 26.   LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT   34 ARTICLE 27.   ENTRY BY LANDLORD   34 ARTICLE 28.   TENANT PARKING   35 ARTICLE 29.   FIRST OFFER RIGHT   35 ARTICLE 30.   MISCELLANEOUS PROVISIONS   36 EXHIBITS EXHIBIT A—OUTLINE OF FLOOR PLAN OF PREMISES EXHIBIT B—WORK LETTER EXHIBIT C—NOTICE OF LEASE TERM DATES EXHIBIT D—RULES AND REGULATIONS EXHIBIT E—FORM OF TENANT'S ESTOPPEL CERTIFICATE EXHIBIT F—INTENTIONALLY DELETED vii -------------------------------------------------------------------------------- INDEX OF MAJOR DEFINED TERMS DEFINED TERMS --------------------------------------------------------------------------------   LOCATION OF DEFINITION IN OFFICE LEASE -------------------------------------------------------------------------------- 7th Floor Improvements   4 7th Floor Space   4 7th Floor T.I. Allowance   4 ACM   38 Actual Cost   12 Additional Rent   5 Affiliate   24 Alterations   14 Applicable Laws   31 Base Rent   4 Base Year   5 Base, Shell and Core   19 BOMA   8 Broker   37 Builder's All Risk   14 Building   1 Building Parking Facility   1 Comparable Buildings   2 Comparable Transactions   2 Computer HVAC System   12 Conference Room   13 Control   24 Cost Pools   6 Direct Expenses   5 Dish   15 Eligibility Period   29 EPA   38 Estimate   8 Estimated Statements   8 Estimated Excess   8 Excess   8 Expense Year   5 Fair Market Rent   2 First Offer Right   33 First Right Space   33 FMR Data   3 Force Majeure   36 Hazardous Material   37 Holidays   12 Independent CPA   9 Landlord   1 Landlord Parties   17 Landlord's Abatement Work   38 Landlord's Review Period   3 Lease   I Lease Commencement Date   2 viii -------------------------------------------------------------------------------- Lease Expiration Date   2 Lease Term   2 Lease Year   2 Notices   36 Offer Notice   33 Operating Expenses   5 Option Rent   2 Option Term   2 Original Improvements   18 Original Tenant   2 Outside Agreement Date   3 Ownership Changes   24 Premises   I Project   1 Prop. 13 Trigger Extent   7 Proposition 13   7 Real Property   1 Renovations   38 Rent   2 Review Period   10 Security Deposit   29 Statement   8 Storage Space Agreements   1 Subject Space   22 Subleases   28 Suite 1050 Improvements   4 Suite 1050 T.I. Allowance   4 Summary   l Systems and Equipment   6 Taking   21 Tax Expenses   6 Tenant   I Tenant Parties   17 Tenant's Review Period   3 Tenant's Share   8 Transfer Notice   21 Transfer Premium   23 Transferee   21 Transfers   21 UPS System   12 ix -------------------------------------------------------------------------------- WILSHIRE COLONNADE OFFICE LEASE     THIS OFFICE LEASE, which includes the preceding Summary of Basic Lease Information (the "Summary") attached hereto and incorporated herein by this reference and certain separate existing storage space agreements previously entered into by and between the parties (the "Storage Space Agreements"; this Office Lease, the Summary and the Storage Space Agreements to be known sometimes collectively hereafter as the "Lease"), dated as of the date set forth in Section 1 of the Summary, is made by and between COLONNADE WILSHIRE CORP., a California corporation ("Landlord"), and TICKETMASTER – CALIFORNIA, INC., a California corporation ("Tenant"). ARTICLE 1. REAL PROPERTY, BUILDING AND PREMISES     1.1. Real Property, Building and Premises. Upon and subject to the terms, covenants and conditions hereinafter set forth in this Lease, Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the premises set forth in Section 6.2 of the Summary (the "Premises"), which Premises are located in the "Building," as that term is defined in this Section 1.1. The outline of the floor plan of the Premises is set forth in Exhibit A attached hereto. The Premises are a part of the building (the "Building") located at 3701 Wilshire Boulevard, Los Angeles, California. The Building, the Building's parking facility ("Building Parking Facility"), the other office building located adjacent to the Building and the land upon which such adjacent office building is located, any outside plaza areas, land and other improvements surrounding the Building and adjacent building which are designated from time to time by Landlord as common areas appurtenant to or servicing the Building, and the land upon which any of the foregoing are situated, are herein sometimes collectively referred to as the "Project" or "Real Property." Tenant is hereby granted the right to the nonexclusive use of the common corridors and hallways, stairwells, elevators, restrooms and other public or common areas located on the Real Property; provided, however, that the manner in which such public and common areas are maintained and operated shall be at the sole discretion of Landlord and the use thereof shall be subject to such rules, regulations and restrictions as Landlord may reasonably make from time to time to the extent the same are non-discriminatorily enforced and Tenant receives advance notice of the same. Landlord reserves the right to make alterations or additions to or to change the location of elements of the Real Property and the common areas thereof as long as such alterations, additions or changes do not unreasonably reduce, restrict or negatively affect Tenant's access to the Premises or the Building Parking Facility. Further, Landlord shall not promulgate or enforce any rules or regulations which unreasonably interfere with the conduct of Tenant's business at the Premises.     1.2. Condition of the Premises. Except as specifically set forth in this Lease and the Work Letter attached hereto as Exhibit B, Tenant shall accept the Premises in its presently existing, "as is" condition subject to latent defects, and Landlord shall not be obligated to provide or pay for any improvement work or services related to the improvement of the Premises. Tenant also acknowledges that Landlord has made no representation or warranty regarding the condition of the Premises or the Building except as specifically set forth in this Lease. Notwithstanding anything to the contrary contained herein, Tenant shall not, by virtue of Tenant's acceptance of the Premises, be required to take any corrective action with respect to any latent defect. Furthermore, if any latent defect exists which materially affects Tenant's quiet enjoyment of the Premises, constitutes a dangerous condition or is required to be corrected by law, then Landlord will undertake the appropriate corrective action at Landlord's cost which cost shall not be charged back to Tenant as a Direct Expense. Nothing in this paragraph shall be construed to impose on Tenant or subject Tenant to any liability to any third party for injury to property or persons arising out of latent defects unless such latent defects were created by Tenant or its employees, agents or contractors in the course of repair work or physical improvements or alterations to the Premises performed by Tenant or its employees, agents or contractors, including without 1 -------------------------------------------------------------------------------- limitation, construction of the Tenant Improvements described in Exhibit B. Nothing in this paragraph shall be construed to impose on Landlord or subject Landlord to any liability to any third party for injury to property or persons arising out of latent defects unless such latent defects were created by Landlord or its employees, agents or contractors. ARTICLE 2. INITIAL LEASE TERM     2.1. Initial Lease Term. The terms and provisions of this Lease shall be effective as of the date of this Lease except for the provisions of this Lease relating to the payment of Rent. The term of this Lease (the "Lease Term") shall be as set forth in Section 7.1 of the Summary and shall commence on the date (the "Lease Commencement Date") set forth in Section 7.2 of the Summary, and shall terminate on the date (the "Lease Expiration Date") set forth in Section 7.3 of the Summary, unless this Lease is sooner terminated as hereinafter provided. The parties acknowledge that Tenant is currently leasing from Landlord the Original Premises under the Original Leases. Landlord and Tenant agree that on the Lease Commencement Date, the Original Leases shall immediately terminate and be of no further force or effect and this Lease shall govern Tenant's lease of the entirety of the Premises. For purposes of this Lease, the term "Lease Year" shall mean each consecutive twelve (12) month period during the Lease Term; provided, however, that the first Lease Year shall commence on the Lease Commencement Date and end on the last day of the twelfth (12th) month thereafter and the second and each succeeding Lease Year shall commence on the first day of the next calendar month; and further provided that the last Lease Year shall end on the Lease Expiration Date. Once during the Lease Term, Landlord may deliver to Tenant a notice of Lease Term dates in the form as set forth in Exhibit C, attached hereto, which notice Tenant shall execute and return to Landlord within five (5) days of receipt thereof, and thereafter the dates set forth on such notice shall be conclusive and binding upon Tenant. Failure of Tenant to timely execute and deliver the Notice of Lease Term Dates shall constitute an acknowledgment by Tenant that the statements included in such notice are true and correct, without exception.     2.2. Option Term.     2.2.1. Option Right. Landlord hereby grants the Tenant named in the preamble to this Lease (the "Original Tenant") one (1) option to extend the Lease Term for a period of five (5) years (the "Option Term"), which option shall be exercisable only by written notice delivered by Tenant to Landlord not less than nine (9) months prior to the expiration of the initial Lease Term, provided that, as of the date of delivery of such notice, Tenant is not in default under this Lease beyond the applicable cure period and Tenant has not previously been in material default under this Lease more than once. Upon the proper exercise of the option to extend, and provided that, as of the end of the initial Lease Term, Tenant is not in default under this Lease beyond the applicable cure period and Tenant has not previously been in material default under this Lease more than once, the Lease Term, as it applies to the Premises, shall be extended for a period of five (5) years. The rights contained in this Section 2.2 shall be personal to the Original Tenant except for any assignee permitted under Section 14.7 and may only be exercised by the Original Tenant (and not any assignee, sublessee or other transferee of the Original Tenant's interest in this Lease except for any assignee permitted under Section 14.7) if the Original Tenant occupies at least 60% of the Premises.     2.2.2. Option Rent. The "Rent," as that term is defined in Section 4.1 below, payable by Tenant during the Option Term (the "Option Rent") will be adjusted to "Fair Market Rent" determined in the manner set forth below. As used herein, "Fair Market Rent" shall mean the annual amount per rentable square foot then being accepted by Landlord for the time period covered by the Option Term in transactions between non-affiliated parties from new, non-expansion, non-renewal and non-equity tenants of comparable creditworthiness, for comparable space, for a comparable 2 -------------------------------------------------------------------------------- use for a comparable period of time ("Comparable Transactions") in the Building, or if there are not a sufficient number of Comparable Transactions in the Building, what a comparable landlord of other similar office buildings in the vicinity of the Building ("Comparable Buildings") with comparable vacancy factors would accept in Comparable Transactions. In any determination of Comparable Transactions appropriate consideration shall be given to the annual rental rates per rentable square foot, the standard of measurement by which the rentable square footage is measured, the ratio of rentable square feet to usable square feet, the type of escalation clause (e.g., whether increases in additional rent are determined on a net or gross basis, and if gross, whether such increases are determined according to a base year or a base dollar amount expense stop), the extent of Tenant's liability under the Lease, abatement provisions reflecting free rent and/or no rent during the period of construction of any other period during the lease term, brokerage commissions, if any, which would be payable by Landlord in similar transactions, length of the lease term, size and location of premises being leased, building standard work letter and/or tenant improvement allowances, if any, and other generally applicable conditions of tenancy for such Comparable Transactions. The intent is that Tenant will obtain the same rent and other economic benefits that Landlord would otherwise give in Comparable Transactions and that Landlord will make and receive the same economic payments and concessions that Landlord would otherwise make and receive in Comparable Transactions.     Landlord shall determine the Fair Market Rent by using its good faith judgment. Landlord shall provide written notice of such amount within thirty (30) days (but in no event later than sixty (60) days) after Tenant provides the notice to Landlord exercising Tenant's option rights which require a calculation of the Fair Market Rent. Tenant shall have fifteen (15) days ("Tenant's Review Period") after receipt of Landlord's notice of the new rental within which to accept such rental. In the event Tenant fails to accept in writing such rental proposed by Landlord then such proposal shall be deemed rejected, and Landlord and Tenant shall attempt to agree upon such Fair Market Rent, using their best good faith efforts. If Landlord and Tenant fail to reach agreement within fifteen (15) days following Tenant's Review Period ("Outside Agreement Date"), then each party shall place in a separate sealed envelope their final proposal as to Fair Market Rent and such determination shall be submitted to arbitration in accordance with subsections (i) through (v) below.     In the event that Landlord fails to timely generate the initial written notice of Landlord's opinion of the Fair Market Rent which triggers the negotiation period of this provision, then Tenant may commence such negotiations by providing the initial notice, in which event Landlord shall have fifteen (15) days ("Landlord's Review Period") after receipt of Tenant's notice of the new rental within which to accept such rental in the event Landlord fails to accept in writing such rental proposed by Tenant, then such proposal shall be deemed rejected, and Landlord and Tenant shall attempt in good faith to agree upon such Fair Market Rent, using their best good faith efforts. If Landlord and Tenant fail to reach agreement within fifteen (15) days following Landlord's Review Period (which shall be, in such event, the "Outside Agreement Date" in lieu of the above definition of such date), then each party shall place in a separate sealed envelope their final proposal as to Fair Market Rent and such determination shall be submitted to arbitration in accordance with subsections (i) through (v) below.     (i)    Landlord and Tenant shall meet with each other within five (5) business days of the Outside Agreement Date and exchange the sealed envelopes and then open such envelopes in each other's presence. If Landlord and Tenant do not mutually agree upon the Fair Market Rent within one (1) business day of the exchange and opening of envelopes, then, within ten (10) business days of the exchange and opening of envelopes Landlord and Tenant shall agree upon and jointly appoint a single arbitrator who shall by profession be a real estate lawyer or broker who shall have been active over the five (5) year period ending on the date 3 -------------------------------------------------------------------------------- of such appointment in the leasing of commercial high-rise properties in the vicinity of the Building. Neither Landlord nor Tenant shall consult with such broker or lawyer as to his or her opinion as to Fair Market Rent prior to the appointment. The determination of the arbitrator shall be limited solely to the issue of whether Landlord's or Tenant's submitted Fair Market Rent for the Premises is the closest to the actual Fair Market Rent for the Premises as determined by the arbitrator, taking into account the requirements of this provision. Such arbitrator may hold such hearings and require such briefs as the arbitrator, in his or her sole discretion, determines is necessary. In addition, Landlord or Tenant may submit to the arbitrator with a copy to the other party within five (5) business days after the appointment of the arbitrator any market data and additional information that such party deems relevant to the determination of Fair Market Rent ("FMR Data") and the other party may submit a reply in writing within five (5) business days after receipt of such FMR Data.     (ii)   The arbitrator shall, within thirty (30) days of his or her appointment, reach a decision as to whether the parties shall use Landlord's or Tenant's submitted Fair Market Rent, and shall notify Landlord and Tenant of such determination.     (iii)   The decision of the arbitrator shall be binding upon Landlord and Tenant, except as provided below.     (iv)   If Landlord and Tenant fail to agree upon and appoint an arbitrator, then the appointment of the arbitrator shall be made by the Presiding Judge of the Los Angeles Superior Court, or, if he or she refuses to act, by any judge having jurisdiction over the parties.     (v)   The cost of arbitration shall be paid by Landlord and Tenant equally.     During the period requiring the adjustment of Annual Base Rent to the Option Rent, Tenant shall pay, as Annual Base Rent pending such determination, the annual Base Rent in effect for the Premises immediately prior to such adjustment; provided, however, that upon the determination of the applicable Fair Market Rent, if the Lease Term has expired, Tenant shall pay Landlord the difference between the amount of annual Base Rent Tenant actually paid and the applicable Option Rent determined in accordance herewith from the Lease Expiration Date through the date of determination of Fair Market Rent, immediately upon the determination of Fair Market Rent. Any amount of annual Base Rent Tenant has actually paid to Landlord which exceeds the applicable Option Rent determined in accordance herewith shall be credited against Tenant's future annual Base Rent obligations.     2.3.   Early Termination. Notwithstanding anything to the contrary contained herein, Tenant may terminate its lease of (a) all or any portion of Suite 1050, and/or (b) approximately 4,775 square feet of space (the "7th Floor Space") on the seventh (7th) floor of the Building, as shown on Exhibit A-l, effective January 31, 2000, by giving Landlord seven (7) months prior written notice. Failure of Tenant to deliver such notice to Landlord by June 30, 1999 shall be deemed Tenant's election to remain in Suite 1050 and the 7th Floor Space and Tenant shall have no further right hereunder to terminate this Lease with respect to such space. If Tenant elects to terminate its lease of the 7th Floor Space in accordance herewith, Tenant shall, at Tenant's sole cost and expense, reconfigure and enclose its seventh (7th) floor reception area in order to create a multi-tenant floor as shown on Exhibit A-2, in accordance with mutually agreed upon plans and specifications and in compliance with all applicable laws, codes, regulations and ordinances. If Tenant does not terminate its lease of the 7th Floor Space in accordance herewith, then prior to January 31, 2000, Landlord shall provide Tenant with an improvement allowance (the "7th Floor T.I. Allowance") in the amount of Seven and No/100 Dollars ($7.00) per rentable square foot of the 7th Floor Space for the costs relating to the initial design and construction of Tenant's improvements which are permanently affixed to the Premises with respect to which improvements Tenant shall have delivered to Landlord the items required under the first sentence of Section 2.2.2 of the Work Letter attached to this Lease as Exhibit B. If Tenant does not 4 -------------------------------------------------------------------------------- terminate its lease of Suite 1050 in accordance herewith, then prior to January 31, 2000, Landlord shall provide Tenant with an improvement allowance (the "Suite 1050 T.I. Allowance") in the amount of Fifteen and No/100 Dollars ($15.00) per rentable square foot of Suite 1050 for costs relating to the initial design and construction of Tenant's improvements which are permanently affixed to the Premises and with respect to which improvements Tenant shall have delivered to Landlord the items required under the first sentence of Section 2.2.2 of the Work Letter attached to this Lease as Exhibit B. The improvements to the Premises shall be constructed in accordance with the terms and conditions of the Work Letter attached to this Lease as Exhibit B, except that the 7th Floor T.I. Allowance and the Suite 1050 T.I. Allowance shall be disbursed as provided under this Section 2.3. ARTICLE 3. BASE RENT     Tenant shall pay, without notice or demand, to Landlord or Landlord's agent at the management office of the Building, or at such other place as Landlord may from time to time designate in writing, in currency or a check for currency which, at the time of payment, is legal tender for private or public debts in the United States of America, base rent ("Base Rent") as set forth in Section 8 of the Summary, commencing on the applicable Rent Commencement Dates set forth in Section 7.3 of the Summary, payable in equal monthly installments as set forth in Section 8 of the Summary in advance on or before the first day of each and every month during the Lease Term, without any setoff or deduction whatsoever (except as otherwise specifically set forth in this Lease). The Base Rent for the New Premises for the first full month of the Lease Term for which Base Rent is payable hereunder, shall be paid on the applicable Rent Commencement Dates. If any rental payment date (including the Rent Commencement Dates) falls on a day of the month other than the first day of such month or if any rental payment is for a period which is shorter than one month, then the rental for any such fractional month shall be a proportionate amount of a full calendar month's rental based on the proportion that the number of days in such fractional month bears to the number of days in the calendar month during which such fractional month occurs. AH other payments or adjustments required to be made under the terms of this Lease that require proration on a time basis shall be prorated on the same basis. ARTICLE 4. ADDITIONAL RENT     4.1. Additional Rent. In addition to paying the Base Rent specified in Article 3 of this Lease, Tenant shall pay as additional rent "Tenant's Share" of the annual "Direct Expenses," as those terms are defined in Sections 4.2 and 4.2.3 of this Lease, respectively, which are in excess of the amount of Direct Expenses applicable to the "Base Year," as that term is defined in Section 4.2.1 of this Lease. Such additional rent, together with any and all other amounts payable by Tenant to Landlord pursuant to the terms of this Lease, shall be hereinafter collectively referred to as the "Additional Rent." The Base Rent and Additional Rent are herein collectively referred to as the "Rent." All amounts due under this Article 4 as Additional Rent shall be payable for the same periods and in the same manner, time and place as the Base Rent. Without limitation on other obligations of Tenant which shall survive the expiration of the Lease Term, the obligations of Tenant to pay the Additional Rent provided for in this Article 4 shall survive for nine (9) months after the expiration of the Lease Term.     4.2. Definitions. As used in this Article 4, the following terms shall have the meanings hereinafter set forth:     4.2.1. "Base Year" shall mean the year set forth in Section 9.1 of the Summary.     4.2.2. "Expense Year" shall mean each calendar year in which any portion of the Lease Term falls, through and including the calendar year in which the Lease Term expires. 5 --------------------------------------------------------------------------------     4.2.3. "Direct Expenses" shall mean "Operating Expenses" and "Tax Expenses."     4.2.4. "Operating Expenses" shall mean all expenses, costs and amounts of every kind and nature, except as specifically excluded in Section 4.7 below, which Landlord shall pay during any Expense Year because of or in connection with the ownership, management, maintenance, repair, replacement, restoration or operation of the Real Property, including, without limitation, any amounts paid for (i) the cost of supplying all utilities (other than separately metered utilities billed directly to Tenant or other tenants or occupants of the Building), the cost of operating, maintaining, repairing, renovating and managing the utility systems, mechanical systems, sanitary and storm drainage systems, and any escalator and/or elevator systems, and the cost of supplies and equipment and maintenance and service contracts in connection therewith; (ii) the cost of licenses, certificates, permits and inspections and the cost of contesting the validity or applicability of any governmental enactments which may affect Operating Expenses, and the costs incurred in connection with the implementation and operation of a legally required transportation system management program or similar program; (iii) the cost of insurance carried by Landlord, in such amounts as Landlord may reasonably determine or as may be required by any mortgagees or the lessor of any underlying or ground lease affecting the Real Property and/or the Building; (iv) the cost of landscaping, relamping, and all supplies, tools, equipment and materials used in the operation, repair and maintenance of the Building; provided, that the portion of Operating Expenses relating to the items listed in this subsection 4.2.4(iv) shall not increase by more than five percent (5%) of such portion for the previous year; (v) the cost of parking area repair, restoration, and maintenance, including, but not limited to, resurfacing, repainting, restriping, and cleaning; (vi) actual and documented fees, charges and other costs, including consulting fees, legal fees and accounting fees, of all contractors engaged by Landlord or otherwise reasonably incurred by Landlord in connection with the management, operation, maintenance and repair of the Building and Real Property; (vii) any equipment rental agreements or management agreements (including the cost of any management fee and the fair rental value of any office space provided thereunder); (viii) wages, salaries and other compensation and benefits of all persons engaged in the operation, management, maintenance or security of the Building (not higher than Building Manager), and employer's Social Security taxes, unemployment taxes or insurance, and any other taxes which may be levied on such wages, salaries, compensation and benefits; provided, that if any employees of Landlord provide services for more than one building of Landlord, then a prorated portion of such employees' wages, benefits and taxes shall be included in Operating Expenses based on the portion of their working time devoted to the Building; (ix) payments under any easement, license, operating agreement, declaration, restrictive covenant, underlying or ground lease (excluding rent), or instrument pertaining to the sharing of costs by the Building; (x) operation, repair, maintenance and replacement of all "Systems and Equipment," as that term is defined in Section 4.2.5 of this Lease, and components thereof; (xi) the cost of janitorial service, alarm and security service, window cleaning, trash removal, replacement of wall and floor coverings, ceiling tiles and fixtures in lobbies, corridors, restrooms and other common or public areas or facilities (excluding tenant improvements for other tenants or occupants of the Building), maintenance and replacement of curbs and walkways, repair to roofs and re-roofing; (xii) amortization (including interest on the unamortized cost) of the cost of acquiring or the rental expense of personal property used in the maintenance, operation and repair of the Building and Real Property; and (xiii) the cost of any capital improvements or other costs (I) which are intended as a labor-saving device or to effect other economies in the operation or maintenance of the Building, or (II) made to the Building after the Lease Commencement Date that are required under any governmental law or regulation, except for capital improvements or costs to remedy a condition existing as of the date of construction of the Building which a federal, state or municipal governmental authority, if it had knowledge of such condition as of the date of construction of the Building, would have then required to be remedied pursuant to governmental laws or regulations in their form existing as of 6 -------------------------------------------------------------------------------- the date of construction of the Building; provided, however, that if any such cost described in (I) or (II) above is a capital expenditure, such cost shall be amortized (including interest on the unamortized cost) over its useful life as Landlord shall reasonably determine. If the Building is not fully occupied during all or a portion of any Expense Year, Landlord shall make an appropriate adjustment to the variable components of Operating Expenses for such Expense Year employing sound accounting and management principles, to determine the amount of Operating Expenses that would have been paid had the Building been ninety-five percent (95%) occupied; and the amount so determined shall be deemed to have been the amount of Operating Expenses for such Expense Year. Landlord shall have the right, from time to time, to equitably allocate some or all of the Operating Expenses among different tenants of the Building (the "Cost Pools"). Such Cost Pools may include, but shall not be limited to, the office space tenants of the Building and the retail space tenants of the Building. Notwithstanding anything to the contrary set forth in this Article 4, when calculating Direct Expenses for the Base Year, Operating Expenses shall exclude market-wide labor-rate increases due to extraordinary circumstances, including, but not limited to, boycotts and strikes, and utility rate increases due to extraordinary circumstances including, but not limited to, conservation surcharges, boycotts, embargoes or other shortages.     4.2.5. "Systems and Equipment" shall mean any plant, machinery, transformers, duct work, cable, wires, and other equipment, facilities, and systems designed to supply heat, ventilation, air conditioning and humidity or any other services or utilities, or comprising or serving as any component or portion of the electrical, gas, steam, plumbing, sprinkler, communications, alarm, security, or fire/life safety systems or equipment, or any other mechanical, electrical, electronic, computer or other systems or equipment which serve the Building in whole or in part and which are not separately metered or a part of another tenant's or occupant's tenant improvements.     4.2.6. "Tax Expenses" shall mean all federal, state, county, or local governmental or municipal taxes, fees, charges or other impositions of every kind and nature, whether general, special, ordinary or extraordinary (including, without limitation, real estate taxes, general and special assessments, transit taxes, leasehold taxes or taxes based upon the receipt of rent, including gross receipts or sales taxes applicable to the receipt of rent, unless required to be paid by Tenant or other tenants or occupants of the Building, personal property taxes imposed upon the fixtures, machinery, equipment, apparatus, systems and equipment, appurtenances, furniture and other personal property used in connection with the Building), which Landlord shall pay during any Expense Year because of or in connection with the ownership, leasing and operation of the Real Property or Landlord's interest therein. For purposes of this Lease, Tax Expenses shall be calculated as if the tenant improvements in the Building were fully constructed and the Real Property, the Building, and all tenant improvements in the Building were fully assessed for real estate tax purposes, and accordingly, during the portion of any Expense Year occurring during the Base Year, Tax Expenses shall be deemed to be increased appropriately. With respect to any increase or reassessment of real property taxes and assessments resulting from any sale, transfer or other change in ownership of the Building or the Project or other event which triggers a reassessment under Article XIIIA of the California Constitution (otherwise known as Proposition 13) (each, a "Prop. 13 Trigger Extent"), Tenant's responsibility to pay for Tenant's Share of any such increases or reassessments shall be limited as provided in Section 4.7(K) below. It is expressly understood and agreed that any charges to Tenant made pursuant to this Section 4.2.6 of this Lease shall not be duplicative of any other charges under this Lease.     4.2.6.1. Tax Expenses shall include, without limitation:     (i)    Any tax on Landlord's rent, right to rent or other gross income from the Real Property or as against Landlord's business of leasing any of the Real Property (but not Landlord's income or franchise taxes); 7 --------------------------------------------------------------------------------     (ii)   Any assessment, tax, fee, levy or charge in addition to, or in substitution, partially or totally, of any assessment, tax, fee, levy or charge previously included within the definition of real property tax, it being acknowledged by Tenant and Landlord that Proposition 13 was adopted by the voters of the State of California in the June 1978 election ("Proposition 13") and that assessments, taxes, fees, levies and charges may be imposed by governmental agencies for such services as fire protection, street, sidewalk and road maintenance, refuse removal and for other governmental services formerly provided without charge to property owners or occupants. It is the intention of Tenant and Landlord that all such new and increased assessments, taxes, fees, levies, and charges and all similar assessments, taxes, fees, levies and charges be included within the definition of Tax Expenses for purposes of this Lease;     (iii)   Any assessment, tax, fee, levy, or charge allocable to or measured by the area of the Premises or the rent payable hereunder, including, without limitation, any gross income tax with respect to the receipt of such rent, or upon or with respect to the possession, leasing, operating, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or any portion thereof; and     (iv)   Any assessment, tax, fee, levy or charge, upon this transaction or any document to which Tenant is a party, creating or transferring an interest or an estate in the Premises.     4.2.6.2. If in any Expense Year subsequent to the Base Year, the amount of Tax Expenses decreases, then for purposes of all subsequent Expense Years, including the Expense Year in which such decrease in Tax Expenses occurred, the Direct Expenses for the Base Year shah be decreased by an amount equal to the decrease in Tax Expenses.     4.2.6.3. Any expenses incurred by Landlord in attempting to protest, reduce or minimize Tax Expenses shall be included in Tax Expenses in the Expense Year such expenses are paid Tax refunds shall be deducted from Tax Expenses in the Expense Year they are received by Landlord. If Tax Expenses for any period during the Lease Term or any extension thereof are increased after payment thereof by Landlord for any reason, including, without limitation, error or reassessment by applicable governmental or municipal authorities, Tenant shall pay Landlord upon demand Tenant's Share of such increased Tax Expenses.     4.2.6.4. Notwithstanding anything to the contrary contained in this Section 4.2.7 (except as set forth in Sections 4.2.6.1 and 4.2.6.2, above), there shall be excluded from Tax Expenses (i) all excess profits taxes, franchise taxes, gift taxes, capital stock taxes, inheritance and succession taxes, estate taxes, federal and state income taxes, and other taxes to the extent applicable to Landlord's general or net income (as opposed to rents, receipts or income attributable to operations at the Building), (ii) any items included as Operating Expenses, and (iii) any items paid by Tenant under Section 4.4 of this Lease or paid by any other tenant or occupant of the Building.     4.2.6.5. Notwithstanding anything to the contrary set forth in this Article 4, when calculating Direct Expenses for the Base Year, such Direct Expenses shall not include any increase in Tax Expenses attributable to special assessments, charges, costs, or fees, or due to modifications or changes in governmental laws or regulations, including, but not limited to, the institution of a split tax roll.     4.2.7. "Tenant's Share" shall mean the percentage set forth in Section 9.2 of the Summary. Tenant's Share was calculated by multiplying the number of rentable square feet of the Premises by 100 and dividing the product by the total rentable square feet in the Building. The rentable square feet in the Premises and Building is measured pursuant to the Standard Method for Measuring 8 -------------------------------------------------------------------------------- Floor Area in Office Buildings, ANSI Z65.1 – 1980 ("BOMA"), provided that tile rentable square footage of the Building shall include all of, and the rentable square footage of the Premises therefore shall include a portion of, the square footage of the ground floor common areas located within the Building and the common area and occupied space of the portion of the Building, dedicated to the service of the Building. In the event either the rentable square feet of the Premises and/or the total rentable square feet of the Building is changed, Tenant's Share shall be appropriately adjusted, and, as to the Expense Year in which such change occurs, Tenant's Share for such year shall be determined on the basis of the number of days during such Expense Year that each such Tenant's Share was in effect.     4.3.  Calculation and Payment of Additional Rent.     4.3.1. Calculation of Excess. If for any Expense Year ending or commencing within the Lease Term, Tenant's Share of Direct Expenses for such Expense Year exceeds Tenant's Share of Direct Expenses for the Base Year, then Tenant shall pay to Landlord, in the manner set forth in Section 4.3.2, below, and as Additional Rent, an amount equal to the excess (the "Excess").     4.3.2. Statement of Actual Direct Expenses and Payment by Tenant. Landlord shall endeavor to give to Tenant on or before the first day of April following the end of each Expense Year, a statement (the "Statement") which shall state the Direct Expenses incurred or accrued for such preceding Expense Year, and which shall indicate the amount, if any, of any Excess. Upon receipt of the Statement for each Expense Year ending during the Lease Term, if an Excess is present, Tenant shall pay, with its next installment of Base Rent due, the full amount of the Excess for such Expense Year, less the amounts, if any, paid during such Expense Year as "Estimated Excess," as that term is defined in Section 4.3.3 of this Lease. The failure of Landlord to timely furnish the Statement for any Expense Year shall not prejudice Landlord from enforcing its rights under this Article 4. Even though the Lease Term has expired and Tenant has vacated the Premises, when the final determination is made of Tenant's Share of the Direct Expenses for the Expense Year in which this Lease terminates, if an Excess is present, Tenant shall immediately pay to Landlord an amount as calculated pursuant to the provisions of Section 4.3.1 of this Lease. The provisions of this Section 4.3.2 shall survive the expiration or earlier termination of the Lease Term.     4.3.3. Statement of Estimated Direct Expenses. In addition, Landlord shall endeavor to give Tenant a yearly expense estimate statement (the "Estimate Statement") which shall set forth Landlord's reasonable estimate (the "Estimate") of what the total amount of Direct Expenses for the then-current Expense Year shall be and the estimated Excess (the "Estimated Excess") as calculated by comparing Tenant's Share of Direct Expenses, which shall be based upon the Estimate, to Tenant's Share of Direct Expenses for the Base Year. The failure of Landlord to timely furnish the Estimate Statement for any Expense Year shall not preclude Landlord from enforcing its rights to collect any Estimated Excess under this Article 4. If pursuant to the Estimate Statement an Estimated Excess is calculated for the then-current Expense Year, Tenant shall pay, with its next installment of Base Rent due, a fraction of the Estimated Excess for the then-current Expense Year (reduced by any amounts paid pursuant to the last sentence of this Section 4.3.3). Such fraction shall have as its numerator the number of months which have elapsed in such current Expense Year to the month of such payment, both months inclusive, and shall have twelve (12) as its denominator. Until a new Estimate Statement is furnished, Tenant shall pay monthly, with the monthly Base Rent installments, an amount equal to one-twelfth (1/12) of the total Estimated Excess set forth in the previous Estimate Statement delivered by Landlord to Tenant.     4.4. Taxes and Other Charges for Which Tenant Is Directly Responsible. Tenant shall reimburse Landlord upon demand for any and all taxes or assessments required to be paid by Landlord (except to the extent included in Tax Expenses by Landlord), excluding state, local and federal personal or 9 -------------------------------------------------------------------------------- corporate income taxes measured by the net income of Landlord from all sources and estate and inheritance taxes, whether or not now customary or within the contemplation of the parties hereto, when:     4.4.1. Said taxes are measured by or reasonably attributable to the cost or value of Tenant's equipment, furniture, fixtures and other personal property located in the Premises; or     4.4.2. Said taxes are assessed upon or with respect to the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises or any portion of the Real Property (including the Building Parking Facility).     4.4.3. Said taxes are assessed upon this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises; or     4.4.4. Said assessments are levied or assessed upon the Real Property or any part thereof or upon Landlord and/or by any governmental authority or entity, and relate to the construction, operation, management, use, alteration or repair of mandatory mass transit improvements.     4.5. Method of Allocation. The parties acknowledge that the Building is a part of a multi-building project and that the costs and expenses incurred in connection with the Real Property (i.e., the Direct Expenses) should be shared between the tenants of the Building and the tenants of the other buildings of the Real Property. Accordingly, as set forth in Section 4.2 above, Direct Expenses (which consists of Operating Expenses and Tax Expenses) are determined annually for the Real Property as a whole, and a portion of the Direct Expenses, which portion shall be determined by Landlord on an equitable basis, shall be allocated to the tenants of the Building (as opposed to the tenants of any other buildings of the Real Property) and such portion shall be the Building Direct Expenses for purposes of this Lease. Such portion of Direct Expenses allocated to the tenants of the Building shall include all Direct Expenses attributable solely to the Building and an equitable portion of the Direct Expenses which are not attributable solely to the Building or the adjacent building on the Real Property, but rather are attributable to the Real Property as a whole.     4.6. Landlord's Books and Records. Within thirty (30) days after notice from Tenant (given within one (1) year after receipt of any Statement), provided that Tenant is not then in default after the applicable cure period has lapsed under this Lease, if Tenant disputes the amount of Additional Rent set forth in the Statement, Tenant shall give written notice to Landlord, and an independent certified public accountant (which accountant is a member of a nationally recognized accounting firm) designated by Tenant and approved by Landlord (which approval shall not he unreasonably withheld) (the "Independent CPA") shall inspect Landlord's records at Landlord's offices at Tenant's expense; provided, however, that if the actual amount of Direct Expenses as determined by such Independent CPA is less than ninety-five percent (95%) of the amount of Direct Expenses as set forth in the Statement, then Landlord shall pay the costs associated with such inspection. If the Independent CPA determines an error was made in the calculation of Direct Expenses from the Statement, the parties shall make such appropriate payments or reimbursements, as the case may be, to each other as are determined to be owing. Any reimbursement amounts determined to be owing by Landlord to Tenant or by Tenant or Landlord shall be (i) in the case of amounts owing from Tenant to Landlord paid within thirty (30) days following such determination, and (ii) in the case of amounts owing from Landlord to Tenant, credited against the next payment of Base Rent due Landlord under the terms of this Lease, or if the Lease Term has expired, within thirty (30) days of such determination. Landlord shall be required to maintain records of all Direct Expenses and other rent adjustments for the entirety of the one-year period ("Review Period") following Landlord's delivery to Tenant of each Statement setting forth Tenant's Share of Direct Expenses. The payment by Tenant of any amounts pursuant to this Article 4 shall not preclude Tenant from questioning the correctness of any Statement provided by Landlord at any time during the Review Period, but the failure of Tenant to object thereto prior to the expiration of the Review Period shall be conclusively deemed Tenant's approval of the Statement. 10 --------------------------------------------------------------------------------     4.7. Exclusions from Direct Expenses. Notwithstanding anything in the definition of Direct Expenses in the Lease to the contrary, Direct Expenses shall not include the following, except to the extent specifically permitted by a specific exception to the following:     (A) wages, salaries or fees or other sums paid to or on account of off-site administrative or executive personnel of Landlord (except for management fees payable to Landlord's property manager);     (B) cost of repairs or replacements incurred by reason of fire, earthquake or other casualty, to the extent that Landlord is reimbursed by insurance proceeds;     (C) overhead and profit increment paid to Landlord or to subsidiaries or affiliates of Landlord for services in the Building to the extent of same exceeds the costs of such services if rendered by unaffiliated third parties on a competitive basis;     (D) rentals and other related expenses (unless such costs would otherwise be charges for repair and maintenance of equipment) incurred in the capital leasing of air conditioning systems, elevators or other equipment ordinarily considered to be of a capital nature (except equipment which is used in providing janitorial or similar services and which is not affixed to the Building);     (E) depreciation of the Building other than routine maintenance and repair;     (F) costs of items considered as capital repairs, replacements, and improvements, equipment under generally accepted accounting principles consistently applied or otherwise, except for the cost of any capital improvements or other costs of a capital nature expressly permitted under Section 4.2.4 above;     (G) any costs incurred for compliance with any legal requirements relating to the Building or the Premises in effect and enforced prior to the Lease Commencement Date, in excess of any reduction in operating costs occasioned by such compliance to the benefit of Tenant;     (H) expenses in connection with services or other benefits which are not provided to Tenant but which are provided to another tenant or occupant of the Building;     (I) any reserves established prospectively by Landlord for deferred maintenance or other items;     (J) sales and other costs of transactions including financing, leasing the Building or any portion thereof, and tenant disputes unrelated to operation or maintenance of the Building but excluding taxes occasioned by reassessment; and     (K) with respect to any increase or reassessment of real property taxes and assessments resulting from a Prop. 13 Trigger Event, Tenant's responsibility to pay for Tenant's Share of any such increases or reassessments shall be as follows: In the case of a Prop. 13 Trigger Event occurring during the first Lease Year, Tenant shall pay zero percent (0%) of the amount of additional rent which Tenant would otherwise have had to pay, as a result of such Prop. 13 Trigger Event. In the case of a Prop. 13 Trigger Event occurring during the second (2nd) Lease Year, Tenant shall pay twenty-five percent (25%) of the amount of additional rent which Tenant would otherwise have had to pay as a result of such Prop. 13 Trigger Event. In the case of a Prop. 13 Trigger Event occurring during the third (3rd) Lease Year, Tenant shall pay fifty percent (50%) of the amount of additional rent which Tenant shall have otherwise have had to pay as a result of such Prop. 13 Trigger Event. In the case of a Prop. 13 Trigger Event occurring during the fourth (4th) Lease Year, Tenant shall pay seventy-five percent (75%) of the amount of additional rent which Tenant shall have otherwise have had to pay as a result of such Prop. 13 Trigger Event. In the case of a Prop. 13 Trigger Event occurring during the fifth (5th) Lease Year, or any subsequent year, Tenant shall pay one hundred percent (100%) of the amount of additional rent which Tenant 11 -------------------------------------------------------------------------------- would otherwise have had to pay as a result of such Prop. 13 Trigger Event. The limitation set forth in this Section 4.7(K) shall in no way limit Tenant's responsibility to pay for Tenant's Share of any increases or reassessments resulting from a Prop. 13 Trigger Event after the Cutoff Date that are attributable to the period after the Cutoff Date or any increases in any other Tax Expenses at any time during the Lease Term which do not result from a Prop. 13 Trigger Event. ARTICLE 5. USE OF PREMISES     Tenant shall use the Premises for the sole purpose of the conduct of Tenant's business and for general executive and administrative business office purposes and for no other purpose or purposes whatsoever. The term "conduct of Tenant's business" shall mean only full service computerized ticketing for entertainment or other events with telephone ordering systems and telemarketing which may include the telephone sale of merchandise (as such activities may change due to technological changes or other changes in the telemarketing industry) on a 24 hour, 7 day per week basis. Landlord acknowledges that this expressed use shall not result in any increase in insurance costs which would be charged to Tenant. Tenant expressly understands and agrees that it shall not engage in the on-site retail sale of entertainment or other special event tickets and that such activity shall be a material breach of this Lease. Tenant further covenants and agrees that it shall not use, or suffer or permit any person or persons to use, the Premises or any part thereof for any use or purpose contrary to the provisions of Exhibit D, attached hereto, or in violation of the laws of the United States of America, the State of California, or the ordinances, regulations or requirements of the local municipal or county governing body or other lawful authorities having jurisdiction over the Building. Tenant shall comply with all recorded covenants, conditions, and restrictions, and the provisions of all ground or underlying leases, now or hereafter affecting the Real Property to the extent Tenant has received prior written notice of same. Tenant shall not use or allow another person or entity to use any part of the Premises for the storage, use, treatment, manufacture or sale of "Hazardous Material," as that term is defined in Section 29.29 of this Lease. Landlord acknowledges, however, that Tenant will maintain products in the Premises which are incidental to the operation of its offices, such as photocopy supplies, secretarial supplies and limited janitorial supplies, which products contain chemicals which are categorized as Hazardous Material. Landlord agrees that the use of such products in the Premises in compliance with all applicable laws and in the manner in which such products are designed to be used shall not be a violation by Tenant of this Article 5. ARTICLE 6. SERVICES AND UTILITIES     6.1. Standard Tenant Services. Landlord shall provide the following services on all days during the Lease Term, unless otherwise stated below.     6.1.1. Subject to all governmental rules, regulations and guidelines applicable thereto, Landlord shall provide heating and air conditioning when necessary for normal comfort for normal office use in the Premises, which shall provide temperatures within the Premises consistent with those specifically provided in comparable first class office buildings in the Mid-Wilshire district of Los Angeles, California, from Monday through Friday, during the period from 8:00 a.m. to 6:00 p.m., and on Saturday during the period from 8:00 a.m. to 1:00 p.m., except for the date of observation of New Year's Day, Presidents' Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day and other locally or nationally recognized holidays (collectively, the "Holidays") at which times Landlord shall make such services available at Landlord's then standard after-hours rates. 12 --------------------------------------------------------------------------------     6.1.2. Landlord shall provide adequate electrical wiring and facilities and power for normal general office use as reasonably determined by Landlord.     6.1.3. Landlord shall provide city water from the regular Building outlets for drinking, lavatory and toilet purposes.     6.1.4. Landlord shall provide janitorial services five (5) days per week, except the date of observation of the Holidays, in and about the Premises and window washing services in a manner consistent with other comparable buildings in the vicinity of the Building.     6.1.5. Landlord shall provide nonexclusive automatic passenger elevator service at all times.     6.1.6. Landlord shall provide nonexclusive freight elevator service subject to scheduling by Landlord.     6.2. Overstandard Tenant Use; Separate Meter. Tenant shall not, without Landlord's prior written consent, use heat-generating machines, machines other than normal fractional horsepower office machines, or equipment or lighting other than building standard lights in the Premises, which may affect the temperature otherwise maintained by the air conditioning system or increase the water normally furnished for the Premises by Landlord pursuant to the terms of Section 6.1 of this Lease. At Landlord's election, Landlord may separately meter the Premises for utilities, including without limitation, HVAC, water, gas and electricity, and Tenant shall pay, at Landlord's election, either directly to the provider thereof or to Landlord, within ten (10) days after billing, the cost of Tenant's consumption and of maintenance of equipment which is installed in order to meter such consumption, at Landlord's "Actual Cost". The term "Actual Cost" shall mean the actual out-of-pocket incremental extra costs to Landlord to provide additional services or utilities without markup for profit, overhead, depreciation or administrative costs. All such costs shall be prorated among all tenants then requesting or needing additional services or utilities during such time periods. The parties stipulate that the Actual Cost for after-hours HVAC is currently $120 per hour, and such cost may be increased by Landlord to reflect any increase in Actual Costs incurred by the Landlord. Landlord acknowledges that Tenant's current electrical usage in the Original Premises as of the date of this Lease is not excessive. The parties acknowledge that as of the date of this Lease Tenant has installed in the Original Premises: (i) a separately metered HVAC system consisting of two (2) separate HVAC units (the "Computer HVAC System"), located on the 6th floor of the Building that provides twenty-four (24) hour HVAC service to Tenant's computer room and Automatic Call Director rooms on the 6th and 7th floors of the Premises, (ii) an Uninterruptible Power Supply System ("UPS System"), and (iii) an Emergency Generator System. Landlord and Tenant agree that Tenant shall maintain and repair the Computer HVAC System, UPS System and Emergency Generator System during the Lease Term, as the same may be extended, at Tenant's sole cost and expense.     6.3. Interruption of Use. Except as specifically set forth in this Lease, Tenant agrees that Landlord shall not be liable for damages, by abatement of Rent or otherwise, for failure to furnish or delay in furnishing any service (including telephone and telecommunication services), or for any diminution in the quality or quantity thereof, when such failure or delay or diminution is occasioned, in whole or in part, by repairs, replacements, or improvements, by any strike, lockout or other labor trouble, by inability to secure electricity, gas, water, or other fuel at the Building after reasonable effort to do so, by any accident or casualty whatsoever, by act or default of Tenant or other parties, or by any other cause beyond Landlord's reasonable control; and except as specifically provided elsewhere in this Lease, such failures or delays or diminution shall never be deemed to constitute an eviction or disturbance of Tenant's use and possession of the Premises or relieve Tenant from paying Rent or performing any of its obligations under this Lease. Furthermore, Landlord shall not be liable under any circumstances for a loss of, or injury to, property or for injury to, or interference with, Tenant's business, including, without limitation, loss of profits, occurring through no fault of Landlord, through or in connection with or incidental to a failure to furnish any of the services or utilities as set forth in 13 -------------------------------------------------------------------------------- this Article 6. Nothing in this Section 6.3 shall be construed to relieve Landlord from any duty to repair and maintain the Building undertaken by Landlord under this Lease.     6.4. Additional Services. Landlord shall also have the exclusive right, but not the obligation, to provide any additional services which may be required by Tenant, including, without limitation, locksmithing, additional janitorial service, and additional repairs and maintenance, provided that Tenant shall pay to Landlord within thirty (30) days billing, the sum of all costs to Landlord of such additional services. Charges for any service for which Tenant is required to pay from time to time hereunder, shall be deemed Additional Rent hereunder and shall be billed on a monthly basis.     6.5. Conference Room Facility. The parties acknowledge that Landlord currently has a conference room facility located on the eleventh (11th) floor of the Building (the "Conference Room") which is available for use by all tenants of the Project, at a usage fee established by Landlord in Landlord's sole and absolute discretion. So long as Landlord maintains the Conference Room for non-exclusive use by tenants of the Project, Tenant shall have the right to use the Conference Room for general meeting and other related purposes for up to thirty-six (36) hours per year. Such right to use the Conference Room shall be subject to availability, as determined by Landlord, and to all such rules and regulations regarding use of the Conference Room as Landlord may impose. Tenant acknowledges that any usage of the Conference Room after Business Hours will be without any HVAC service, unless specific arrangements are made by Tenant with Landlord for HVAC usage. In the event HVAC services are provided to the Conference Room after Business Hours, Tenant shall be charged the then-standard rates being charged by Landlord to other tenants in the Building for after Business Hours HVAC usage. Landlord makes no representation or warranty to Tenant that Landlord will continue to provide the Conference Room throughout the Lease Term or that the Conference Room will be available for use by Tenant at any particular time or from time to time. ARTICLE 7. REPAIRS     Except as specifically provided in this Lease to the contrary, subject to the provisions of Article 4 above, Landlord shall keep the structural portions of the Building and the Premises, including the water lines, plumbing, HVAC, electrical systems and other systems of the Building, maintained and in a state of good repair consistent with that typically maintained by comparable office buildings in the Mid-Wilshire district of Los Angeles, California. Subject to Landlord's obligations under the first sentence of this Article 7, at all times during the Lease Term, Tenant shall, at Tenant's own expense, keep the Premises, including all improvements, fixtures and furnishings therein, in good order, repair and condition at all times during the Lease Term. In addition, Tenant shall, at Tenant's own expense but under the supervision and subject to the prior approval of Landlord, and within any reasonable period of time specified by Landlord, promptly and adequately repair all damage to the interior (non-structural) portions of the Premises and replace or repair all damaged or broken fixtures and appurtenances; provided however, that, at Landlord's option, or if Tenant fails to make such repairs, Landlord may, but need not, make such repairs and replacements, and Tenant shall pay Landlord the cost thereof, including a percentage of the cost thereof (to be uniformly established for the Building, but in no event to exceed five percent (5%)) sufficient to reimburse Landlord for all overhead, general conditions, fees and other costs or expenses arising from Landlord's involvement with such repairs and replacements forthwith upon being billed for same. Landlord may, but shall not be required to, enter the Premises at all reasonable times to make such repairs, alterations, improvements and additions to the Premises or to the Building or to any equipment located in the Building as Landlord shall desire or deem necessary or as Landlord may be required to do by governmental or quasi-governmental authority or court order or decree. Tenant hereby waives and releases its right to make repairs at Landlord's expense under Sections 1941 and 1942 of the California Civil Code; or under any similar law, statute, or ordinance now or hereafter in effect. 14 -------------------------------------------------------------------------------- ARTICLE 8. ADDITIONS AND ALTERATIONS     8.1. Landlord's Consent to Alterations. Tenant may not make any improvements, alterations, additions or changes to the Premises (collectively, the "Alterations") without first procuring the prior written consent of Landlord to such Alterations, which consent shall be requested by Tenant not less than thirty (30) days prior to the commencement thereof, and which consent shall not be unreasonably withheld or delayed by Landlord. However, it is expressly understood and agreed that Landlord may refuse consent to any Alteration which affects the structure of the Building or the exterior of the Building without regard to any standard of reasonableness. With respect to any Alteration which affects the electrical, HVAC or mechanical systems of the Building, Landlord shall be reasonable in refusing or denying consent and in no event shall Landlord be required to give consent if Landlord incurs a cost as a result of such Alteration by Tenant, or such Alteration requires an increase in the power or other existing capacities of the Building electrical, HVAC or mechanical systems unless Tenant agrees to pay for such costs. For purposes of this Section 8.1, it is expressly understood and agreed that if Landlord delays consent for more than ten (10) days after Landlord has received the plans and specifications for such alterations and improvements in a form sufficiently detailed to obtain building permits, then such delay shall be deemed unreasonable. With respect to any repair of any existing item located within the Premises which malfunctions or requires replacement because it is broken, and which does not involve the upgrading or enhancement of such item, and such repair or replacement is in the ordinary course of Tenant's business and necessary to its continued operation, then Tenant need not get Landlord's prior written consent for such repair or replacement but shall notify Landlord so that Landlord may post a notice of non-responsibility. No such notice or consent shah be required for the repair or replacement of Tenant's trade fixtures. The Premises shall be initially improved as provided in and subject to, the Work Letter attached hereto as Exhibit B and made a part hereof.     8.2. Manner of Construction. Landlord may impose, as a condition of its consent to all Alterations or repairs of the Premises or about the Premises, such requirements as Landlord in its sole discretion may deem desirable, including, but not limited to, the requirement that upon Landlord's request, Tenant shall, at Tenant's expense, remove such Alterations upon the expiration or any early termination of the Lease Term (provided that Tenant shall not be required to remove any Alterations which are customary and typical for business office operations subject to Section 8.4 below), and/or the requirement that Tenant utilize for such purposes only contractors, materials, mechanics and materialmen reasonably selected by Landlord. In any event, a contractor of Landlord's selection shall perform all mechanical, electrical, plumbing, structural, and heating, ventilation and air conditioning work, and such work shall be performed at Tenant's cost. Tenant shall construct such Alterations and perform such repairs in conformance with any and all applicable rules and regulations of any federal, state, county or municipal code or ordinance and pursuant to a valid building permit, issued by the city in which the Building is located, in conformance with Landlord's construction rules and regulations. Landlord's approval of the plans, specifications and working drawings for Tenant's Alterations shall create no responsibility or liability on the part of Landlord for their completeness, design sufficiency, or compliance with all laws, rules and regulations of governmental agencies or authorities. All work with respect to any Alterations must be done in a good and workmanlike manner and diligently prosecuted to completion to the end that the Premises shall at all times be a complete unit except during the period of work. In performing the work of any such Alterations, Tenant shall have the work performed in such manner as not to obstruct access to the Building or the common areas for any other tenant of the Building, and as not to obstruct the business of Landlord or other tenants in the Building, or interfere with the labor force working in the Building. In the event that Tenant makes any Alterations, Tenant agrees to carry "Builder's All Risk" insurance in an amount approved by Landlord covering the construction of such Alterations, and such other insurance as Landlord may require, it being understood and agreed that all of such Alterations shall be insured by Tenant pursuant to Article 10 of this Lease immediately upon completion thereof. In addition, Landlord may, in its discretion, require 15 -------------------------------------------------------------------------------- Tenant to obtain a lien and completion bond or some alternate form of security satisfactory to Landlord in an amount sufficient to ensure the lien-free completion of such Alterations and naming Landlord as a co-obligee. Upon completion of any Alterations, Tenant agrees to cause a Notice of Completion to be recorded in the office of the Recorder of the county in which the Building is located in accordance with Section 3093 of the Civil Code of the State of California or any successor statute, and Tenant shall deliver to the Building management office a reproducible copy of the "as built" drawings of the Alterations.     8.3. Payment for Alterations. In the event Tenant orders any Alteration or repair work directly from Landlord, or from the contractor selected by Landlord, the charges for such work shall be deemed Additional Rent under this Lease, payable upon billing therefor, either periodically during construction or upon the substantial completion of such work, at Landlord's option. Upon completion of such work, Tenant shall deliver to Landlord, if payment is made directly to contractors, evidence of payment, contractors' affidavits and full and final waivers of all liens for labor, services or materials. Whether or not Tenant orders any work directly from Landlord, Tenant shall pay to Landlord a percentage of the cost of such work (such percentage, which shall vary depending upon whether or not Tenant orders the work directly from Landlord, to be established on a uniform basis for the Building, but in no event to exceed five percent (5%)) sufficient to compensate Landlord for all overhead, general conditions, fees and other costs and expenses arising from Landlord's involvement with such work.     8.4. Landlord's Property. All Alterations, improvements, fixtures and/or equipment other than Tenant's personal property, fixtures, workstations and equipment which may be installed or placed in or about the Premises, and all signs installed in, on or about the Premises, from time to time, shall be at the sole cost of Tenant and shall be and become the property of Landlord, except that Tenant may remove any of Tenant's Alterations, improvements, fixtures and/or equipment, provided Tenant repairs any damage to the Premises and Building caused by such removal. Furthermore, if Landlord, as a condition to Landlord's consent to any Alteration, requires that Tenant remove any Alteration upon the expiration or early termination oftbe Lease Term, Landlord may, by written notice to Tenant prior to the end of the Lease Term, or given upon any earlier termination of this Lease, require Tenant at Tenant's expense to remove such Alterations and to repair any dam age to the Premises and Building caused by such removal. If Tenant fails to complete such removal and/or to repair any damage caused by the removal of any Alterations, Landlord may do so and may charge the cost thereof to Tenant. Tenant hereby indemnifies and holds Landlord harmless from any liability, cost, obligation, expense or claim of lien in any manner relating to the installation, placement, removal or financing of any such Alterations, improvements, fixtures and/or equipment in, on or about the Premises, except to the extent caused by the negligence or willful misconduct of Landlord or Landlord's agents, employees or contractors.     8.5. Antennae/Satellite Dish. The parties hereby acknowledge that Tenant has a parabolic satellite dish (the "Dish") on the roof of the Building. Subject to approval by all applicable governmental authorities, so long as this Lease is in full force and effect and Tenant is not in default under the terms, covenants and conditions of this Lease beyond the applicable cure period, Landlord grants to Tenant and its agents and contractors, the right to maintain and operate the Dish, and related equipment, including cables from the exterior of the Dishes to equipment inside the Premises necessary for the operation of the Dish, in its current location on the roof of the Building, at Tenant's sole cost and expense. In no event shall the Dish be more than six feet (6') in diameter. Landlord may impose such reasonable requirements as to color and/or architectural treatment to mask the Dish to Landlord's reasonable satisfaction. The Dish and all supporting frames and structures shall be painted in a color of Landlord's choice and shall bear no advertising material or wording of any sort. The maintenance and operation of the Dish shall be in accordance with the provisions of this Lease and shall be performed at Tenant's sole cost and expense. Tenant will ensure that the Dish, and each part of it, is maintained in accordance with all federal, state and local rules and building codes. Tenant will obtain, at its sole cost 16 -------------------------------------------------------------------------------- and expense, all Federal Communications Commission and other licenses or approvals required to install and operate the Dish and shall repair any and all damage to the Premises (including, but not limited to, the roof of the Building) caused as a result of Tenant's installation of the Dish. The Dish is and shall remain the property of Tenant or Tenant's assignee, transferee or sublessee, and Landlord and Tenant agree that the Dish is not, and installation of the Dish at the Premises shall not cause the Dish to become, a fixture pursuant to this Lease or by operation of law. Tenant shall not be entitled to receive any income from any third-party individual or entity for the use of the Dish. Tenant shall be responsible for the operation, repair and maintenance of the Dish during the term of this Lease, at Tenant's sole cost and expense, and upon the expiration or other termination of this Lease, Tenant shall remove said Dish and repair any and all damage to the Premises (including, but not limited to, the roof of the Building) caused as a result of such removal. Tenant shall use the roof solely for the operation ofthe Dish as set forth herein and for no other purposes. Tenant agrees to operate the Dish in such a manner so as not to interfere with or impair the operation of other antennae or telecommunication equipment of Landlord or other tenants or occupants of the Project. If Tenant's use of the Dish shall cause such interference or impairment, Tenant shall, at its sole cost and expense, promptly eliminate such condition by relocating the Dish or otherwise. In the event Landlord repairs or replaces the roof during the term of this Lease, Tenant will remove the Dish from the roof at Tenant's sole cost upon receipt of written request from Landlord. Tenant shall be able to place the Dish on the roof, at Tenant's sole cost and expense, after Landlord completes repairing or replacing the roof which Landlord shall pursue in a reasonably diligent manner. Landlord may have its representative present at the removal, relocation or any reinstallation of the Dish. It is expressly understood that Tenant's right to have installed, operate and maintain the Dish is a non-exclusive right and Landlord shall continue to have the right to grant similar licenses or rights to other tenants of the Building or any other persons at Landlord's sole discretion, to install, operate and maintain other satellite dishes, radio or microwave equipment; however, in no event shall Landlord or any other tenant have the right to use Tenant's Dish. Tenant specifically understands and agrees that Landlord has made no representation as to the suitability of the Building or any of its systems to the conduct or operation of the Dish for the purposes stated herein. Landlord shall have no liability for any signal disruption caused by any malfunction of any cables within the Building necessary for the operation of the Dish or by the malfunction of any mechanical, electrical or other system of the Building.     Landlord assumes no liability or responsibility for interference with the Dish caused by other tenants placing similar equipment on the roof of their premises. The Dish shall be included within the coverage of all insurance policies required to be maintained by Tenant under this Lease and Tenant shall obtain at its cost all permits required by governmental authorities for the Dish. The Dish shall be used solely in connection with the business operations in the Premises, and shall not be used by any party who is not an occupant or tenant of the Premises.     Tenant agrees to indemnify and hold Landlord its agents, and employees, harmless from any and all claims or damages which may arise by reason of any work done by Tenant, its employees, agents and contractors in connection with any modifications to the installation, operation, maintenance, or removal of the Dish and any supporting framework or structure or other equipment on the rooftop of the Building or in the conduit for the cable connecting the Dish and the Premises except for claims for damages resulting from the negligent or wrongful acts or omissions of the Landlord, its agents or employees. Tenant further agrees to defend any cause of action, claim or damage against Landlord which may arise out of the undertakings by Tenant on the roof of the Building pursuant to this Section 8.5. The rights provided to the Tenant are unique to the original Tenant named in this Lease and may not be assigned or otherwise transferred in any manner. 17 -------------------------------------------------------------------------------- ARTICLE 9. COVENANT AGAINST LIENS     Tenant has no authority or power to cause or permit any lien or encumbrance of any kind whatsoever, whether created by act of Tenant, operation of law or otherwise, to attach to or be placed upon the Real Property, Building or Premises, and any and all liens and encumbrances created by Tenant shall attach to Tenant's interest only. Landlord shall have the right at all times to post and keep posted on the Premises any notice which it deems necessary for protection from such liens. Tenant covenants and agrees not to suffer or permit any lien of mechanics or materialmen or others to be placed against the Real Property, the Building or the Premises with respect to work or services claimed to have been performed for or materials claimed to have been furnished to Tenant or the Premises, and, in case of any such lien attaching or notice of any lien, Tenant covenants and agrees to cause it to be bonded over or to be immediately released and removed of record. Notwithstanding anything to the contrary set forth in this Lease, in the event that such lien is not released and removed on or before the date occurring five (5) days after notice of such lien is delivered by Landlord to Tenant, Landlord, at its sole option, may immediately take all action necessary to release and remove such lien, without any duty to investigate the validity thereof, and all sums, costs and expenses, including reasonable attorneys' fees and costs, incurred by Landlord in connection with such lien shall be deemed Additional Rent under this Lease and shall immediately be due and payable by Tenant. ARTICLE 10. INSURANCE     10.1. Indemnification and Waiver. Landlord, its partners and their respective officers, agents, servants, employees, and independent contractors (collectively, "Landlord Parties") shall not be liable for any damage either to person or property orresulting from the loss of use thereof, which damage is sustained by Tenant or by other persons claiming through Tenant, except to the extent caused by the negligence or willful misconduct of the Landlord Panics. Tenant shall indemnify, defend, protect, and hold harmless Landlord Parties from any and all loss, cost, damage, expense and liability (including without limitation court costs and reasonable attorneys' fees) incurred in connection with or arising from the negligence or wilful misconduct of Tenant, its partners, and their respective officers, agents, servants, employees, and independent contractors (collectively, "Tenant Parties") or any cause in, on or about the Premises either prior to, during, or after the expiration of the Lease Term, provided that the terms of the foregoing indemnity shall not apply to the gross negligence or wilful misconduct of Landlord Parties. Landlord shall indemnify, defend, protect, and hold harmless Tenant, its partners, and their respective officers, agents, servants, employees, and independent contractors (collectively, "Tenant Parties") from any and all loss, cost, damage, expense and liability (including without limitation reasonable attorneys' fees) arising from the negligence or wilful misconduct of Landlord in, on or about the Project, except to the extent caused by the negligence or wilful misconduct of the Tenant Parties. Notwithstanding anything to the contrary set forth in this Lease, either party's agreement to indemnify the other party as set forth in this Section 10.1 shall be ineffective to the extent the matters for which such party agreed to indemnify the other party are covered by insurance required to be carried by the non-indemnifying party pursuant to this Lease. Further, Tenant's agreement to indemnify Landlord and Landlord's agreement to indemnify Tenant pursuant to this Section 10.1 are not intended to and shall not relieve any insurance carrier of its obligations under policies required to be carried pursuant to the provisions of this Lease, to the extent such policies cover, or if carried, would have covered the matters, subject to the parties' respective indemnification obligations; nor shall they supersede any inconsistent agreement of the parties set forth in any other provision of this Lease. The provisions of this Section 10.1 shall survive the expiration or sooner termination of this Lease with respect to any claims or liability occurring prior to such expiration or termination. 18 --------------------------------------------------------------------------------     10.2. Tenant's Compliance with Landlord's Fire and Casualty Insurance. Tenant shall, at Tenant's expense, comply as to the Premises with all insurance company requirements pertaining to the use of the Premises. Landlord shall, at Landlord's expense, comply as to the Building with all insurance requirements pertaining to Landlord's ownership of the Building. If Tenant's conduct or use of the Premises causes any increase in the premium for such insurance policies, then Tenant shall reimburse Landlord for any such increase. Landlord acknowledges that Tenant's current use of the Premises is not a reason for an increase in Landlord's insurance premiums. Tenant, at Tenant's expense, shall comply with all rules, orders, regulations or requirements of Landlord's insurance policies to the extent Tenant has notice thereo.     10.3. Tenant's Insurance. Tenant shall maintain the following coverages in the following amounts.     10.3.1. Commercial General Liability Insurance covering the insured against claims of bodily injury, personal injury and property damage arising out of Tenant's operations, assumed liabilities or use of the Premises, including a Broad Form Commercial General Liability endorsement covering the insuring provisions of this Lease and the performance by Tenant of the indemnity agreements set forth in Section 10.1 of this Lease, for limits of liability not less than: Bodily Injury and   $3,000,000 each occurrence Property Damage Liability   $3,000,000 each occurrence Personal Injury Liability   $3,000,000 each occurrence $3,000,000 annual aggregate 0% Insured's participation     10.3.2. Physical Damage Insurance covering (i) all office furniture, trade fixtures, office equipment, merchandise and all other items of Tenant's property on the Premises installed by, for, or at the expense of Tenant, (ii) the improvements which exist in the Premises as of the Lease Commencement Date (the "Original Improvements"), and (iii) all other improvements, alterations and additions to the Premises, including any improvements, alterations or additions installed at Tenant's request above the ceiling of the Premises or below the floor of the Premises. Such insurance shall be written on an "all risks" of physical loss or damage basis, for the full replacement cost value new without deduction for depreciation of the covered items and in amounts that meet any co-insurance clauses of the policies of insurance and shall include a vandalism and malicious mischief endorsement, sprinkler leakage coverage and earthquake sprinkler leakage coverage.     10.3.3. Form of Policies. The minimum limits of policies of insurance required of Tenant under this Lease shall in no event limit the liability of Tenant under this Lease. Such insurance shall (i) name Landlord, and any other party it so specifies, as an additional insured; (ii) specifically cover the liability assumed by Tenant under this Lease, including, but not limited to, Tenant's obligations under Section 10.1 of this Lease; (iii) be issued by an insurance company having a rating of not less than A-VII in Best's Insurance Guide or which is otherwise acceptable to Landlord and licensed to do business in the state in which the Building is located; (iv) be primary insurance as to all claims thereunder and provide that any insurance carried by Landlord is excess and is noncontributing with any insurance requirement of Tenant; (v) provide that said insurance shall not be canceled or coverage changed unless thirty (30) days' prior written notice shall have been given to Landlord and any mortgagee or ground or underlying lessor of Landlord; and (vi) contain a cross-liability endorsement or severability of interest clause acceptable to Landlord. Tenant may obtain the insurance coverage required under this Article 10 in the form of a blanket insurance policy. Tenant shall deliver said policy or policies or certificates thereof to Landlord on or before the Lease Commencement Date and at least thirty (30) days before the expiration dates thereof. In the event Tenant shall fail to procure such insurance, or to deliver such policies or 19 -------------------------------------------------------------------------------- certificate, Landlord may, at its option, procure such policies for the account of Tenant, and the cost thereof shall be paid to Landlord as Additional Rent within five (5) days after delivery to Tenant of bills therefor.     10.4. Subrogation. Landlord and Tenant agree to have their respective insurance companies issuing property damage insurance waive any rights of subrogation that such companies may have against Landlord or Tenant, as the case may be, so long as the insurance carried by Landlord and Tenant, respectively, is not invalidated thereby. As long as such waivers of subrogation are contained in their respective insurance policies, Landlord and Tenant hereby waive any right that either may have against the other on account of any loss or damage to their respective property to the extent such loss or damage is insurable under policies of insurance for fire and all risk coverage, theft, public liability, or other similar insurance.     10.5. Additional Insurance Obligations. The limits of policies of insurance required of Tenant and Landlord under this Lease shall never be decreased, but shall be increased in accordance with increases, if any, necessary to maintain policy limits from time to time customary and usual for a comparable first class office building in Los Angeles. Additionally, Tenant shall carry and maintain during the entire Lease Term, at Tenant's sole cost and expense, such other reasonable types of insurance coverage and in such reasonable amounts covering the Premises and Tenant's operations therein, as are customary and usual for a comparable first class office building in Los Angeles and required by Landlord of other tenants in the Building.     10.6. Landlord's Insurance. Landlord shall carry public liability and contractual indemnity insurance in the amount of at least $3,000,000 combined single limit coverage and fire and extended coverage for additional perils in the amount of at least $3,000,000. ARTICLE 11. DAMAGE AND DESTRUCTION     11.1. Repair of Damage to Premises by Landlord. Tenant shall promptly notify Landlord of any damage to the Premises resulting from fire or any other casualty. If the Premises or any common areas of the Building serving or providing access to the Premises shall be damaged by fire or other casualty, Landlord shall promptly and diligently, subject to reasonable delays for insurance adjustment or other matters beyond Landlord's reasonable control, and subject to all other terms of this Article 11, restore the Base, Shell, and Core of the Premises and improvements to the Building not built by or for a tenant (collectively, the "Base, Shell and Core") and such common areas. Such restoration shall be to substantially the same condition of the Base, Shell, and Core and common areas prior to the casualty, except for modifications required by zoning and building codes and other laws or by the holder of a mortgage on the Building, or the lessor of a ground or underlying lease with respect to the Real Property and/or the Building, or any other modifications to the common areas deemed desirable by Landlord, provided access to the Premises and any common restrooms serving the Premises shall not he materially impaired. Notwithstanding any other provision of this Lease, upon the occurrence of any damage to the Premises, Tenant shall assign to Landlord (or to any party designated by Landlord) all insurance proceeds payable to Tenant under Tenant's insurance required under Section 10.3 of this Lease, and Landlord shall repair any injury or damage to the Original Improvements installed in the Premises and shall return such Original Improvements to their original condition; provided that if the cost of such repair by Landlord exceeds the amount of insurance proceeds received by Landlord from Tenant's insurance carrier, as assigned by Tenant, the cost of such repairs shall be paid by Tenant to Landlord prior to Landlord's repair of the damage. In connection with such repairs and replacements, Tenant shall, prior to the commencement of construction, submit to Landlord, for Landlord's review and approval, all plans, specifications and working drawings relating thereto, and Landlord shall select the contractors to perform such improvement work. Such submittal of plans and construction of improvements shall be performed in substantial compliance with the terms of the Work Letter as 20 -------------------------------------------------------------------------------- though such construction of improvements were the initial construction of the Tenant Improvements. Landlord shall not be liable for any inconvenience or annoyance to Tenant or its visitors, or injury to Tenant's business resulting in any way from such damage or the repair thereof; provided however, that if such fire or other casualty shall have damaged the Premises or common areas necessary to Tenant's occupancy, and if such damage is not the result of the negligence or wilful misconduct of Tenant or Tenant's employees, contractors, licensees, or invitees, Landlord shall allow Tenant a proportionate abatement of Rent to the extent Landlord is reimbursed from the proceeds of rental interruption insurance purchased by Landlord as part of Operating Expenses, during the time and to the extent the Premises are unfit for occupancy for the purposes permitted under this Lease, and not occupied by Tenant as a result thereof.     11.2. Landlord's Option to Repair. Notwithstanding the terms of Section 11.1 of this Lease, Landlord may elect not to rebuild and/or restore the Premises and/or Building and instead terminate this Lease by notifying Tenant in writing of such termination within thirty (30) days after the date of damage, such notice to include a termination date giving Tenant ninety (90) days to vacate the Premises, but Landlord may so elect only if the Building shall be damaged by fire or other casualty or cause, whether or not the Premises are affected, and one or more of the following conditions is present: (i) repairs cannot reasonably be completed within one hundred twenty (120) days of the date of damage (when such repairs are made without the payment of overtime or other premiums); (ii) the holder of any mortgage on the Building or ground or underlying lessor with respect to the Real Property and/or the Building shall require that the insurance proceeds or any portion thereof be used to retire the mortgage debt, or shall terminate the ground or underlying lease, as the case may be; or (iii) the damage is not fully covered, except for deductible amounts, by Landlord's insurance policies. Provided, however, in the event the Building shall be damaged to the extent of fifty percent (50%) or more of its replacement cost, either Landlord or Tenant may elect to cancel and terminate this Lease upon written notice to the other within thirty (30) days after the damage. In addition, in the event that (A) the Premises are totally destroyed or damaged to any substantial extent and such destruction or damage cannot be repaired by Landlord within a period of thirty (30) days after the date of such damage or destruction and Landlord is unable to provide Tenant with comparable temporary premises reasonably acceptable to Tenant (provided that Tenant shall have the right to terminate this Lease if Tenant is unable to relocate back to the Premises within an additional thirty (30) day period), or (B) the Premises or the Building is destroyed or damaged to any substantial extent during the last twenty-four (24) months of the Lease Term, then notwithstanding anything contained in this Article 11, either party shall have the option to terminate this Lease by giving written notice to the other party of the exercise of such option within thirty (30) days after such damage or destruction, in which event this Lease shall cease and terminate as of the date of such notice. Upon any such termination of this Lease pursuant to this Section 11.2, Tenant shall pay the Base Rent and Additional Rent, properly apportioned up to such date of destruction, and both parties hereto shall thereafter be freed and discharged of all further obligations hereunder, except as provided for in provisions of this Lease which by their terms survive the expiration or earlier termination of the Lease Term. Notwithstanding anything to the contrary contained in this Article 11, Tenant shall have the right to terminate this Lease if it is unable to reasonably conduct its business within the Premises as a result of damage or destruction of the Premises or the Building for thirty (30) consecutive days and in fact does not conduct its business in the Premises during such thirty (30) consecutive day period and Landlord is unable to provide Tenant with comparable temporary premises reasonably acceptable to Tenant. If Tenant attempts to use the Premises during such thirty (30) consecutive day period but is unable to derive substantially the same income from the conduct of its business from the Premises (at least eighty-five percent (85%) of the pre-damage income) after such damage or destruction as before the event of damage or destruction as a result of the material loss of use of the Premises rather than as a result of any external market condition changes (such as a change in peak season to non-peak season or the fact that special events producing income prior to the damage or destruction were complete) then it will be deemed that 21 -------------------------------------------------------------------------------- Tenant's attempted use during such thirty (30) consecutive day period will not be deemed "doing business in the Premises".     11.3. Waiver of Statutory Provisions. The provisions of this Lease, including this Article 11, constitute an express agreement between Landlord and Tenant with respect to any and all damage to, or destruction of, all or any part of the Premises, the Building or any other portion of the Real Property, and any statute or regulation of the State of California, including, without limitation, Sections 1932(2) and 1933(4) of the California Civil Code, with respect to any rights or obligations concerning damage or destruction in the absence of an express agreement between the parties, and any other statute or regulation, now or hereafter in effect, shall have no application to this Lease or any damage or destruction to all or any part of the Premises, the Building or any other portion of the Real Property; provided, however, that such waivers are not intended to limit or impair any express rights or privileges which may have been granted to Tenant in this Lease. ARTICLE 12. NONWAIVER     No waiver of any provision or breach of this Lease shall be implied by any failure of Landlord or Tenant to enforce any remedy on account of the violation of such provision, even if such violation shall continue or be repeated subsequently, any waiver by Landlord or Tenant of any provision of this Lease may only be in writing, and no express waiver shall affect any provision other than the one specified in such waiver and that one only for the time and in the manner specifically stated. Forbearance by Landlord or Tenant in enforcement of one or more of the remedies herein provided upon an event of default shall not be deemed or construed to constitute a waiver of such default. The acceptance of any Rent hereunder by Landlord following the occurrence of any default, whether or not known to Landlord, shall not be deemed a waiver of any such default, except only a default in the payment of the Rent so accepted, Tenant's payment of any Rent hereunder shall not constitute a waiver by Tenant of any breach or default by Landlord under this Lease. ARTICLE 13. CONDEMNATION     13.1. Permanent Taking. If the whole or any part of the Premises or Building shall be taken by power of eminent domain or condemned by any competent authority for any public or quasi-public use or purpose, or if any adjacent property or street shall be so taken or condemned, or reconfigured or vacated by such authority in such manner as to require the use, reconstruction or remodeling of any part of the Premises or Building, or if Landlord shall grant a deed or other instrument in lieu of such taking by eminent domain or condemnation (each, a "Taking"), Landlord shall have the option to terminate this Lease upon ninety (90) days' notice, provided such notice is given no later than one hundred eighty (180) days after the date of such taking, condemnation, reconfiguration, vacation, deed or other instrument. If more than twenty-five percent (25%) of the rentable square feet of the Premises is taken, if access to the Premises is substantially impaired, or if Tenant is unable to conduct Tenant's business as then being conducted within the Premises as a result of a Taking, Tenant shall have the option to terminate this Lease upon ninety (90) days' notice, provided such notice is given no later than one hundred eighty (180) days after the date of such Taking. Landlord shall be entitled to receive the entire award or payment in connection therewith, except that Tenant shall have the right to file any separate claim for award for the taking of the unamortized value of tenant improvements which Tenant has installed and paid for, for Tenant's moving expenses and for Tenant's goodwill if such separate claim is permitted by law but, if such separate claim is not so permitted then Tenant may join in Landlord's claim but only to the extent of seeking award for the Taking of such items stated in this sentence. If the authority making the award fails to make an allocation for such item or items, then the entire award shall be Landlord's. All Rent shall be apportioned as of the date of such termination, or 22 -------------------------------------------------------------------------------- the date of such taking, whichever shall first occur. If any part of the Premises shall be taken, and this Lease shall not be so terminated, the Rent shall be proportionately abated. Tenant hereby waives any and all rights it might otherwise have pursuant to Section 1265.130 of the California Code of Civil Procedure.     13.2. Temporary Taking. Notwithstanding anything to the contrary contained in this Article 13, in the event of a temporary taking of all or any portion of the Premises that does not render the Premises unusable by Tenant for the conduct of Tenant's business as then being conducted, for a period of one hundred and eighty (180) days or less, then this Lease shall not terminate but the Base Rent and the Additional Rent shall be abated for the period of such taking in proportion to the ratio that the amount of rentable square feet of the Premises taken bears to the total rentable square feet of the Premises. Landlord shall be entitled to receive the entire award made in connection with any such temporary taking. ARTICLE 14. ASSIGNMENT AND SUBLETTING     14.1. Transfers. Tenant shall not, without the prior written consent of Landlord, which consent shall not be unreasonably withheld or delayed as provided in Section 14.2 below, assign, mortgage, pledge, hypothecate, encumber, or permit any lien to attach to, or otherwise transfer, this Lease or any interest hereunder, permit any assignment or other such foregoing transfer of this Lease or any interest hereunder by operation of law, sublet the Premises or any part thereof, or permit the use of the Premises by any persons other than Tenant and its employees (all of the foregoing are hereinafter sometimes referred to collectively as "Transfers" and any person to whom any Transfer is made or sought to be made is hereinafter sometimes referred to as a "Transferee"), except as otherwise provided in Section 14.7 below. If Tenant shall desire Landlord's consent to any Transfer, Tenant shall notify Landlord in writing, which notice (the "Transfer Notice") shall include (i) the proposed effective date of the Transfer, which shall not be less than thirty (30) days after the date of delivery of the Transfer Notice, (ii) a description of the portion of the Premises to be transferred (the "Subject Space"), (iii) all of the terms of the proposed Transfer and the consideration therefor, including a calculation of the "Transfer Premium," as that term is defined in Section 14.3 below, in connection with such Transfer, the name and address of the proposed Transferee, and a copy of all existing and/or proposed documentation pertaining to the proposed Transfer, including all existing operative documents to be executed to evidence such Transfer or the agreements incidental or related to such Transfer, and (iv) current financial statements of the proposed Transferee certified by an officer, partner or owner thereof, and any other information reasonably required by Landlord, which will enable Landlord to determine the financial responsibility, character, and reputation of the proposed Transferee, nature of such Transferee's business and proposed use of the Subject Space, and such other information as Landlord may reasonably require. Any Transfer made without Landlord's prior written consent shall, at Landlord's option, be null, void, and of no effect, and shall, at Landlord's option, constitute a default by Tenant under this Lease. Whether or not Landlord shall grant consent, Tenant shall pay Landlord's actual out-of-pocket review and processing fees, as well as any reasonable out-of-pocket legal fees incurred by Landlord, within thirty (30) days after written request by Landlord.     14.2. Landlord's Consent. Landlord shall not unreasonably withhold or delay its consent to any proposed Transfer of the Subject Space to the Transferee on the terms specified in the Transfer Notice. Landlord agrees that it shall either consent, refuse consent or exercise its rights under Section 14.4 above no later than fifteen (15) days following Landlord's receipt of all of the documents and information described in Section 14.1. In the event Landlord fails to respond to Tenant's request for consent within such fifteen (15) day period, then Landlord's failure to so act within said 15-day period shall be deemed consent to the proposed subletting or assignment. If Landlord notifies Tenant in writing of its intention to exercise the rights of recapture provided under Section 14.4, then Tenant 23 -------------------------------------------------------------------------------- shall have ten (10) days after delivery of such notification to withdraw the request for assignment or subletting. The parties hereby agree that it shall be reasonable under this Lease and under any applicable law for Landlord to withhold consent to any proposed Transfer where one or more of the following apply, without limitation as to other reasonable grounds for withholding consent:     14.2.1. The Transferee is of a character or reputation or engaged in a business which is not consistent with the then existing tenants of the Building or Project;     14.2.2. The Transferee intends to use the Subject Space for purposes which are not permitted under this Lease or the use permitted by Landlord of comparable space in the Building except with respect to any retail space on the ground floor;     14.2.3. The Transferee is either a governmental agency or instrumentality thereof; provided, however, that Tenant shall be entitled to assign, sublet or otherwise transfer to a governmental agency or instrumentality thereof to the extent Landlord has leased or has permitted the lease of space to a comparable governmental agency or instrumentality thereof of comparable stature;     14.2.4. The Transfer will result in substantially more occupants than the number of people utilizing comparable space in the Building;     14.2.5. The Transferee is not a party of reasonable financial worth and/or financial stability in light of the responsibilities involved under the Lease on the date consent is requested in Landlord's reasonable judgment;     14.2.6. The proposed Transfer would cause Landlord to be in violation of another lease or agreement to which Landlord is a party, or would give an occupant of the Building a right to cancel its lease;     14.2.7. Intentionally deleted; or     14.2.8. Either (a) the proposed Transferee occupies space in the Building at the time of the request for consent (provided, however, that Tenant may assign or sublease space to an occupant of the Building to the extent Landlord cannot meet such occupant's space needs or to the extent such occupant occupies space on the same floor as to which the Premises are located or on a floor contiguous to a floor leased by Tenant), or (b) Landlord is in exclusive negotiations with such proposed Transferee to lease a particular space in the Building at such time.     If Landlord consents to any Transfer pursuant to the terms of this Section 14.2 (and does not exercise any recapture rights Landlord may have under Section 14.4 of this Lease), Tenant may within nine (9) months after Landlord's consent, but not later than the expiration of said nine-month period, enter into such Transfer of the Premises or portion thereof, upon substantially the same terms and conditions as are set forth in the Transfer Notice furnished by Tenant to Landlord pursuant to Section 14.1 of this Lease, provided that if there are any changes in the terms and conditions from those specified in the Transfer Notice (i) such that Landlord would initially have been entitled to refuse its consent to such Transfer under this Section 14.2, or (ii) which would cause the proposed Transfer to be more favorable to the Transferee than the terms set forth in Tenant's original Transfer Notice, Tenant shall again submit the Transfer to Landlord for its approval and other action under this Article 14 (including Landlord's right of recapture, if any, under Section 14.4 of this Lease). 24 --------------------------------------------------------------------------------     14.3. Transfer Premium. If Landlord consents to a Transfer, as a condition thereto which the parties hereby agree is reasonable, Tenant shall pay to Landlord fifty percent (50%) of any "Transfer Premium," as that term is defined in this Section 14.3, received by Tenant from such Transferee. "Transfer Premium" shall mean all rent, additional rent or other consideration payable by such Transferee in excess of the Rent and Additional Rent payable by Tenant under this Lease on a per rentable square foot basis if less than all of the Premises is transferred, less Tenant's actual costs and expenses incurred and paid by Tenant in connection with such Transfer (including but not limited to costs of Transfer such as brokerage commissions, improvement allowance and reasonable legal fees). "Transfer Premium" shall also include, but not be limited to, key money and bonus money paid by Transferee to Tenant in connection with such Transfer, and any payment in excess of fair market value for products or services rendered by Tenant to Transferee as a subterfuge to avoid the provisions of this Section.     14.4. Landlord's Option as to Subject Space. Notwithstanding anything to the contrary contained in this Article 14, Landlord shall have the option, by giving written notice to Tenant within fifteen (15) days after receipt of any Transfer Notice, to (i) recapture the Subject Space. Such recapture notice shall cancel and terminate this Lease, or create a sublease or assignment, as the case may be, with respect to the Subject Space as of the date stated in the Transfer Notice as the effective date of the proposed Transfer until the last day of the term of the Transfer as set forth in the Transfer Notice. In the event of a recapture by Landlord, if this Lease shall be canceled with respect to less than the entire Premises, the Rent reserved herein shall be prorated on the basis of the number of rentable square feet retained by Tenant in proportion to the number of rentable square feet contained in the Premises, and this Lease as so amended shall continue thereafter in full force and effect, and upon request of either party, the parties shall execute written confirmation of the same. If Landlord declines, or fails to elect in a timely manner to recapture the Subject Space under this Section 14.4, then, provided Landlord has consented to the proposed Transfer, Tenant shall be entitled to proceed to transfer the Subject Space to the proposed Transferee, subject to provisions of the last paragraph of Section 14.2 of this Lease.     14.5. Effect of Transfer. If Landlord consents to a Transfer, (i) the terms and conditions of this Lease shall in no way be deemed to have been waived or modified, (ii) such consent shall not be deemed consent to any further Transfer by either Tenant or a Transferee, (iii) Tenant shall deliver to Landlord, promptly after execution, an original executed copy of all documentation pertaining to the Transfer in form reasonably acceptable to Landlord, (iv) Tenant shall furnish upon Landlord's request a complete statement, certified by an independent certified public accountant, or Tenant's chief financial officer, setting forth in detail the computation of any Transfer Premium Tenant has derived and shall derive from such Transfer, and (v) no Transfer relating to this Lease or agreement entered into with respect thereto, whether with or without Landlord's consent, shall relieve Tenant or any guarantor of the Lease from liability under this Lease. Landlord or its authorized representatives shall have the right at all reasonable times after reasonable notice and at Landlord's sole cost to audit the books, records and papers of Tenant relating to any Transfer, and shall have the right to make copies thereof.     14.6. Additional Transfers. For purposes of this Lease, the term "Transfer" shall also include (i) if Tenant is a partnership, the withdrawal or change, voluntary, involuntary or by operation of law, of twenty-five percent (25%) or more of the partners, or transfer of twenty-five percent or more of partnership interests, within a twelve (12)-month period, or the dissolution of the partnership without immediate reconstitution thereof, and (ii) if Tenant is a closely held corporation (i.e., whose stock is not publicly held and not traded through an exchange or over the counter), (A) the dissolution, merger, consolidation or other reorganization of Tenant, the sale or other transfer of more than an aggregate of fifty percent (50%) of the voting shares of Tenant (other than to immediate family members by reason of gift or death), within a twelve (12) month period, or (B) the sale, mortgage, hypothecation or pledge of more than an aggregate of fifty percent (50%) of the value of the unencumbered assets of Tenant within a twelve (12) month period ((A) and (B) are collectively hereinafter referred to as "Ownership 25 -------------------------------------------------------------------------------- Changes"). Notwithstanding anything to the contrary contained in this Article 14, any Ownership Change shall not be deemed an act of assignment under this Article 14 provided that (1) the net worth of the Tenant or the successor entity or purchaser, as applicable, after the Ownership Change shall not be less than the net worth of Tenant as of the date of execution and delivery of this Lease, (2) the business of Tenant continues to be operated as a going concern from the Premises subsequent to such event, and (3) Landlord receives notice of any such event at least ten (10) days after the effective date of such event.     14.7. Non-Transfers. Notwithstanding anything to the contrary contained in this Article 14, any change in the stock ownership of Tenant in accordance with Section 14.6 shall not be deemed an act of assignment under this Article 14 provided that the net worth of the corporate Tenant after the stock transfer shall not be less than the net worth of the corporate initial Tenant ("Original Tenant") as of the date of execution and delivery of this Lease. Further, any assignment of the Lease by operation of law, or otherwise, incidental to the merger or consolidation of Tenant with any other entity or in connection with a sale of substantially all of the assets of Tenant shall not require Landlord's consent provided (i) the successor entity or purchaser has a net worth at least equal to the net worth of the Tenant as of the date of execution and delivery of this Lease, (ii) the business continues to be operated as a going concern from the Premises subsequent to such event, and (iii) Landlord receives notice of any such event at least ten (10) days after the effective date of such event. Notwithstanding anything to the contrary contained in this Article 14 and as an express exception to Landlord's right of recapture provided in Section 14.4, the Original Tenant may assign its interest in this Lease or sublet the Premises to a subsidiary that is wholly owned by Original Tenant or to any corporation which is affiliated with Original Tenant under common ownership or control (each, an "Affiliate") without Landlord's consent but upon ten (10) days prior notice to Landlord, subject to the following conditions: (A) at least fifty percent (50%) of the stock or other ownership interest in the Affiliate is held by the Original Tenant or under common control of Original Tenant's parent, (B) the Original Tenant shall remain liable for the performance of all of the terms, covenants and conditions of this Lease, (C) said Original Tenant provides Landlord written notice of such assignment or subletting within ten (10) days after the effective date thereof, (D) the Affiliate is of good character, reputation, credit and professional standing, (E) the Affiliate has a net worth at least equal to the net worth of the Original Tenant as of the date of execution and delivery of this Lease, and (F) such assignment or sublease is not a subterfuge by Tenant to avoid its obligations under this Lease. "Control," as used in this Section 14.7, shall mean the ownership, directly or indirectly, of at least fifty-one percent (51%) of the voting securities of, or possession of the right to vote, in the ordinary direction of its affairs, of at least fifty-one percent (51%) of the voting interest in, any person or entity. ARTICLE 15. SURRENDER OF PREMISES; OWNERSHIP AND REMOVAL OF TRADE FIXTURES     15.1  Surrender of Premises. No act or thing done by Landlord or any agent or employee of Landlord during the Lease Term shall be deemed to constitute an acceptance by Landlord or a surrender of the Premises unless such intent is specifically acknowledged in a writing signed by Landlord. The delivery of keys to the Premises to Landlord or any agent or employee of Landlord shall not constitute a surrender of the Premises or effect a termination of this Lease, whether or not the keys are thereafter retained by Landlord, and notwithstanding such delivery Tenant shall be entitled to the return of such keys at any reasonable time upon request until this Lease shall have been properly terminated. The voluntary or other surrender of this Lease by Tenant, whether accepted by Landlord or not, or a mutual termination hereof, shall not work a merger, and at the option of Landlord shall operate as an assignment to Landlord of all subleases or subtenancies affecting the Premises. 26 --------------------------------------------------------------------------------     15.2. Removal of Tenant Property by Tenant. Upon the expiration of the Lease Term, or upon any earlier termination of this Lease, Tenant shall, subject to the provisions of this Article 15, quit and surrender possession of the Premises to Landlord in as good order and condition as when Tenant took possession and as thereafter improved by Landlord and/or Tenant, reasonable wear and tear and repairs which are specifically made the responsibility of Landlord hereunder excepted. Upon such expiration or termination, Tenant shall, without expense to Landlord, remove or cause to be removed from the Promises all debris and rubbish, and such items of furniture, equipment, free-standing cabinet work, and other articles of personal property owned by Tenant or installed or placed by Tenant at its expense in the Premises, and such similar articles of any other persons claiming under Tenant, as Landlord may, in its sole discretion, require to be removed, and Tenant shall repair at its own expense all damage to the Premises and Building resulting from such removal. Tenant shall not be required to remove (i) the improvements in the Original Premises existing as of the date of this Lease, (ii) the Tenant Improvements described in and to be constructed in accordance with the Work Letter attached to this Lease as Exhibit B, (iii) any Alterations or tenant improvements which are customary and typical for business office operations subject to Section 8.4, and (iv) any Alteration or tenant improvement installed by Tenant with Landlord's prior written approval unless such removal was required by Landlord as a condition precedent to Landlord's consent thereto and such condition was imposed at the time Landlord so consented to such Alteration or tenant improvement. Nothing contained in this Lease shall be construed as creating a security interest or other property interest in Tenant's furniture, fixtures and equipment and Tenant shall be entitled to remove such items at any time during the term of this Lease or upon expiration or earlier termination of this Lease. ARTICLE 16. HOLDING OVER     If Tenant holds over after the expiration of the Lease Term hereof, with or without the express or implied consent of Landlord, such tenancy shall be from month-to-month only, and shall not constitute a renewal hereof or an extension for any further term, and in such case Rent shall be payable at a monthly rate equal to one hundred fifty percent (150%) the Rent applicable during the last rental period of the Lease Term under this Lease. Such month-to-month tenancy shall be subject to every other term, covenant and agreement contained herein. Nothing contained in this Article 16 shall be construed as consent by Landlord to any holding over by Tenant, and Landlord expressly reserves the right to require Tenant to surrender possession of the Premises to Landlord as provided in this Lease upon the expiration or other termination of this Lease. The provisions of this Article 16 shall not be deemed to limit or constitute a waiver of any other rights or remedies of Landlord provided herein or at law. If Tenant fails to surrender the Premises upon the termination or expiration of this Lease, in addition to any other liabilities to Landlord accruing therefrom, Tenant shall he responsible to Landlord for all damage which Landlord shall suffer by reason thereof. Notwithstanding anything to the contrary contained in this Article 16, if Tenant holds over in possession of the Premises with Landlord's express written permission (it being understood and agreed that Landlord shall have the right to grant or deny such permission in Landlord's sole and absolute discretion), then Tenant shall pay Landlord Rent at the rate and subject to the Additional Rent provisions of this lease which were in effect during the last month of the then most recently expired term unless and until Landlord gives Tenant at least thirty (30) days prior written notice increasing the Rent. It is the intention of the parties that Tenant shall have at least thirty (30) days written notice before any increase in Rent, consistent with the nature of the holdover tenancy as a month-to-month tenancy if and only if such holdover is with Landlord's express written permission. 27 -------------------------------------------------------------------------------- ARTICLE 17. ESTOPPEL CERTIFICATES     Within twenty (20) days following a request in writing by Landlord, Tenant shall execute and deliver to Landlord an estoppel certificate, which, as submitted by Landlord, shall be substantially in the form of Exhibit E, attached hereto (or such other commercially reasonable form as may be required by any prospective mortgagee or purchaser of the Project, or any portion thereof), indicating therein any exceptions thereto that may exist at that time, and shall also contain any other information reasonably requested by Landlord or Landlord's mortgagee or prospective mortgagee. ARTICLE 18. SUBORDINATION     This Lease is subject and subordinate to all present and future ground or underlying leases of the Real Property and to the lien of any mortgages or trust deeds, now or hereafter in force against the Real Property and the Building, if any, and to all renewals, extensions, modifications, consolidations and replacements thereof, and to all advances made or hereafter to be made upon the security of such mortgages or trust deeds, subject to Tenant's prior receipt of a commercially reasonable non-disturbance agreement unless the holders of such mortgages or trust deeds, or the lessors under such ground lease or underlying leases, require in writing that this Lease be superior thereto. Tenant covenants and agrees in the event any proceedings are brought for the foreclosure of any such mortgage, or if any ground or underlying lease is terminated, to attorn, without any deductions or set-offs (except the concessions to Tenant provided in Exhibit B attached hereto to the extent continuing after foreclosure) whatsoever, to the purchaser upon any such foreclosure sale, or to the lessor of such ground or underlying lease, as the case may be, if so requested to do so by such purchaser or lessor, and to recognize such purchaser or lessor as the lessor under this Lease, subject to Tenant's prior receipt of a commercially reasonable non-disturbance agreement. Tenant shall, within ten (10) days of request by Landlord, execute such further instruments or assurances as Landlord may reasonably deem necessary to evidence or confirm the subordination or superiority of this Lease to any such mortgages, trust deeds, ground leases or underlying leases. ARTICLE 19. DEFAULTS; REMEDIES     19.1. Events of Default. The occurrence of any of the following shall constitute a default of this Lease by Tenant:     19.1.1. Any failure by Tenant to pay any Rent or any other charge required to be paid under this Lease, or any part thereof, when due unless such failure is cured within ten (10) calendar days after written notice that same is past due and unpaid; or     19.1.2. Any failure by Tenant to observe or perform any other provision, covenant or condition of this Lease to be observed or performed by Tenant where such failure continues for thirty (30) days after written notice thereof from Landlord to Tenant; provided, however, that if the nature of such default is such that the same cannot reasonably be cured within a thirty (30)-day period, Tenant shall not be deemed to be in default if it diligently commences such cure within such period and thereafter diligently proceeds to rectify and cure said default as soon as possible; or     19.1.3. Abandonment of the Premises by Tenant; Abandonment is herein defined to include, but is not limited to, any absence by Tenant from the Premises for fourteen (14) consecutive business days or longer while in default of any provision of this Lease; or 28 --------------------------------------------------------------------------------     19.1.4. To the extent permitted by law, a general assignment by Tenant or any guarantor of the Lease for the benefit of creditors, or the filing by or against Tenant or any guarantor of any proceeding under an insolvency or bankruptcy law, unless in the case of a proceeding filed against Tenant or any guarantor the same is dismissed within ninety (90) days, or the appointment or a trustee or receiver to take possession of all or substantially all of the assets of Tenant or any guarantor, unless possession is restored to Tenant or such guarantor within ninety (90) days, or any execution or other judicially authorized seizure of all or substantially all of Tenant's assets located upon the Premises or of Tenant's interest in this Lease, unless such seizure is discharged within ninety (90) days; or     19.1.5. The hypothecation or assignment of this Lease or subletting of the Premises, or attempts at such actions, in violation of Article 14 hereof.     19.2. Remedies Upon Default. Upon the occurrence of any event of default by Tenant, Landlord shall have, in addition to any other remedies available to Landlord at law or in equity, the option to pursue any one or more of the following remedies, each and all of which shall be cumulative and nonexclusive, without any notice or demand whatsoever.     19.2.1. Terminate this Lease, in which event Tenant shall immediately surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may, without prejudice to any other remedy which it may have for possession or arrearages in rent, enter upon and take possession of the Premises and expel or remove Tenant and any other person who may be occupying the Premises or any part thereof, without being liable for prosecution or any claim or damages therefor provided that any such action shall be in compliance with all applicable laws; and Landlord may recover from Tenant the following:     (i)  The worth at the time of award of any unpaid rent which has been earned at the time of such termination; plus     (ii) The worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus     (iii) The worth at the time of award of the amount by which the unpaid rent for the balance of the Lease Term after the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus     (iv) Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, specifically including but not limited to, all reasonable brokerage commissions and advertising expenses incurred, expenses of remodeling the Premises or any portion thereof for a new tenant, whether for the same or a different use, and any special concessions made to obtain a new tenant (all amortized over the then remaining Lease Term); and     (v) At Landlord's election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable law. The term "rent" as used in this Section 19.2 shall be deemed to be and to mean all sums of every nature required to be paid by Tenant pursuant to the terms of this Lease, whether to Landlord or to others. As used in Paragraphs 19.2.1(i) and (ii), above, the "worth at the time of award" shall be computed by allowing interest at the rate set forth in Article 25 of this Lease, but in no case greater than the maximum amount of such interest permitted by law. As used in Paragraph 19.2.1(iii) above, the "worth at the time of award" shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). 29 --------------------------------------------------------------------------------     19.2.2. Landlord shall have the remedy described in California Civil Code Section 1951.4 (lessor may continue lease in effect after lessee's breach and abandonment and recover rent as it becomes due, if lessee has the right to sublet or assign, subject only to reasonable limitations). Accordingly, if Landlord does not elect to terminate this Lease on account of any default by Tenant, Landlord may, from time to time, without terminating this Lease, enforce all of its rights and remedies under this Lease, including the right to recover all rent as it becomes due.     19.3. Sublesses of Tenant. Whether or not Landlord elects to terminate this Lease on account of any default by Tenant, as set forth in this Article 19, Landlord shall have the right to terminate any and all subleases, licenses, concessions or other consensual arrangements for possession (collectively, "Subleases") entered into by Tenant and affecting the Premises, with the exception of any Sublease wherein the subtenant (i) occupies more than fifty percent (50%) of a floor of the Building, (ii) has an equal or greater net worth than Tenant as of the date of this Lease, (iii) is not an Affiliate of Tenant, or may, in Landlord's sole discretion, succeed to Tenant's interest in such Subleases. In the event of Landlord's election to succeed to Tenant's interest in any such Subleases, Tenant shall, as of the date of notice by Landlord of such election, have no further right to or interest in the rent or other consideration receivable thereunder.     19.4. Form of Payment After Default. Following the occurrence of an event of default by Tenant, Landlord shall have the right to require that any or all subsequent amounts paid by Tenant to Landlord hereunder, whether in the cure of the default in question or otherwise, be paid in the form of cash, money order, cashier's or certified check drawn on an institution acceptable to Landlord, or by other means approved by Landlord, notwithstanding any prior practice of accepting payments in any different form.     19.5. Waiver or Default. No waiver by Landlord or Tenant of any violation or breach of any of the terms, provisions and covenants herein contained shall be deemed or construed to constitute a waiver of any other or later violation or breach of the same or any other of the terms, provisions, and covenants herein contained. Forbearance by Landlord in enforcement of one or more of the remedies herein provided upon an event of default shall not be deemed or construed to constitute a waiver of such default. The acceptance of any Rent hereunder by Landlord following the occurrence of any default, whether or not known to Landlord, shall not be deemed a waiver of any such default, except only a default in the payment of the Rent so accepted.     19.6. Efforts to Relet. For the purposes of this Article 19, Tenant's right to possession shall not be deemed to have been terminated by efforts of Landlord to relet the Premises, by its acts of maintenance or preservation with respect to the Premises, or by appointment of a receiver to protect Landlord's interests hereunder. The foregoing enumeration is not exhaustive, but merely illustrative of acts which may be performed by Landlord without terminating Tenant's right to possession.     19.7. Abatement of Rent When Tenant is Prevented from Using Premises. In the event that Tenant is prevented from using, and does not use, the Premises or any portion thereof, for five (5) consecutive business days or ten (10) business days in any twelve (12) month period (the "Eligibility Period") as a result of (i) any damage or destruction to the Premises, the Building Parking Facility (without the provision of reasonable substitute parking) and/or the Building, (ii) any repair, maintenance or alteration performed by Landlord after the Lease Commencement Date, which substantially interferes with Tenant's use of the Premises, the Building Parking Facility (without the provision of reasonable substitute parking) and/or the Building, (iii) any failure by Landlord to provide Tenant with services or access to the Premises, the Building Parking Facility (without the provision of reasonable substitute parking) and/or the Building, (iv) because of an eminent domain proceeding, or (v) because of the presence of Hazardous Materials in, on or around the Premises, the Building or the Project which poses a health risk to occupants of the Premises, not introduced or caused to be released by Tenant, then Tenant's Rent shall be equitably abated or reduced, as the case may be, after expiration of the 30 -------------------------------------------------------------------------------- Eligibility Period for such time that Tenant continues to be so prevented from using, and does not use, the Premises or a portion thereof, in the proportion that the rentable area of the portion of the Premises that Tenant is prevented from using, and does not use, bears to the total rentable area of the Premises. However, in the event that Tenant is prevented from conducting, and does not conduct, its business in any portion of the Premises for a period of time in excess of the Eligibility Period, and the remaining portion of the Premises is not sufficient to allow Tenant to effectively conduct its business therein, and if Tenant does not conduct its business from such remaining portion, then for such time after expiration of the Eligibility Period during which Tenant is so prevented from effectively conducting its business therein, the Rent for the entire Premises shall be abated; provided, however, if Tenant reoccupies and conducts its business from any portion of the Premises during such period, the Rent allocable to such reoccupied portion, based on the proportion that the rentable area of such reoccupied portion of the Premises bears to the total rentable area of the Premises, shall be payable by Tenant from the date such business operations commence. If Tenant's right to abatement occurs because of an eminent domain taking and/or because of damage or destruction to the Premises, the Building Parking Facility (without the provision of reasonable substitute parking), the Building and/or Tenant's property, Tenant's abatement period shall continue until Tenant has been given reasonably sufficient time, and sufficient access to the Premises, the Building Parking Facility and/or the Building, to rebuild such portion it is required to rebuild, to install its property, furniture, fixtures, and equipment to the extent the same shall have been removed and/or damaged as a result of such damage or destruction and/or eminent domain taking and to move in over a weekend. To the extent Tenant is entitled to abatement without regard to the Eligibility Period, because of an event covered by Articles 11 [Damage or Destruction] and 13 [Condemnation] of the Lease, then the Eligibility Period shall not be applicable. To the extent Tenant has prepaid rent (as it does each month since Rent is due on the first day of each month) and Tenant is subsequently entitled to an abatement, such prepaid, and subsequently abated, Rent should be refunded to, and paid by Landlord to, Tenant within thirty (30) days after the end of the appropriate month. ARTICLE 20. COVENANT OF QUIET ENJOYMENT     Subject to the terms and provisions of this Lease, Landlord covenants that Tenant shall, during the Lease Term, peaceably and quietly have, hold and enjoy the Premises subject to the terms, covenants, conditions, provisions and agreements hereof without interference by Landlord or by any persons lawfully claiming by or through Landlord. The foregoing covenant is in lieu of any other covenant express or implied. ARTICLE 21. SECURITY DEPOSIT     Landlord and Tenant acknowledge that Landlord is currently holding Tenant's security deposit in the amount of $57,190.37 under the Original Lease. The parties agree that Landlord shall retain the deposit described in the foregoing sentence as the "Security Deposit" under this Lease notwithstanding anything to the contrary contained in the Original Leases. Tenant shall not be required to deposit any sum in addition to the Security Deposit with Landlord upon execution of this Lease. The Security Deposit shall be held by Landlord as security for the faithful performance by Tenant of all the terms, covenants, and conditions of this Lease to be kept and performed by Tenant during the Lease Term. The Security Deposit shall not be mortgaged, assigned or encumbered in any manner whatsoever by Tenant without the prior written consent of Landlord. If Tenant defaults with respect to any provisions of this Lease, including, but not limited to, the provisions relating to the payment of Rent, Landlord may, but shall not be required to, use, apply or retain all or any part of the Security Deposit for the payment of any Rent or any other sum in default, or for the payment of any amount that Landlord 31 -------------------------------------------------------------------------------- may spend or become obligated to spend by reason of Tenant's default, or to compensate Landlord for any other loss or damage that Landlord may suffer by reason of Tenant's default. If any portion of the Security Deposit is so used or applied, Tenant shall, within ten (10) days after written demand therefor, deposit cash with Landlord in an amount sufficient to restore the Security Deposit to its original amount, and Tenant's failure to do so shall be a default under this Lease. If Tenant disputes the application of the Security Deposit, Tenant may seek its appropriate remedies under law or in the equity. If the amount applied by Landlord is less than or equal to $10,000 and Landlord demands replenishment of such amount, then Tenant shall replenish such amount by payment directly to Landlord during the pendency of any dispute as to said application and demand for replenishment. However, if the amount applied by Landlord is greater than $10,000 and Landlord demands replenishment of such amount, Tenant will replenish the first $10,000 so demanded to be replenished by payment directly to Landlord and shall place the balance for which replenishment is demanded in an interest bearing escrow account with an escrow holder mutually acceptable to both parties until such dispute is resolved, interest shall be apportioned according to the resolution of the dispute. The use, application or retention of the Security Deposit, or any portion thereof, by Landlord shall not (a) prevent Landlord from exercising any other right or remedy provided by this Lease or by law, it being intended that Landlord shall not first be required to proceed against the Security Deposit, nor (b) operate as a limitation on any recovery to which Landlord may otherwise be entitled. Tenant acknowledges that Landlord has the right to transfer or mortgage its interest in the Real Property and the Building and in this Lease and Tenant agrees that in the event of any such transfer or mortgage, Landlord shall have the right to transfer or assign the Security Deposit to the transferee or mortgagee. Upon such transfer or assignment of the Security Deposit, Landlord shall thereby be released by Tenant from all liability or obligation for the return of such Security Deposit and Tenant shall look solely to such transferee or mortgagee for the return of the Security Deposit provided said transferee assumes liability for the return to Tenant of the Security Deposit. Landlord shall deposit the Security Deposit in an interest-bearing account in Landlord's name with interest to accrue at the rate which is paid on a money-market account offered by any retail or commercial bank or savings and loan association qualified to do business and doing business in Los Angeles, California, or, if such account is no longer offered, then at the rate which is paid on a regular pass-book savings account offered by any retail or commercial bank or savings and loan association qualified to do business and doing business in Los Angeles, California and such interest shall accrue to Tenant's benefit. Provided that Tenant is not in default of this Lease beyond any applicable cure period, Landlord shall pay on each of the anniversary dates of the Lease Commencement Date any interest earned and paid on the Security Deposit to the respective date of said anniversary. Upon expiration of this Lease, Landlord shall return the Security Deposit to Tenant, consistent with the provisions of this Article 21, together with any interest which has been paid thereon from the date of the last disbursement of interest to Tenant until such date of expiration of this Lease. If Tenant is not then in default beyond any applicable cure period, the Security Deposit, or any balance thereof, shall be returned to Tenant, or, at Landlord's option, to the last assignee of Tenant's interest hereunder, within thirty (30) days following the expiration of the Lease Term. Tenant hereby waives the provisions of Section 1950.7 of the California Civil Code, and all other provisions of law, now or hereafter in force, which provide that Landlord may claim from a security deposit only those sums reasonably necessary to remedy defaults in the payment of rent, to repair damage caused by Tenant or to clean the Premises, it being agreed that Landlord may, in addition, claim those sums reasonably necessary to compensate Landlord for any other loss or damage, foreseeable or unforeseeable, caused by the act or omission of Tenant or any officer, employee, agent or invitee of Tenant. 32 -------------------------------------------------------------------------------- ARTICLE 22. SUBSTITUTION OF OTHER PREMISES     Intentionally Deleted. ARTICLE 23. SIGNS     23.1. In General. Tenant shall be entitled, at its sole cost and expense, to identification signage outside of Tenant's Premises on the floors on which Tenant's Premises are located. The location, quality, design, style, lighting and size of such signage shall be consistent with the Landlord's Building standard signage program and shall be subject to Landlord's prior written approval, in its reasonable discretion and shall include Tenant's logo. Upon the expiration or earlier termination of this Lease, Tenant shall be responsible, at its sole cost and expense, for the removal of such signage and the repair of all damage to the Building caused by such removal.     23.2. Building Directory. Tenant shall be entitled to one (1) line on the Building directory to display Tenant's name and location in the Building.     23.3. Prohibited Signage and Other Items. Any signs, notices, logos, pictures, names or advertisements which are installed and that have not been individually approved by Landlord may be removed without notice by Landlord at the sole expense of Tenant. Tenant may not install any signs on the exterior or roof of the Building or the common areas of the Building or the Real Property. Any signs, window coverings, or blinds (even if the same are located behind the Landlord approved window coverings for the Building), or other items visible from the exterior of the Premises or Building are subject to the prior approval of Landlord, in its sole discretion. ARTICLE 24. COMPLIANCE WITH LAW     Tenant shall not do anything or suffer anything to be done in or about the Premises which will in any way conflict with any law, statute, ordinance or other governmental rule, regulation or requirement now in force or which may hereafter be enacted or promulgated (collectively, "Applicable Laws"). At its sole cost and expense, except as otherwise provided in the Work Letter attached as Exhibit B to this Lease, Tenant shall promptly comply with any Applicable Laws which relate to (i) Tenant's use of the Premises, (ii) the tenant improvements, (iii) any Alterations made by Tenant to the Premises, or (iv) the Base, Shell and Core, but as to the Base, Shell and Core, only to the extent such obligations are triggered by Tenant's use of the Premises for other than normal and customary business office purposes or because of Tenant's installation of Alterations or Tenant Improvements which do not constitute normal and customary business office improvements; provided, however, that costs incurred by Landlord in connection with any modifications or additions after the date of execution of this Lease other than the work to be performed by Landlord under the Work Letter attached to this Lease shall be Operating Expenses to the extent permitted under Section 4.2.4. Should any standard or regulation now or hereafter be imposed on Landlord or Tenant by a state, federal or local governmental body charged with the establishment, regulation and enforcement of occupational, health or safety standards for employers, employees, landlords or tenants, then Tenant agrees, at its sole cost and expense, to comply promptly with such standards or regulations, but Landlord shall, subject to reimbursement in accordance with Article 4 above, pay for any changes to the Base, Shell and Core, Building Structure and/or Building Systems and Equipment required thereby unless related to Tenant's specific use or improvement for other than normal and customary business office operations, in which event Tenant shall be solely responsible for payment therefor. A "call center" is deemed to be a normal and customary business office operation; provided, however, that to the extent any Applicable Law imposes 33 -------------------------------------------------------------------------------- a requirement that applies to call center operations and not to other normal and customary business office operations, then to that extent, Tenant shall be responsible for changes to the Building Structure and Building Systems and Equipment. The judgment of any court of competent jurisdiction or the admission of Tenant in any judicial action, regardless of whether Landlord is a party thereto, that Tenant has violated any of said governmental measures, shall he conclusive of that fact as between Landlord and Tenant. ARTICLE 25. LATE CHARGES     If any installment of Rent or any other sum due from Tenant shall not be received by Landlord or Landlord's designee within five (5) days after said amount is due, more than two (2) times in any twelve (12) consecutive month period during the Lease Term, then Tenant shall pay to Landlord a late charge equal to five percent (5%) of the amount due plus any attorneys' fees incurred by Landlord by reason of Tenant's failure to pay Rent and/or other charges when due hereunder. The late charge shall be deemed Additional Rent and the right to require it shall be in addition to all of Landlord's other rights and remedies hereunder or at law and shall not be construed as liquidated damages or as limiting Landlord's remedies in any manner. In addition to the late charge described above, any Rent or other amounts owing hereunder which are not paid within three (3) days after the date they are due shall thereafter bear interest until paid at a rate equal to ten percent (10%) per annum, provided that in no case shall such rate be higher than the highest rate permitted by applicable law. ARTICLE 26. LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT     26.1. Landlord's Cure. All covenants and agreements to be kept or performed by Tenant under this Lease shall be performed by Tenant at Tenant's sole cost and expense and without any reduction of Rent except as otherwise provided elsewhere in this Lease. If Tenant shall fail to perform any of its obligations under this Lease after expiration of any applicable notice and cure period, then upon three (3) additional days notice from Landlord, Landlord may, but shall not be obligated to, after reasonable prior notice to Tenant, make any such payment or perform any such act on Tenant's part without waiving its right based upon any default of Tenant and without releasing Tenant from any obligations hereunder.     26.2. Tenant's Reimbursement. Except as may be specifically provided to the contrary in this Lease, Tenant shall pay to Landlord, within fifteen (15) days after delivery by Landlord to Tenant of statements therefor) sums equal to expenditures reasonably made and obligations incurred by Landlord in connection with the remedying by Landlord of Tenant's defaults pursuant to the provisions of Section 26.1. ARTICLE 27. ENTRY BY LANDLORD     Landlord reserves the right at all reasonable times and upon reasonable notice which shall be at least one (1) day in advance except in the case of an emergency to the Tenant to enter the Premises to (i) inspect them; (ii) show the Premises to prospective purchasers, mortgagees or ground or underlying lessors, or, during the last twelve (12) months of the Lease Term, to prospective Tenants; (iii) post notices of nonresponsibility; or (iv) alter, improve or repair the Premises or the Building if necessary to comply with current building codes or other applicable laws, or for structural alterations, repairs or improvements to the Building conducted in accordance with the provisions of this Lease. Notwithstanding anything to the contrary contained in this Article 27, Landlord may enter the Premises at any time to (A) perform services required of Landlord; and (B) take possession due to any breach of 34 -------------------------------------------------------------------------------- this Lease in the manner provided herein. Any such entries shall be without the abatement of Rent and shall include the right to take such reasonable steps as required to accomplish the stated purposes; provided, however, any such entry shall be performed in a manner so as not to unreasonably interfere with Tenant's use of the Premises and shall be performed after normal business hours if reasonably practical. Landlord shall exercise its right of entry under this Lease in a reasonable manner. Landlord and its agents, employees and contractors shall comport themselves in such a manner as to not breach the confidentiality of Tenant's business or records. Except in case of emergency, in no event shall Landlord or its agents, employees or contractors enter Tenant's computer room. Landlord shall not interfere with Tenant's electrical and mechanical equipment located within the Premises or the Emergency Generator System located in the basement of the Building without Tenant's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed. Except as otherwise set forth in Section 19.4, Tenant hereby waives any claims for damages or for any injuries or inconvenience to or interference with Tenant's business, lost profits, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned thereby. For each of the above purposes, Landlord shall at all times have a key with which to unlock all the doors in the Premises, excluding Tenant's vaults, safes and special security areas designated in advance by Tenant. In an emergency, Landlord shall have the right to use any means that Landlord may deem proper to open the doors in and to the Premises. Any entry into the Premises in the manner hereinbefore described shall not be deemed to be a forcible or unlawful entry into, or a detainer of, the Premises, or an actual or constructive eviction of Tenant from any portion of the Premises. ARTICLE 28. TENANT PARKING     Tenant shall have the right to rent and the number and type of parking spaces set forth in Section 11 of the Summary at the rates set forth in Section 11 of the Summary. Tenant shall pay to Landlord all parking charges along with Tenant's monthly rent payment. Tenant's continued right to use the parking spaces and rent the parking passes is conditioned upon Tenant abiding by all rules and regulations which are prescribed from time to time for the orderly operation and use of the Building Parking Facility to the extent that Tenant receives prior written notice of same. Landlord specifically reserves the right to change the size, configuration, design, layout, location and all other aspects of the Building Parking Facility and Tenant acknowledges and agrees that Landlord may, without incurring any liability to Tenant and without any abatement of Rent under this Lease, from time to time, close-off or restrict access to the Building Parking Facility, or relocate Tenant's parking spaces to other parking facilities and/or surface parking areas within a reasonable distance of the Premises, for purposes of permitting or facilitating any such construction, alteration or improvements with respect to the Building Parking Facility or to accommodate or facilitate renovation, alteration, construction or other modification of other improvements or structures located on the Real Property as long as Tenant's use of the number of parking spaces rented under this Lease is not reduced, restricted or impaired as a result thereof. Landlord may delegate its responsibilities hereunder to a parking operator in which case such parking operator shall have all the rights of control attributed hereby to the Landlord and such owner, but such delegation shall in no way reduce or eliminate Landlord's obligations to provide parking to Tenant as provided hereunder. ARTICLE 29. FIRST OFFER RIGHT     29.1. First Right Space. Subject to any rights granted to tenants occupying the Project prior to Tenant, and provided that Tenant is not in default under the terms of this Lease, Tenant shall have the right (the "First Offer Right") to lease any space that may become available on the tenth (10th) floor of the Building (the "First Right Space"), if all or any portion of the First Right Space comes available 35 -------------------------------------------------------------------------------- for lease during the Lease Term, as the same may be extended. Upon all or any portion of the First Right Space coming available, Landlord shall give Tenant a written notice ("Offer Notice") of the availability of all or such portion of the First Right Space, which Offer Notice shall include a summary of the economic terms for which Landlord is willing to enter into a lease of the available portion of the First Right Space. The parties acknowledge and agree that except with respect to such economic terms, all of the terms and provisions of this Lease shall apply to any lease by Tenant of any portion of the First Right Space.     29.2. Exercise Terms. Tenant shall have thirty (30) days from receipt by Tenant of the Offer Notice to exercise the First Offer Right by delivering to Landlord written notice of Tenant's election to exercise the First Offer Right. If Tenant desires to lease the First Right Space but objects to the economic terms set forth in the Offer Notice, Landlord and Tenant shall negotiate in good faith in an attempt to reach an agreement with respect to the terms for Tenant's lease of the available portion of the First Right Space. If Landlord and Tenant are unable to agree on the terms of a lease of all or the available portion of the First Right Space within fifteen (15) days after Landlord's delivery of the Offer Notice, Landlord shall thereafter be free to lease such space to any third party on such terms and conditions that Landlord reasonably deems appropriate; provided, however, such terms and conditions shall not (without first offering the same to Tenant with an opportunity to accept the same within five (5) days following such offer) include economic terms and conditions which equate to less than ninety-five percent (95%) in terms of quantifiable value to that which was last offered to Tenant in writing in accordance with this Article. ARTICLE 30. MISCELLANEOUS PROVISIONS     30.1. Terms. The necessary grammatical changes required to make the provisions hereof apply either to corporations or partnerships or individuals, men or women, as the case may require, shall in all cases be assumed as though in each case fully expressed.     30.2. Binding Effect. Each of the provisions of this Lease shall extend to and shall, as the case may require, bind or inure to the benefit not only of Landlord and of Tenant, but also of their respective successors or assigns, provided this clause shall not permit any assignment by Tenant contrary to the provisions of Article 14 of this Lease.     30.3. No Air Rights. No rights to any view or to light or air over any property, whether belonging to Landlord or any other person, are granted to Tenant by this Lease. If at any time any windows of the Premises are temporarily darkened or the light or view therefrom is obstructed by reason of any repairs, improvements, maintenance or cleaning in or about the Building, the same shall be without liability to Landlord and without any reduction or diminution of Tenant's obligations under this Lease.     30.4. Modification of Lease. Should any current or prospective mortgagee or ground lessor for the Building require a modification or modifications of this Lease, which modification or modifications will not cause an increased cost or expense to Tenant or in any other way materially or adversely change the rights and obligations of Tenant hereunder, then and in such event, Tenant agrees that this Lease may be so modified subject to Tenant's prior reasonable consent after reviewing said changes and agrees to execute whatever documents are required therefor and deliver the same to Landlord within days following the request therefor. Should Landlord or any such current or prospective mortgagee or ground lessor require execution of a short form of Lease for recording, containing, among other customary provisions, the names of the parties, a description of the Premises and the Lease Term, Tenant agrees to execute such short form of Lease and to deliver the same to Landlord within twenty (20) days following the request therefor the recordation of which shall be at the sole cost and expense of Landlord, and not included as an Operating Expense. 36 --------------------------------------------------------------------------------     30.5. Transfer of Landlord's Interest. Tenant acknowledges that Landlord has the right to transfer all or any portion of its interest in the Real Property and Building and in this Lease, and Tenant agrees that in the event of any such transfer, Landlord shall automatically be released from all liability under this Lease not accrued as of the date of the transfer and Tenant agrees to look solety to such transferee for the performance of Landlord's obligations hereunder, accruing after the transfer (except for any unfulfilled Tenant Improvement obligations), after the date of transfer upon agreement by such transferee to fully assume and be liable for all obligations of this Lease to be performed by Landlord which first accrue or arise after the date of the conveyance, and Tenant shall attorn to such transferee.     30.6. Prohibition Against Recording. Except as provided in Section 29.4 of this Lease, neither this Lease, nor any memorandum, affidavit or other writing with respect thereto, shall be recorded by Tenant with the Los Angeles County Recorder's Office or by anyone acting through, under or on behalf of Tenant.     30.7. Landlord's Title. Landlord's title is and always shall be paramount to the title of Tenant. Nothing herein contained shall empower Tenant to do any act which can, shall or may encumber the title of Landlord.     30.8. Captions. The captions of Articles and Sections are for convenience only and shall not be deemed to limit, construe, affect or alter the meaning of such Articles and Sections.     30.9. Relationship of Parties. Nothing contained in this Lease shall be deemed or construed by the parties hereto or by any third party to create the relationship of principal and agent, partnership, joint venturer or any association between Landlord and Tenant, it being expressly understood and agreed that neither the method of computation of Rent nor any act of the parties hereto shall be deemed to create any relationship between Landlord and Tenant other than the relationship of landlord and tenant.     30.10. Application of Payments. Landlord shall have the right to apply payments received from Tenant pursuant to this Lease, regardless of Tenant's designation of such payments, to satisfy any obligations of Tenant hereunder, in such order and amounts as Landlord, in its sole discretion, may elect.     30.11. Time of Essence. Time is of the essence of this Lease and each of its provisions.     30.12. Partial Invalidity. If any term, provision or condition contained in this Lease shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term, provision or condition to persons or circumstances other than those with respect to which it is invalid or unenforceable, shall not be affected thereby, and each and every other term, provision and condition of this Lease shall be valid and enforceable to the fullest extent possible permitted by law.     30.13. No Warranty. In executing and delivering this Lease, Tenant has not relied on any representation, including, but not limited to, any representation whatsoever as to the amount of any item comprising Additional Rent or the amount of the Additional Rent in the aggregate or that Landlord is furnishing the same services to other tenants, at all, on the same level or on the same basis, or any warranty or any statement of Landlord which is not set forth herein or in one or more of the exhibits attached hereto.     30.14. Landlord Exculpation. It is expressly understood and agreed that notwithstanding anything in this Lease to the contrary, and notwithstanding any applicable law to the contrary, the liability of Landlord and the Landlord Parties hereunder (including any successor landlord) and any recourse by Tenant against Landlord or the Landlord Parties shall be limited solely and exclusively to an amount which is equal to the interest of Landlord in the Building and insurance proceeds, and neither Landlord, nor any of the Landlord Parties shall have any personal liability therefor, and Tenant hereby 37 -------------------------------------------------------------------------------- expressly waives and releases such personal liability on behalf of itself and all persons claiming by, through or under Tenant.     30.15. Entire Agreement. It is understood and acknowledged that there are no oral agreements between the parties hereto affecting this Lease and this Lease supersedes and cancels any and all previous negotiations, arrangements, brochures, agreements and understandings, if any, between the parties hereto or displayed by Landlord to Tenant with respect to the subject matter thereof, and none thereof shall be used to interpret or construe this Lease. This Lease and any side letter or separate agreement executed by Landlord and Tenant in connection with this Lease and dated of even date herewith contain all of the terms, covenants, conditions, warranties and agreements of the parties relating in any manner to the rental, use and occupancy of the Premises, shall be considered to be the only agreement between the parties hereto and their representatives and agents, and none of the terms, covenants, conditions or provisions of this Lease can be modified, deleted or added to except in writing signed by the parties hereto. All negotiations and oral agreements acceptable to both parties have been merged into and are included herein. There are no other representations or warranties between the parties, and all reliance with respect to representations is based totally upon the representations and agreements contained in this Lease.     30.16. Right to Lease. Landlord reserves the absolute right to effect such other tenancies in the Building as Landlord in the exercise of its sole business judgment shall determine to best promote the interests of the Building subject to Landlord's covenant to operate the Building in a manner consistent with that comparable buildings in the vicinity of the Building as provided below. Tenant does not rely on the fact, not does Landlord represent, that any specific tenant or type or number of tenants shall, during the Lease Term, occupy any space in the Building.     30.17. Force Majeure. Except as otherwise provided in the Work Letter attached to this Lease as Exhibit B, any prevention, delay or stoppage due to strikes, lockouts, labor disputes, acts of God, inability to obtain services, labor, or materials or reasonable substitutes therefor, governmental actions, civil commotions, fire or other casualty, and other causes beyond the reasonable control of the party obligated to perform, except with respect to the obligations imposed with regard to Rent and other charges to be paid by Tenant pursuant to this Lease (collectively, the "Force Majeure"), notwithstanding anything to the contrary contained in this Lease, shall excuse the performance of such party for a period equal to any such prevention, delay or stoppage and, therefore, if this Lease specifies a time period for performance of an obligation of either party, that time period shall be extended by the period of any delay in such party's performance caused by a Force Majeure.     30.18. Waiver of Redemption by Tenant. Tenant hereby waives for Tenant and for all those claiming under Tenant all right now or hereafter existing to redeem by order or judgment of any court Tenant's right of occupancy of the Premises after any termination of this Lease. Notwithstanding the foregoing, if the law permits a right of redemption to Tenant after a judgment of possession or eviction in favor of Landlord and pending the finality of such judgment or appeal, Tenant continues to remain in possession of the Premises and actually pays rent in the manner required by this Lease and at the times required by this Lease during the pendency of such judgment and appeal to Landlord and not to the court or any escrow or other person designated by the court, then Tenant shall be deemed not to have waived its right of redemption.     30.19. Notices. All notices, demands, statements or communications (collectively, "Notices") given or required to be given by either party to the other hereunder shall be in writing, shall be sent by United States certified or registered mail, postage prepaid, return receipt requested, or delivered personally (i) to Tenant at the appropriate address set forth in Section 5 of the Summary, or to such other place as Tenant may from time to time designate in a Notice to Landlord; or (ii) to Landlord at the addresses set forth in Section 3 of the Summary, or to such other firm or to such other place as Landlord may from time to time designate in a Notice to Tenant. Any Notice will be deemed given on 38 -------------------------------------------------------------------------------- the date it is received. If Tenant is notified in writing of the identity and address of Landlord's mortgagee or ground or underlying lessor, Tenant shall give to such mortgagee or ground or underlying lessor written notice of any default by Landlord under the terms of this Lease by registered or certified mail, and such mortgagee or ground or underlying lessor shall be given a reasonable opportunity to cure such default prior to Tenant's exercising any remedy available to Tenant.     30.20. Authority. If Tenant is a corporation or partnership, each individual executing this Lease on behalf of Tenant hereby represents and warrants that Tenant is a duly formed and existing entity qualified to do business in the state in which the Building is located and that Tenant has full right and authority to execute and deliver this Lease and that each person signing on behalf of Tenant is authorized to do so.     30.21. Attorneys' Fees. If either party commences litigation against the other for the specific performance of this Lease, for damages for the breach hereof or otherwise for enforcement of any remedy hereunder, the parties hereto agree to and hereby do waive any right to a trial by jury and, in the event of any such commencement of litigation, the prevailing party shall be entitled to recover from the other party such costs and reasonable attorneys' fees as may have been incurred, including any and all costs incurred in enforcing, perfecting and executing such judgment.     30.22. Governing Law. This Lease shall be construed and enforced in accordance with the laws of the state of California.     30.23. Submission of Lease. Submission of this instrument for examination or signature by Tenant does not constitute a reservation of or an option for lease, and it is not effective as a lease or otherwise until execution and delivery by both Landlord and Tenant.     30.24. Broker. Landlord and Tenant hereby warrant to each other that they have had no dealings with any real estate broker or agent in connection with the negotiation of this Lease, excepting only the real estate broker or agent specified in Section 12 of the Summary (the "Broker"), and that they know of no other real estate broker or agent who is entitled to a commission in connection with this Lease. Each party agrees to indemnify and defend the other party against and hold the other party harmless from any and all claims, demands, losses, liabilities, lawsuits, judgments, and costs and expenses (including without limitation reasonable attorneys' fees) with respect to any leasing commission or equivalent compensation alleged to be owing on account of the indemnifying party's dealings with any real estate broker or agent other than the Broker.     30.25. Building Name and Signage. Landlord shall have the right at any time to change the name of the Building and to install, affix and maintain any and all signs on the exterior and on the interior of the Building as Landlord may, in Landlord's sole discretion, desire. Tenant shall not use the name of the Building or use pictures or illustrations of the Building in advertising or other publicity, without the prior written consent of Landlord.     30.26. Transportation Management. Tenant shall fully comply with all applicable rules and regulations pertaining to programs intended to manage parking, transportation or traffic in and around the Building, and in connection therewith, Tenant shall take responsible action for the transportation planning and management of all employees located at the Premises by working directly with Landlord, any governmental transportation management organization or any other transportation-related committees or entities to the extent required by law. Such programs may include, without limitation: (i) restrictions on the number of peak-hour vehicle trips generated by Tenant; (ii) increased vehicle occupancy; (iii) implementation of an in-house ridesharing program and an employee transportation coordinator; (iv) working with employees and any Building or area-wide ridesharing program manager; (v) instituting employer-sponsored incentives (financial or in-kind) to encourage employees to rideshare; and (vi) utilizing flexible work shifts for employees. 39 --------------------------------------------------------------------------------     30.27. Hazardous Material; Asbestos Disclosure. As used herein, the term "Hazardous Material" means any hazardous or toxic substance, material or waste which is or becomes regulated by any local governmental authority, the state in which the Building is located or the United States Government. Tenant acknowledges that Landlord may incur costs (A) for complying with laws, codes, regulations or ordinances relating to Hazardous Material, or (B) otherwise in connection with Hazardous Material, including, without limitation, the following: (i) Hazardous Material present in soil or ground water; (ii) Hazardous Material that migrates, flows, percolates, diffuses or in any way moves onto or under the Real Property; (iii) Hazardous Material present on or under the Real Property as a result of any discharge, dumping or spilling (whether accidental or otherwise) on the Real Property by other tenants of the Real Property or their agents, employees, contractors or invitees, or by others; and (iv) material which becomes Hazardous Material due to a change in laws, codes, regulations or ordinances which relate to hazardous or toxic material, substances or waste. Tenant agrees that the costs incurred by Landlord with respect to, or in connection with, complying with laws, codes, regulations or ordinances relating to Hazardous Material shall be an Operating Expense, unless the cost of such compliance, as betwcen Landlord and Tenant, is caused by Landlord's negligence or willful misconduct or is made the responsibility of Tenant under this Lease. To the extent any such Operating Expense relating to Hazardous Material is subsequently recovered or reimbursed through insurance, or recovered from third parties, or other action, Tenant shall be entitled to a proportionate share of such Operating Expense to which such recovery or reimbursement relates.     Landlord has advised Tenant that the Building contains asbestos, which was commonly used as a fireproofing and insulation agent in buildings constructed before 1979. The Building was constructed before 1979 and there is asbestos-containing material ("ACM") in the Premises as well as in other areas of the Building. Landlord agrees to abate, at Landlord's sole cost and expense which cost and expense shall not be included in Operating Expenses, all ACM on the ninth (9th) floor of the Building ("Landlord's Abatement Work") as soon as commercially reasonable after execution of this Lease. According to the United States Environmental Protection Agency ("EPA"); "intact and undisturbed asbestos materials do not pose a health risk. The mere presence of asbestos in a building does not mean that the health of the building occupants is endangered . . . However, asbestos materials can become hazardous when, due to damage, disturbance, or deterioration over time, they release fibers into building air." Managing Asbestos In Place, Washington, D.C., EPA 20T-2003, July 1990, at page 3. Landlord has provided or will provide Tenant with a separate notification containing such matters as the location of ACM in the Building. Tenant agrees in turn to notify its contractors and employees who work in the Building as required by California's Asbestos Notification Law (Health & Safety Code §§ 25915 et seq.). Tenant shall comply, and cause its employees, agents, contractors and invitees to comply, with all laws and regulations applicable to ACM, including without limitation work practice and notification regulations in the event of any work or activities which might disturb the ACM. Tenant shall not cause, suffer or permit any such activities to commence or continue without first notifying and obtaining the consent of Landlord, in addition to any notices or consents required by law. Tenant shall comply, and cause its employees, agents, contractors and invitees to comply, with any and all rules, regulations and asbestos management programs which may be adopted by Landlord for the Building or any other instructions, directions or prohibitions which Landlord may deliver with respect to the ACM. If any asbestos-related work is performed by or at the instance of Tenant, Tenant shall promptly provide Landlord with documentation establishing, as to each and every performance of such work, that the same was performed strictly in accordance with applicable government standards and with the requirements of this Lease.     Tenant accepts the Premises with knowledge that there is ACM in the Building, but subject to Landlord's agreement to abate all ACM on the ninth (9th) floor of the Building no later than November 30, 1998 (subject to extension for Force Majeure delays and any delays caused by Tenant). and waives and releases any claim against Landlord which Tenant may now or hereafter have or acquire arising in connection with the presence of ACM in the Building. 40 --------------------------------------------------------------------------------     30.28. Confidentiality. Landlord and Tenant acknowledge that the content of this Lease and any related documents are confidential information. Landlord and Tenant shall keep such confidential information strictly confidential and shall not disclose such confidential information to any person or entity other than Landlord's and Tenant's financial, legal, and space planning consultants.     30.29. Landlord Renovations. It is specifically understood and agreed that Landlord has no obligation and has made no promises to alter, remodel, improve, renovate, repair or decorate the Premises, Building, or any part thereof and that no representations respecting the condition of the Premises or the Building have been made by Landlord to Tenant except as specifically set forth herein or in the Work Letter. However, Tenant acknowledges that Landlord is currently renovating or may during the Lease Term renovate, improve, alter, or modify (collectively, the "Renovations") the Building, Premises, and/or Real Property, including without limitation the Building Parking Facility, common areas, systems and equipment, roof, and structural portions of the same, which Renovations may include, without limitation, (i) modifying the common areas and tenant spaces to comply with applicable laws and regulations, including regulations relating to the physically disabled, seismic conditions, and building safety and security, and (ii) installing new carpeting, lighting, and wall coverings in the Building common areas, and in connection with such Renovations, Landlord may, among other things, erect scaffolding or other necessary structures in the Building, limit or eliminate access to portions of the Real Property, including portions of the common areas, or perform work in the Building, which work may create noise, dust or leave debris in the Building. Tenant hereby agrees that such Renovations and Landlord's actions in connection with such Renovations shall in no way constitute a constructive eviction of Tenant nor entitle Tenant to any abatement of Rent except as expressly provided in Section 19.9 or elsewhere in the Lease. Except to the extent otherwise provided in this Lease, Landlord shall have no responsibility or for any reason be liable to Tenant for any direct or indirect injury to or interference with Tenant's business arising from the Renovations, nor shall Tenant be entitled to any compensation or damages from Landlord for loss of the use of the whole or any part of the Premises or of Tenant's personal property or improvements resulting from the Renovations or Landlord's actions in connection with such Renovations, or for any inconvenience or annoyance occasioned by such Renovations or Landlord's actions in connection with such Renovations, except to the extent of the negligence or willful misconduct of Landlord or its employees or contractors.     30.30. Security. Landlord shall provide security for the Building twenty-four (24) hours per day, seven (7) days per week, three hundred sixty-five (365) days per year; provided, that, Landlord shall have no liability with respect to any failure of any security to protect the Building, the Premises or any users thereof. As of the date of execution of this Lease, Landlord maintains the following security facilities and services at the Building: (i) television monitors manned by security guards which view access to each of the two towers of the Building and which are located in the lobby of each of the towers on a 24-hours per day basis, (ii) one roving guard patrolling the Project between the hours of 6:00 p.m. and midnight every day of the week, and (iii) a restricted access list for persons seeking access during the off hours of the Building. Landlord shall maintain equivalent facilities and services throughout the Lease Term. The purpose of such security services is to monitor and limit access to the Building.     30.31. Consent/Duty to Act Reasonably. Except for any references to the terms "sole" or "absolute" (and except for matters which (1) could have an adverse effect on the structural integrity of the Building Structure, (2) could have an adverse effect on the Building Systems and Equipment, or (3) could have an effect on the exterior appearance of the Building, whereupon in each such case Landlord's duty is to act in good faith and in compliance with the Lease), any time the consent of Landlord or Tenant is required, such consent shall not be unreasonably withheld, conditioned or delayed. Subject to the foregoing, whenever this Lease grants Landlord or Tenant the right to take action, exercise discretion, establish rules and regulations or make allocations or other determinations 41 -------------------------------------------------------------------------------- (other than decisions to exercise expansion, contraction, cancellation, termination or renewal options), Landlord and Tenant shall act reasonably and in good faith.     IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be executed the day and date first above written. "Landlord"   COLONNADE WlLSHIRE CORP., a California corporation     By: /s/ INSIGNIA/E.S.G., INC., AGENT          By: --------------------------------------------------------------------------------         Its: /s/ ILLEGIBLE    -------------------------------------------------------------------------------- ILLEGIBLE President "Tenant"   TICKETMASTER L.L.C., a Delaware limited liability company     By: /s/ STUART DEPINA    -------------------------------------------------------------------------------- Stuart DePina Senior Vice President, Treasurer & CFO     By: /s/ VICTORIA RISHWAIN    -------------------------------------------------------------------------------- Victoria Rishwain Assistant Secretary 42 -------------------------------------------------------------------------------- QuickLinks FOURTH AMENDMENT TO OFFICE LEASE EXHIBIT "A" Expansion Space Floor Plan EXHIBIT "A" Expansion Space Floor Plan EXHIBIT "B" First Offer Space Floor Plan THIRD AMENDMENT TO OFFICE LEASE EXHIBIT "A" Expansion Space Floor Plan EXHIBIT "A" Expansion Space Floor Plan SECOND AMENDMENT TO OFFICE LEASE FIRST AMENDMENT TO OFFICE LEASE WILSHIRE COLONNADE SUMMARY OF BASIC LEASE INFORMATION WILSHIRE COLONNADE INDEX INDEX OF MAJOR DEFINED TERMS WILSHIRE COLONNADE OFFICE LEASE ARTICLE 1. REAL PROPERTY, BUILDING AND PREMISES ARTICLE 2. INITIAL LEASE TERM ARTICLE 3. BASE RENT ARTICLE 4. ADDITIONAL RENT ARTICLE 5. USE OF PREMISES ARTICLE 6. SERVICES AND UTILITIES ARTICLE 7. REPAIRS ARTICLE 8. ADDITIONS AND ALTERATIONS ARTICLE 9. COVENANT AGAINST LIENS ARTICLE 10. INSURANCE ARTICLE 11. DAMAGE AND DESTRUCTION ARTICLE 12. NONWAIVER ARTICLE 13. CONDEMNATION ARTICLE 14. ASSIGNMENT AND SUBLETTING ARTICLE 15. SURRENDER OF PREMISES; OWNERSHIP AND REMOVAL OF TRADE FIXTURES ARTICLE 16. HOLDING OVER ARTICLE 17. ESTOPPEL CERTIFICATES ARTICLE 18. SUBORDINATION ARTICLE 19. DEFAULTS; REMEDIES ARTICLE 20. COVENANT OF QUIET ENJOYMENT ARTICLE 21. SECURITY DEPOSIT ARTICLE 22. SUBSTITUTION OF OTHER PREMISES ARTICLE 23. SIGNS ARTICLE 24. COMPLIANCE WITH LAW ARTICLE 25. LATE CHARGES ARTICLE 26. LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT ARTICLE 27. ENTRY BY LANDLORD ARTICLE 28. TENANT PARKING ARTICLE 29. FIRST OFFER RIGHT ARTICLE 30. MISCELLANEOUS PROVISIONS

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10q-9 AMENDMENT TO THE BELLSOUTH PERSONAL RETIREMENT ACCOUNT PENSION PLAN     WHEREAS, BellSouth Corporation (the "Company") sponsors the BellSouth Personal Retirement Account Pension Plan (the "Plan"), which was amended and restated effective January 1, 1998, and subsequently amended from time to time; and     WHEREAS, pursuant to section 15.01 of the Plan, the BellSouth Employees' Benefit Claim Review Committee (the "Committee") is authorized to adopt nonmaterial amendments to the Plan; and     WHEREAS, the Committee approved all of the following revisions to the Plan document at its February 11, 2000 meeting, and authorized appropriate officers of the Company to do such further acts and to execute such documents as may be necessary or advisable to effectuate the purposes of such approvals; and     WHEREAS, the Committee desires to revise the language of the Plan document to clarify: (i)that participants who first become eligible for a service pension in 1998 and who retire on or after January 1, 1998 and before January 1, 2000, the benefit payable shall be derived from the Participant's December 31, 1997 account balance (prior to the one-time increase), credited with service credits, supplemental credits, additional credits, and interest credits; (ii)that the lump sum option is not available for disability pensions; and (iii)the use of GATT assumptions in the calculation of minimum account balances before and after January 1, 2000.     NOW, THEREFORE, the Committee hereby approves the following amendments of the Plan. 1.     Section 6.02 of the Plan is amended by deleting the first sentence of subparagraph 6.02(a)(iii) and substituting therefor the following: "With respect to a Participant who first becomes eligible for a service pension in 1998 and who retires on or after January 1, 1998 and before January 1, 2000, the benefit payable shall be derived from the Participant's December 31, 1997 account balance (prior to the one-time increase), credited with service credits, supplemental credits, additional credits, and interest credits at the rate of 4 percent per year, compounded annually, and converting such amount to a lifetime annuity using the appropriate factor from the table set forth in Appendix C, which shall be based on the BellSouth Management Mortality Tables." 2.     Section 6.02(b) of the Plan is amended by adding at the end thereof the following: "The disability pension is not payable as a lump sum settlement under the provisions of Section 7.08." 3.     Section 7.08 of the Plan is amended by deleting subparagraph 7.08(d)(ii) in its entirety and substituting therefor the following: "For a Participant whose Pension Commencement Date occurs before January 1, 2000, the monthly benefit based on the Minimum Account Balance, calculated in accordance with subparagraph 6.02(a)(ii)." 4.     Section 7.08 of the Plan is amended by adding subparagraph 7.08(e)(iii) as follows: "For a Participant whose Pension Commencement Date occurs on or after January 1, 2000, the monthly benefit based on the Minimum Account Balance, calculated in accordance with subparagraph 6.02(a)(ii)." 1 -------------------------------------------------------------------------------- 5.     Any other provisions of the Plan not amended herein shall remain in full force and effect.     This Amendment shall be effective as of February 11, 2000. By: /s/ RICHARD D. SIBBERNSEN      --------------------------------------------------------------------------------     Richard D. Sibbernsen Vice President—Human Resources Date: December 15, 2000 2 -------------------------------------------------------------------------------- QuickLinks AMENDMENT TO THE BELLSOUTH PERSONAL RETIREMENT ACCOUNT PENSION PLAN 1. 2. 3. 4. 5.

    Receivables Sale Agreement   Dated as of September 28, 2001   among   Albany International Receivables Corporation, as the Seller,   Albany International Corp., as the Initial Collection Agent,   ABN AMRO Bank N.V., as the Agent,   the Committed Purchasers from time to time party hereto,   and   Amsterdam Funding Corporation       Table of Contents     Article I Purchases from Seller and Settlements         Section 1.1. Sales   Section 1.2. Interim Liquidations.   Section 1.3. Selection of Discount Rates and Tranche Periods.   Section 1.4. Fees and Other Costs and Expenses   Section 1.5. Maintenance of Sold Interest; Deemed Collection   Section 1.6. Reduction in Commitments   Section 1.7. Optional Repurchases   Section 1.8. Security Interest         Article II Sales to and from Amsterdam; Allocations         Section 2.1. Required Purchases from Amsterdam.   Section 2.2. Purchases by Amsterdam.   Section 2.3. Allocations and Distributions         Article III Administration and Collections         Section 3.1. Appointment of Collection Agent   Section 3.2. Duties of Collection Agent   Section 3.3. Reports   Section 3.4. Lock-Box Arrangements   Section 3.5. Enforcement Rights   Section 3.6. Collection Agent Fee   Section 3.7. Responsibilities of the Seller   Section 3.8. Actions by Seller   Section 3.9. Indemnities by the Collection Agent.   Section 3.10. Currency Conversion.         Article IV Representations and Warranties         Section 4.1. Representations and Warranties         Article V Covenants         Section 5.1. Covenants of the Seller         Article VI Indemnification         Section 6.1. Indemnities by the Seller   Section 6.2. Increased Cost and Reduced Return   Section 6.3. Other Costs and Expenses   Section 6.4. Withholding Taxes   Section 6.5. Payments and Allocations         Article VII Conditions Precedent     Section 7.1. Conditions to Closing Section 7.2. Conditions to Each Purchase     Article VIII The Agent     Section 8.1. Appointment and Authorization Section 8.2. Delegation of Duties Section 8.3. Exculpatory Provisions Section 8.4. Reliance by Agent Section 8.5. Assumed Payments Section 8.6. Notice of Termination Events Section 8.7. Non-Reliance on Agent and Other Purchasers Section 8.8. Agent and Affiliates Section 8.9. Indemnification Section 8.10. Successor Agent     Article IX Miscellaneous     Section 9.1. Termination Section 9.2. Notices Section 9.3. Payments and Computations Section 9.4. Sharing of Recoveries Section 9.5. Right of Setoff Section 9.6. Amendments Section 9.7. Waivers Section 9.8. Successors and Assigns; Participations; Assignments Section 9.9. Intended Tax Characterization Section 9.10. Confidentiality Section 9.11. Agreement Not to Petition Section 9.12. Excess Funds Section 9.13. No Recourse Section 9.14. Headings; Counterparts Section 9.15. Cumulative Rights and Severability Section 9.16. Governing Law; Submission to Jurisdiction Section 9.17. Waiver of Trial by Jury Section 9.18. Entire Agreement Section 9.19. Appointment for Service of Process Section 9.20. Payments in Relevant Currency         schedules Description     Schedule I Definitions Schedule II Committed Purchasers and Commitments of Committed Purchasers     Exhibits Description     Exhibit A Form of Incremental Purchase Request Exhibit B Form of Notification of Assignment to Amsterdam from the Committed Purchasers Exhibit C Form of Periodic Report Exhibit D Addresses and Names of Seller and Originators Exhibit E Lock-Boxes and Lock-Box Banks Exhibit F Form of Lock-Box Letter Exhibit G Compliance Certificate Exhibit H Credit and Collection Policy Exhibit I Exchange Rates Exhibit J Bankrupt Obligors   Receivables Sale Agreement   Receivables Sale Agreement, dated as of September 28, 2001, among Albany International Receivables Corporation, a Cayman Islands company, as Seller (the “Seller”), Albany International Corp., a Delaware corporation, as initial Collection Agent (the “Initial Collection Agent,” and, together with any successor thereto, the “Collection Agent”), ABN AMRO Bank N.V., as agent for the Purchasers (the “Agent”), the committed purchasers party hereto (the “Committed Purchasers”) and Amsterdam Funding Corporation (“Amsterdam”).  Certain capitalized terms used herein, and certain rules of construction, are defined in Schedule I.  The Committed Purchasers and the Commitments of the Committed Purchasers are listed on Schedule II.   The parties hereto agree as follows:   Article I   Purchases from Seller and Settlements   Section 1.1.           Sales.   (a)           The Sold Interest.  Subject to the terms and conditions hereof, the Seller may, from time to time before the Liquidity Termination Date, sell to Amsterdam or, only if Amsterdam declines to make the applicable purchase, ratably to the Committed Purchasers (who hereby agree, subject to the terms and conditions hereof, in such event to make such purchase) an undivided percentage ownership interest in the Receivables, the Related Security and all related Collections.  Any such purchase (a “Purchase”) shall be made by each relevant Purchaser remitting funds to the Seller, through the Agent, pursuant to Section 1.1(c) or by the Collection Agent remitting Collections to the Seller pursuant to Section 1.1(d).  The aggregate percentage ownership interest so acquired by a Purchaser in the Receivables, the Related Security and related Collections (its “Purchase Interest”) shall equal at any time the sum of the following percentages:   I   +   PRP ER           where:   I               =          the outstanding Investment of such Purchaser at such time;   ER           =          the Eligible Receivables Balance at such time; and   PRP         =          the Purchaser Reserve Percentage at such time.   Except during a Liquidation Period for a Purchaser, such Purchaser’s Purchase Interest will change whenever its Investment, its Purchaser Reserve Percentage or the Eligible Receivables Balance changes.  During a Liquidation Period for a Purchaser its Purchase Interest shall remain constant at the percentage in effect as of the day immediately preceding the commencement of the relevant Liquidation Period, except for redeterminations to reflect Investment acquired from or transferred to another Purchaser under the Transfer Agreement.  The sum of all Purchasers’ Purchase Interests at any time is referred to herein as the “Sold Interest”, which at any time is the aggregate percentage ownership interest then held by the Purchasers in the Receivables, the Related Security and Collections.   (b)           Amsterdam Purchase Option and Other Purchasers’ Commitments.  Subject to Section 1.1(d) concerning Reinvestment Purchases, at no time will Amsterdam have any obligation to make a Purchase.  Each purchaser listed on Schedule II hereto (together, the “Committed Purchasers” and each, a “Committed Purchaser”) severally hereby agrees, subject to Section 7.2 and the other terms and conditions hereof (including, in the case of an Incremental Purchase (as defined below), that Amsterdam has refused to make a requested Purchase), to make Purchases before the Liquidity Termination Date, based on its Ratable Share of each Purchase, to the extent its Investment would not thereby exceed its Commitment, the Aggregate Investment would not thereby exceed the Purchase Limit, and the Matured Aggregate Investment would not thereby exceed the Aggregate Commitments.  Each Purchaser’s first Purchase and each additional Purchase by such Purchaser not made from Collections pursuant to Section 1.1(d) is referred to herein as an “Incremental Purchase.”  Each Purchase made by a Purchaser with the proceeds of Collections in which it has a Purchase Interest, which does not increase the outstanding Investment of such Purchaser, is referred to herein as a “Reinvestment Purchase.”   (c)           Incremental Purchases.  In order to request an Incremental Purchase from a Purchaser, the Seller must provide to the Agent an irrevocable written request substantially in the form of Exhibit A, by (i) 10:00 a.m. (Chicago time) two Business Days before the requested date (the “Purchase Date”) of such Purchase, in the case of each Purchase by Amsterdam, (ii) 10:00 a.m. (Chicago time) three Business Days before the Purchase Date in the case of each Purchase by the Committed Purchasers that is to accrue Discount at the Eurodollar Rate and (iii) 10:00 a.m. (Chicago time) on the Purchase Date in the case of each Purchase by the Committed Purchasers that is to accrue Discount at the Prime Rate, or, in each of the foregoing cases, such later time or day as Amsterdam shall agree.  Each such notice shall specify the requested Purchase Date (which must be a Business Day) and the requested amount (the “Purchase Amount”) of such Purchase, which must be in a minimum amount of $500,000 (or, if less, an amount equal to the Maximum Incremental Purchase Amount).  An Incremental Purchase may only be requested from Amsterdam unless Amsterdam, in its sole discretion, determines not to make such Incremental Purchase, in which case the Seller may request such Incremental Purchase from the Committed Purchasers.  The Agent shall promptly notify the contents of any such request to each Purchaser from which the Purchase is requested.  If Amsterdam determines, in its sole discretion, to make all or any portion of the requested Purchase, Amsterdam shall transfer to the Agent’s Account the Purchase Amount (or portion thereof) on the requested Purchase Date.  If Amsterdam determines, in its sole discretion, not to make all or any portion of a requested Purchase and the Seller requests the Incremental Purchase from the Committed Purchasers subject to Section 7.2 and the other terms and conditions hereof, each Committed Purchaser shall transfer its Ratable Share of that portion of the requested Purchase Amount not funded by Amsterdam into the Agent’s Account by no later than 12:00 noon (Chicago time) on the Purchase Date (which, in the case of a Purchase that is to accrue Discount at the Eurodollar Rate, in no event will be earlier than three Business Days after such request is made to the Committed Purchasers).  The Agent shall transfer to the Seller Account the proceeds of any Incremental Purchase delivered into the Agent’s Account.   (d)           Reinvestment Purchases.  Unless Amsterdam has provided to the Agent, the Seller, and the Collection Agent a notice (which notice has not been revoked by Amsterdam) that it no longer wishes to make Reinvestment Purchases (in which case Amsterdam’s Reinvestment Purchases, but not those of the Committed Purchasers, shall cease), on each day before the Liquidity Termination Date that any Collections are received by the Collection Agent and no Interim Liquidation is in effect, a Purchaser’s Purchase Interest in such Collections shall automatically be used to make a Reinvestment Purchase by such Purchaser.  Amsterdam may revoke any notice provided under the first sentence of this Section 1.1(d) by notifying the Agent, the Seller, and the Collection Agent that it will make Reinvestment Purchases.   Section 1.2.           Interim Liquidations.  (a) Optional.  The Seller may at any time direct that Reinvestment Purchases cease and that an Interim Liquidation commence for all Purchasers by giving the Agent and the Collection Agent at least three Business Days’ prior written notice specifying the date on which the Interim Liquidation shall commence and, if desired, when such Interim Liquidation shall cease (identified as a specific date prior to the Liquidity Termination Date or as when the Aggregate Investment is reduced to a specified amount).  If the Seller does not so specify the date on which an Interim Liquidation shall cease, it may cause such Interim Liquidation to cease at any time before the Liquidity Termination Date, subject to Section 1.2(b) below, by giving the Agent and the Collection Agent at least three Business Days' prior written notice before the date on which it desires such Interim Liquidation to cease.   (b)           Mandatory.  If at any time before the Liquidity Termination Date any condition in Section 7.2 is not fulfilled, Reinvestment Purchases shall cease and an Interim Liquidation shall commence, which shall cease only upon the Seller confirming to the Agent that the conditions in Section 7.2 are fulfilled.   Section 1.3.           Selection of Discount Rates and Tranche Periods. (a) Amsterdam.  Amsterdam's Investment will accrue Funding Charges for each day on which it is outstanding.  On each Settlement Date the Seller shall pay to the Agent (for the benefit of Amsterdam) an aggregate amount equal to all accrued and unpaid Funding Charges in respect of such Investment for the immediately preceding Discount Period. The Agent shall allocate the Investment of Amsterdam to Tranche Periods in its sole discretion.   (b)           Committed Purchasers.  All Investment of the Committed Purchasers shall be allocated to one or more Tranches reflecting the Discount Rates at which such Investment accrues Discount and the Tranche Periods for which such Discount Rates apply.  In each request for an Incremental Purchase from the Committed Purchasers and three Business Days before the expiration of any Tranche Period applicable to any Committed Purchaser’s Investment, the Seller may direct (subject to Section 1.3(c)) the Tranche Period(s) to be applicable to such Investment and the Discount Rate(s) applicable thereto.  All Investment of the Committed Purchasers may accrue Discount at either the Eurodollar Rate or the Prime Rate, in all cases as established for each Tranche Period applicable to such Investment.  Any Investment of the Committed Purchasers not allocated to a Tranche Period shall be a Prime Tranche.  During the pendency of a Termination Event, the Agent may reallocate any outstanding Investment of the Committed Purchasers to a Prime Tranche.  All Discount accrued on the Investment of the Committed Purchasers during a Tranche Period shall be payable by the Seller on the last day of such Tranche Period or, for a Eurodollar Tranche with a Tranche Period of more than three months, three months after the commencement, and on the last day, of such Tranche Period.  If, by the time required by this Section 1.3(b), the Seller fails to select a Discount Rate or Tranche Period for any Investment of the Committed Purchasers, such amount of Investment shall automatically accrue Discount at the Prime Rate for a three Business Day Tranche Period.  Any Investment purchased from Amsterdam pursuant to the Transfer Agreement shall accrue interest at the Prime Rate and have an initial Tranche Period of three Business Days.   (c)           If the Agent or any Committed Purchaser reasonably determines (i) that maintenance of any Eurodollar Tranche would violate any applicable law or regulation, (ii) that deposits of a type and maturity appropriate to match fund any of such Purchaser’s Eurodollar Tranches are not available or (iii) that the maintenance of any Eurodollar Tranche will not adequately and fairly reflect the cost of such Purchaser of funding Eurodollar Tranches, then the Agent, upon the direction of such Purchaser, shall suspend the availability of future Eurodollar Tranches until such time as the Agent or applicable Committed Purchaser provides notice that the circumstances giving rise to such suspension no longer exist, and, if required by any applicable law or regulation, terminate any outstanding, Eurodollar Tranche so affected.  All Investment allocated to any such terminated Eurodollar Tranche shall be reallocated to a Prime Tranche.   Section 1.4.           Fees and Other Costs and Expenses.  (a) The Seller shall pay to the Agent (i) for the ratable benefit of the Committed Purchasers, such amounts as agreed to with the Committed Purchasers and the Agent in the Fee Letter.   (b)           If (i) the amount of Amsterdam’s Investment is reduced (other than as a result of a Put) on any date other than the last day of a CP Tranche, (ii) the amount of Investment allocated to any LIBOR Tranche is reduced on any day other than the last day of its Tranche Period or (iii) if a requested Incremental Purchase at the Eurodollar Rate does not take place on its scheduled Purchase Date (other than due to acts or omissions of the applicable Purchaser or Agent), the Seller shall pay the Early Payment Fee to each Purchaser that had its Investment so reduced or scheduled Purchase not made.   (c)           Investment, Discount and Funding Charges shall not be recourse obligations of the Seller and shall be payable solely from Collections and from amounts payable under Sections 1.5, 1.7 and 6.1 (to the extent amounts paid under Section 6.1 indemnify against reductions in or non–payment of Receivables).  The Seller shall pay, as a full recourse obligation, all other amounts payable hereunder.   Section 1.5.           Maintenance of Sold Interest; Deemed Collection.  (a) General.  If at any time before the Liquidity Termination Date the Eligible Receivables Balance is less than the sum of the Aggregate Investment (or, if a Termination Event exists, the Matured Aggregate Investment) plus the Aggregate Reserve, the Seller shall pay to the Agent an amount equal to such deficiency for application to reduce the Investments of the Purchasers ratably in accordance with the principal amount of their respective Investments, applied first to Prime Tranches and second to the other Tranches with the shortest remaining maturities unless otherwise specified by the Seller.  Any amount so applied to reduce Amsterdam’s Investment shall be deposited in the Special Transaction Subaccount.   (b)           Deemed Collections.  If on any day the Outstanding Balance of a Receivable is reduced or cancelled as a result of any defective or rejected goods or services, any cash discount or adjustment (including any adjustment resulting from the application of any special refund or other discounts or any reconciliation), any setoff or credit (whether such claim or credit arises out of the same, a related, or an unrelated transaction) or other reason not arising from the financial inability of the Obligor to pay undisputed indebtedness, the Seller shall be deemed to have received on such day a Collection on such Receivable in the amount of such reduction or cancellation.  If on any day any representation, warranty, covenant or other agreement of the Seller related to a Receivable set forth in Section 4.1(e) or 4.1(k) hereof is not true or is not satisfied, the Seller shall be deemed to have received on such day a Collection in the amount of the Outstanding Balance of such Receivable.  All such Collections deemed received by the Seller under this Section 1.5(b) shall be remitted by the Seller to the Collection Agent in accordance with Section 5.1(i).   (c)           Adjustment to Sold Interest.  At any time before the Liquidity Termination Date that the Seller is deemed to have received any Collection under Section 1.5(b) (“Deemed Collections”) that derives from a Receivable that is otherwise reported as an Eligible Receivable, so long as no Liquidation Period then exists, the Seller may satisfy its obligation to deliver such amount to the Collection Agent by instead notifying the Agent that the Sold Interest should be recalculated by decreasing the Eligible Receivables Balance by the amount of such Deemed Collections, so long as such adjustment does not cause the Sold Interest to exceed 100%.   (d)           Payment Assumption.  Unless an Obligor otherwise specifies or another application is required by contract or law, any payment received by the Seller from any Obligor shall be applied as a Collection of Receivables of such Obligor (starting with the oldest such Receivable) and remitted to the Collection Agent as such.   Section 1.6.           Reduction in Commitments.  The Seller may, upon at least five Business Days’ notice to the Agent, reduce the Aggregate Commitment in increments of $1,000,000, so long as the Aggregate Commitment as so reduced is no less than the Matured Aggregate Investment.  Each such reduction in the Aggregate Commitment shall reduce the Commitment of each Committed Purchaser in accordance with its Ratable Share and shall reduce the Purchase Limit so that the Aggregate Commitment remains at least 102% of the Purchase Limit and the Purchase Limit is no less than the outstanding Aggregate Investment.   Section 1.7.           Optional Repurchases.  At any time that the Aggregate Investment is less than 10% of the Aggregate Commitment in effect on the date hereof, the Seller may, upon at least five Business Days’ notice to the Agent, repurchase the entire Sold Interest from the Purchasers at a price equal to the outstanding Matured Aggregate Investment and all other amounts then owed hereunder.  No Early Payment Fee shall be payable in connection with a repurchase made in accordance with the terms of this Section.   Section 1.8.           Security Interest.  (a) The Seller hereby grants to the Agent, for its own benefit and for the ratable benefit of the Purchasers, a security interest in all Receivables, Related Security, Collections and Lock-Box Accounts to secure the payment of all amounts other than Investment owing hereunder and (to the extent of the Sold Interest) to secure the repayment of all Investment.  The Seller and Collection Agent shall hold in trust for the benefit of the Persons entitled thereto any Collections received pending their application pursuant to Section 1.1(c), Section 2.3 or Article III hereof.  After the occurrence of a Termination Event, the Seller and Collection Agent shall not, without the prior written consent of the Instructing Group, distribute any Collections to any Person other than the Agent and the Purchasers (and to the Collection Agent, in payment of the Collection Agent Fee to the extent permitted hereto) (whether as payment on a Note or otherwise) until all amounts owed under the Transaction Documents the Agent and the Purchasers shall have been indefeasibly paid in full.   (b)           The Seller hereby assigns and otherwise transfers to the Agent (for the benefit of the Agent, each Purchaser and any other Person to whom any amount is owed hereunder), all of the Seller’s right, title and interest in, to and under the Purchase Agreement and the Limited Guaranty as security for fulfillment of Seller’s obligations under the Transaction Documents.  The Seller shall execute, file and record all financing statements, continuation statements and other documents required to perfect or protect such assignment.  This assignment includes (a) all monies due and to become due to the Seller from the Originators or the Parent under or in connection with the Purchase Agreement and the Limited Guaranty (including fees, expenses, costs, indemnities and damages for the breach of any obligation or representation related to such agreement) and (b) all rights, remedies, powers, privileges and claims of the Seller against the Originators or the Parent under or in connection with the Purchase Agreement and the Limited Guaranty.  All provisions of the Purchase Agreement and the Limited Guaranty shall inure to the benefit of, and may be relied upon by, the Agent, each Purchaser and each such other Person.  At any time that a Termination Event has occurred and is continuing, the Agent shall have the sole right to enforce the Seller’s rights and remedies under the Purchase Agreement and the Limited Guaranty to the same extent as the Seller could absent this assignment, but without any obligation on the part of the Agent, any Purchaser or any other such Person to perform any of the obligations of the Seller under the Purchase Agreement (or the promissory note executed thereunder) or the Limited Guaranty.  All amounts distributed to the Seller under the Purchase Agreement from Receivables sold to the Seller thereunder shall constitute Collections hereunder and shall be applied in accordance herewith.   (c)           This agreement shall be a security agreement for purposes of the UCC.  Upon the occurrence of a Termination Event, the Agent shall have all rights and remedies provided under the UCC as in effect in all applicable jurisdictions.   Article II   Sales to and from Amsterdam; Allocations   Section 2.1.           Required Purchases from Amsterdam. (a) Amsterdam may, at any time, and on the earlier of the Amsterdam Termination Date and ten Business Days following the Agent and Amsterdam learning of a continuing Termination Event, Amsterdam shall, sell to the Committed Purchasers pursuant to the Transfer Agreement any percentage designated by Amsterdam of Amsterdam’s Investment and its related Amsterdam Settlement (each, a “Put”).   (b)           Any portion of Amsterdam’s Investment and related Amsterdam Settlement purchased by a Committed Purchaser shall be considered part of such Purchaser’s Investment and related Amsterdam Settlement from the date of the relevant Put.  Immediately upon any purchase by the Committed Purchasers of any portion of Amsterdam’s Investment on or after the occurrence of a Termination Event, the Seller shall pay to the Agent (for the ratable benefit of such Purchasers) an amount equal to the sum of (i) the Assigned Amsterdam Settlement and (ii) all unpaid Discount owed to Amsterdam (whether or not then due) to the end of each applicable Tranche Period to which any Investment being Put has been allocated, (iii) all accrued but unpaid fees (whether or not then due) payable to Amsterdam in connection herewith at the time of such purchase and (iv) all accrued and unpaid costs, expenses and indemnities due to Amsterdam from the Seller in connection herewith.   (c)           The proceeds from each Put received by Amsterdam (other than amounts described in clauses (iii) and (iv) of the last sentence of Section 2.1(b)), shall be transferred into the Special Transaction Subaccount and used solely to pay that portion of the outstanding commercial paper of Amsterdam issued to fund or maintain the Investment of Amsterdam so transferred.  Until used to pay commercial paper, all proceeds of any Put pursuant to this Section shall be invested in Permitted Investments.  All earnings on such Permitted Investments shall be promptly remitted to the Committed Purchasers (ratably, in accordance with their Commitments) unless the Seller shall have paid the amounts described in the second sentence of Section 2.1(b), in which case such amounts shall be remitted to the Seller.   Section 2.2.           Purchases by Amsterdam.  Amsterdam may at any time deliver to the Agent and each Committed Purchaser a notification of assignment in substantially the form of Exhibit B.  If Amsterdam delivers such notice, each Committed Purchaser shall sell to Amsterdam and Amsterdam shall purchase in full from each Committed Purchaser, the Investment of the Committed Purchasers on the last day of the relevant Tranche Periods, at a purchase price equal to such Investment plus accrued and unpaid Discount thereon. Any sale from any Committed Purchaser to Amsterdam pursuant to this Section 2.2 shall be without recourse, representation or warranty except for the representation and warranty that the Investment sold by such Committed Purchaser is free and clear of any Adverse Claim created or granted by such Committed Purchaser and that such Purchaser has not suffered a Bankruptcy Event.   Section 2.3.           Allocations and Distributions.   (a)           Amsterdam Termination and Non-Reinvestment Periods.  Before the Liquidity Termination Date (unless an Interim Liquidation is in effect), on each day during a period that Amsterdam has an outstanding Investment and is not making Reinvestment Purchases (as established under Section 1.1(d)) and at all times on and after the Amsterdam Termination Date, the Collection Agent (i) shall set aside and hold in trust solely for the benefit of Amsterdam (or deliver to the Agent, if so instructed pursuant to Section 3.2(a)) Amsterdam’s Purchase Interest in all Collections received on such day and (ii) shall distribute on the last day of each CP Tranche Period to the Agent (for the benefit of Amsterdam) the amounts so set aside up to the amount of Amsterdam’s Investment allocated to such Tranche Period and, to the extent not already paid in full, all Discount thereon and all other amounts then due from the Seller in connection with such Investment and Tranche Period.  If any part of the Sold Interest in any Collections is applied to pay any amounts that are recourse obligations of the Seller pursuant to Section 1.4(c) and after giving effect to such application the Sold Interest is greater than 100%, the Seller shall pay, as a recourse obligation for distribution as part of the Sold Interest in Collections, to the Collection Agent the amount so applied to the extent necessary so that after giving effect to such payment the Sold Interest is no greater than 100%.   (b)           Liquidity Termination Date and Interim Liquidations.  On each day during any Interim Liquidation and on each day on and after the Liquidity Termination Date, the Collection Agent shall set aside and hold in trust solely for the account of the Agent, for the benefit of the Agent and the Purchasers, (or deliver to the Agent, if so instructed pursuant to Section 3.2(a)) the Sold Interest in all Collections received on such day and such Collections shall be allocated as follows:   (i)            first, to the Purchasers (ratably, based on the Matured Value of their respective Investments) until all Investment of, Funding Charges with respect to Amsterdam and Discount with respect to the Committed Purchasers, as applicable, due but not already paid to, Amsterdam and the Committed Purchasers have been paid in full;   (ii)           second, to the Purchasers until all other amounts owed to the Purchasers have been paid in full;   (iii)          third, to the Agent until all amounts owed to the Agent have been paid in full;   (iv)          fourth, to any other Person (other than the Seller, the Collection Agent or an Originator) to whom any amounts are owed under the Transaction Documents until all such amounts have been paid in full; and   (v)           fifth, to the Collection Agent until all amounts owed to the Collection Agent under the Agreement have been paid in full; and   (vi)          sixth, to the Seller.   On the last day of each Tranche Period (unless otherwise instructed by the Agent pursuant to Section 3.2(a)), the Collection Agent shall deposit into the Agent’s Account, from such set aside Collections, all amounts allocated to such Tranche Period and all Tranche Periods that ended before such date that are due in accordance with the priorities in clauses (i)-(ii) above.  No distributions shall be made to pay amounts under clauses (iii) - (vi) until sufficient Collections have been set aside to pay all amounts described in clauses (i) and (ii) that may become payable for all outstanding Tranche Periods.  All distributions by the Agent shall be made ratably within each priority level in accordance with the respective amounts then due each Person included in such level unless otherwise agreed by the Agent and all Purchasers.  If any part of the Sold Interest in any Collections is applied to pay any amounts payable hereunder that are recourse obligations of the Seller pursuant to Section 1.4(c) and after giving effect to such application the Sold Interest is greater than 100%, the Seller shall pay, as a recourse obligation for distribution in respect of each applicable Purchaser's Investment as part of the Sold Interest in Collections, to the Collection Agent the amount so applied to the extent necessary so that after giving effect to such payment the Sold Interest is no greater than 100%.   Article III   Administration and Collections   Section 3.1.           Appointment of Collection Agent.  (a) The servicing, administering and collecting of the Receivables shall be conducted exclusively by a Person (the “Collection Agent”) designated to so act on behalf of the Purchasers under this Article III.  As the Initial Collection Agent, the Parent is hereby designated as, and agrees to perform the duties and obligations of, the Collection Agent.  The Initial Collection Agent acknowledges that the Agent and each Purchaser have relied on the Initial Collection Agent’s agreement to act as Collection Agent (and the agreement of any of the sub-collection agents to so act) in making the decision to execute and deliver this Agreement and agrees that it will not voluntarily resign as Collection Agent nor permit any sub-collection agent to voluntarily resign as a sub-collection agent.  At any time after (and only after) the occurrence of a Collection Agent Replacement Event, the Agent may designate a new Collection Agent to succeed the Parent (or any successor Collection Agent).  Any replacement Collection Agent may not be a direct or indirect competitor of any Seller Entity and shall agree to be bound by a confidentiality agreement substantively identical to that set forth in Section 9.10.   (b)           The Initial Collection Agentmay delegate its duties and obligations as Collection Agent to anAffiliate of the Initial Collection Agent (acting as a sub-collection agent).  Notwithstanding such delegation, the Initial Collection Agent shall remain primarily liable for the performance of the duties and obligations so delegated, and the Agent and each Purchaser shall have the right to look solely to the Initial Collection Agentfor such performance.  The Agent may at any time after (and only after) the occurrence of a Collection Agent Replacement Event remove or replace any sub-collection agent.   (c)           If replaced as provided herein, the Collection Agent agrees it will terminate, and will cause each existing sub-collection agent to terminate, its collection activities in a manner reasonably requested by the Agent to facilitate the transition to a new Collection Agent.  The Collection Agent shall reasonably cooperate with and assist any new Collection Agent (including providing reasonable access to, and transferring, all Records and allowing (to the extent permitted by applicable law and contract) the new Collection Agent to use all licenses, hardware or software necessary or desirable to collect the Receivables).  The Initial Collection Agentirrevocably agrees reasonably to act (if requested to do so) as the data-processing agent for any new Collection Agent in substantially the same manner as the Initial Collection Agent conducted such data-processing functions while it acted as the Collection Agent.   Section 3.2.           Duties of Collection Agent.  (a) The Collection Agent shall take, or cause to be taken, all action necessary or advisable to collect each Receivable in accordance (in all material respects) with this Agreement, the Credit and Collection Policy and all applicable laws, rules and regulations using the skill and attention the Collection Agent exercises in collecting other receivables or obligations owed solely to it.  The Collection Agent shall, in accordance herewith, separately account for all Collections to which a Purchaser is entitled and pay from such Collections all Funding Charges and Discount when due.  If so instructed by the Agent, after the occurrence of a Collection Agent Replacement Event, the Collection Agent shall transfer to the Agent the amount of Collections to which the Agent and the Purchasers are entitled by the Business Day following receipt.  Each party hereto exclusively hereby appoints the Collection Agent to enforce such Person’s rights and interests in the Receivables, but (notwithstanding any other provision in any Transaction Document) the Agent shall at all times after the occurrence of a Collection Agent Replacement Event have the sole right to direct the Collection Agent to commence or settle any legal action to enforce collection of any Receivable.   (b)           If no Termination Event exists and the Collection Agent determines that such action is appropriate, the Collection Agent may, in accordance with the Credit and Collection Policy, extend the maturity of any Receivable (but no such extension shall be for a period of more than thirty days) or adjust the Outstanding Balance of any Receivable in respect of any defective or rejected goods, any goods not timely delivered, or any good which do not meet design or performance specifications.  Any such extension or adjustment shall not alter the status of a Receivable as a Defaulted Receivable or Delinquent Receivable or limit any rights of the Agent or the Purchasers hereunder.  If a Termination Event exists, the Collection Agent may make such extensions or adjustments only with the prior consent of the Instructing Group.   (c)           The Collection Agent shall turn over to the Seller (i) any percentage of Collections in excess of the Sold Interest, less all reasonable costs and expenses of the Collection Agent for servicing, collecting and administering the Receivables and (ii) subject to Section 1.5(d), the collections and records for any indebtedness owed to the Seller that is not a Receivable.  The Collection Agent shall have no obligation to remit any such funds or records to the Seller until the Collection Agent receives evidence (reasonably satisfactory to the Agent) that the Seller is entitled to such items.  The Collection Agent has no obligations concerning indebtedness that is not a Receivable other than to deliver the collections and records for such indebtedness to the Seller when required by this Section 3.2(c).   (d)           The Collection Agent shall take all actions necessary to maintain the perfection and priority of the security interest of the Agent in the Receivables.   (e)           Any replacement Collection Agent may not be a direct or indirect competitor of any Seller Entity and shall agree to be bound by a confidentiality agreement substantively identical to that set forth in Section 9.10.   Section 3.3.           Reports.  On or before the twentieth day of each month, and, after the occurrence of a Termination Event, at such other times covering such other periods as is requested by the Agent or the Instructing Group, the Collection Agent shall deliver to the Agent a report reflecting information as of the close of business of the Collection Agent for the immediately preceding Settlement Period or such other preceding period as is requested (each a “Periodic Report”), containing the information described on Exhibit C (with such modifications or additional information as reasonably requested by the Agent or the Instructing Group).   Section 3.4.           Lock-Box Arrangements.  The Agent is hereby authorized to give notice at any time after the occurrence of a Collection Agent Replacement Event to any or all Lock-Box Banks that the Agent is exercising its rights under the Lock-Box Letters and to take all actions permitted under the Lock-Box Letters.  The Seller agrees to take any action reasonably requested by the Agent to facilitate the foregoing.  After the Agent takes any such action under the Lock-Box Letters, the Seller shall immediately deliver to the Agent any Collections received by the Seller.  If the Agent takes control of any Lock-Box Account, the Agent shall distribute Collections it receives in accordance herewith and shall deliver to the Collection Agent, for distribution under Section 3.2, all other amounts it receives from such Lock-Box Account.   Section 3.5.           Enforcement Rights.  (a) The Agent may at any time after the occurrence of a Collection Agent Replacement Event direct the Obligors and the Lock-Box Banks to make all payments on the Receivables directly to the Agent or its designee.  The Agent may, and the Seller shall at the Agent’s request, withhold the identity of the Purchasers from the Obligors and Lock-Box Banks.  Upon the Agent’s request after the occurrence of a Collection Agent Replacement Event, the Seller (at the Seller’s expense) shall (i) give notice to each Obligor of the Agent’s ownership of the Sold Interest and direct that payments on Receivables be made directly to the Agent or its designee, (ii) assemble for the Agent all Records and collateral security for the Receivables and the Related Security and transfer to the Agent (or its designee), or (to the extent permitted by applicable law and contract) license to the Agent (or its designee) the use of, all software useful to collect the Receivables and (iii) segregate in a manner acceptable to the Agent all Collections the Seller receives and, promptly upon receipt, remit such Collections in the form received, duly endorsed or with duly executed instruments of transfer, to the Agent or its designee.   (b)           Prior to the occurrence of a Termination Event, neither the Agent nor any Purchaser will contact or communicate with any Obligor without the prior written consent of the Seller.  After the occurrence of a Collection Agent Replacement Event, the Seller hereby irrevocably appoints the Agent as its attorney-in-fact coupled with an interest, with full power of substitution and with full authority in the place of the Seller, to take any and all steps deemed desirable by the Agent, in the name and on behalf of the Seller to (i) collect any amounts due under any Receivable, including endorsing the name of the Seller on checks and other instruments representing Collections and enforcing such Receivables and the Related Security, and (ii) exercise any and all of the Seller’s rights and remedies under the Purchase Agreement.  The Agent’s powers under this Section 3.5(b) shall not subject the Agent to any liability if any action taken by it proves to be inadequate or invalid, nor shall such powers confer any obligation whatsoever upon the Agent.   (c)           Neither the Agent nor any Purchaser shall have any obligation to take or consent to any action to realize upon any Receivable or Related Security or to enforce any rights or remedies related thereto.  To the extent that the Agent and the Purchasers elect not to enforce any rights they may have been granted by the Seller with respect to the Receivables and the Related Security, the Seller may exercise such rights in accordance with the terms hereof.   Section 3.6.           Collection Agent Fee.  On or before the twentieth day of each calendar month, the Seller shall pay to the Collection Agent a fee for the immediately preceding calendar month as compensation for its services (the “Collection Agent Fee”) equal to (a) at all times an Affiliate of the Seller is the Collection Agent, such consideration as is acceptable to it, so long as such consideration is upon fair and reasonable terms no less favorable to the Seller than could be obtained in a comparable arm's–length transaction with a Person other than a Seller Entity, the receipt and sufficiency of which is hereby acknowledged, and (b) at all times any other Person is the Collection Agent, a reasonable amount agreed upon by the Agent and the new Collection Agent on an arm’s–length basis reflecting rates and terms prevailing in the market at such time.  The Collection Agent may apply to payment of the Collection Agent Fee only the portion of the Collections in excess of Collections that fund Reinvestment Purchases and that pay Funding Charges and Discount.  The Agent may, with the consent of the Instructing Group, pay the Collection Agent Fee to the Collection Agent from the Sold Interest in Collections.  The Seller shall be obligated to reimburse any such payment.   Section 3.7.           Responsibilities of the Seller.  The Seller shall, or shall cause the Originators to, pay when due all Taxes payable in connection with the Receivables and the Related Security or their creation or satisfaction other than Taxes for which the Seller is not obligated to indemnify the Agent and the Purchasers pursuant to Section 6.1.  The Seller shall, and shall cause the Originators to, perform all of its obligations under agreements related to the Receivables and the Related Security to the same extent as if interests in the Receivables and the Related Security had not been transferred hereunder or, in the case of the Originators, under the Purchase Agreement.  The Agent’s or any Purchaser’s exercise of any rights hereunder shall not relieve the Seller or the Originators from such obligations.  Neither the Agent nor any Purchaser shall have any obligation to perform any obligation of the Seller or of the Originators or any other obligation or liability in connection with the Receivables or the Related Security.   Section 3.8.           Actions by Seller.  The Seller shall defend and indemnify the Agent and each Purchaser against all costs, expenses, claims and liabilities for any action taken by the Seller, the Originators or any other Affiliate of the Seller or of the Originators (whether acting as Collection Agent or otherwise) related to any Receivable and the Related Security, or arising out of any alleged failure of compliance of any Receivable or the Related Security with the provisions of any law or regulation, except to the extent such costs, expenses, claims and liabilities are attributable to the gross negligence or willful misconduct of the Person seeking their recovery.  If any goods related to a Receivable are repossessed, the Seller agrees to resell, or to have the Originators or another Affiliate resell, such goods in a commercially reasonable manner for the account of the Agent and remit, or have remitted, to the Agent the Purchasers’ share in the gross sale proceeds thereof net of any out-of-pocket expenses and any equity of redemption of the Obligor thereon.  Any such moneys collected by the Seller or the Originators or other Affiliate of the Seller pursuant to this Section 3.8 shall be segregated and held in trust for the Agent and remitted to the Agent’s Account within one Business Day of receipt as part of the Sold Interest in Collections for application as provided herein.   Section 3.9.           Indemnities by the Collection Agent.  Without limiting any other rights any Person may have hereunder or under applicable law, the Collection Agent hereby indemnifies and holds harmless the Seller, the Agent and each Purchaser and their respective officers, directors, agents and employees (each a “Collection Agent Indemnified Party”) from and against any and all damages, losses, claims, liabilities, penalties, Taxes, costs and expenses (including attorneys’ fees and court costs) (all of the foregoing collectively, the “Collection Agent Indemnified Losses”) at any time imposed on or incurred by any Collection Agent Indemnified Party to the extent arising out of or otherwise relating to:   (i)            any representation or warranty made by the Collection Agent in this Agreement or any Periodic Report or any other information or report delivered by the Collection Agent pursuant hereto, which shall have been false or incorrect in any material respect when made;   (ii)           the failure by the Collection Agent to comply with any applicable law, rule or regulation related to any Receivable or the Related Security;   (iii)          any loss of a perfected security interest (or in the priority of such security interest) as a result of any commingling by the Collection Agent of funds to which the Agent or any Purchaser is entitled hereunder with any other funds;   (iv)          the imposition of any Lien with respect to any Receivable, Related Security or Lock-Box Account as a result of any action taken by the Collection Agent under any Transaction Documents; or   (v)           any failure of the Collection Agent to perform its duties or obligations in accordance with the provisions of this Agreement (including, without limitation, compliance with the Credit and Collection Policy) or any other Transaction Document to which the Collection Agent is a party;   whether arising by reason of the acts to be performed by the Collection Agent hereunder or otherwise, excluding only Collection Agent Indemnified Losses to the extent (a) a final judgment of a court of competent jurisdiction determined that such Collection Agent Indemnified Losses resulted solely from gross negligence or willful misconduct of the Collection Agent Indemnified Party seeking indemnification, (b) solely due to the credit risk of the Obligor and for which reimbursement would constitute recourse to the Collection Agent for uncollectible Receivables, or (c) such Collection Agent Indemnified Losses include Taxes on, or measured by, the overall net income of the Agent or any Purchaser computed in accordance with the Intended Tax Characterization; provided, however, that nothing contained in this sentence shall limit the liability of the Collection Agent or limit the recourse of the Agent and each Purchaser to the Collection Agent for any amounts otherwise specifically provided to be paid by the Collection Agent hereunder.   Section 3.10.        Currency Conversion. The Collection Agent shall remit all Collections on Receivables that are not denominated in US Dollars in US Dollars converted at the applicable Exchange Rate. Each Exchange Rate notified by the Collection Agent to the Agent in a Periodic Report will be determined by the Collection Agent in good faith.   Article IV   Representations and Warranties   Section 4.1.           Representations and Warranties.  The Seller represents and warrants to the Agent and each Purchaser as of the Closing Date, the date of each Incremental Purchase, and (except for the representations and warranties set forth in Section 4.1(g) and (h)) the date of each Reinvestment Purchase, that:   (a)           Corporate Existence and Power.  Each of the Seller and each Seller Entity is an exempted company or corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all corporate power and authority and all governmental licenses, authorizations, consents and approvals required to carry on its business in each jurisdiction in which its business is now conducted, except where failure to obtain such license, authorization, consent or approval would not have a material adverse effect on (i) its ability to perform its obligations under, or the enforceability of, any Transaction Document, (ii) the business or financial condition of the Parent and its Subsidiaries, taken as a whole, (iii) the interests of the Agent or any Purchaser under any Transaction Document or (iv) the enforceability or collectibility of a material portion of the Receivables.   (b)           Corporate Authorization and No Contravention.  The execution, delivery and performance by each of the Seller and each Seller Entity of each Transaction Document to which it is a party and the creation of all security interests provided for herein and therein (i) are within its powers, (ii) have been duly authorized by all necessary action, (iii) do not contravene or constitute a default under (A) any applicable law, rule or regulation, (B) its or any other Seller Entity’s memorandum and articles of association or charter or by-laws or (C) any agreement, order or other instrument to which it or any other Seller Entity is a party or its property is subject and (iv) will not result in any Adverse Claim on any Receivable other than pursuant to the Transaction Documents, the Related Security or Collection or give cause for the acceleration of any indebtedness of the Seller or any other Seller Entity.   (c)           No Consent Required.  No approval, authorization or other action by, or filings with, any Governmental Authority or other Person is required in connection with the execution, delivery and performance by the Seller or any Seller Entity of any Transaction Document to which it is a party or any transaction contemplated thereby.   (d)           Binding Effect.  Each Transaction Document to which the Seller or any Seller Entity is a party constitutes the legal, valid and binding obligation of such Person enforceable against that Person in accordance with its terms, except as limited by bankruptcy, insolvency, or other similar laws of general application relating to or affecting the enforcement of creditors’ rights generally and subject to general principles of equity.   (e)           Perfection of Ownership Interest.  The Cayman Islands is not a jurisdiction whose law generally requires information concerning the existence of a non-possessory security interest in the Receivables, Collections or Related Security to be made generally available in a filing, recording or registration system as a condition or result of the security interest’s obtaining priority over the rights of a lien creditor with respect thereto.  Immediately preceding its sale of Receivables to the Seller, an Originator was the owner of, had good title to, and effectively sold, such Receivables to the Seller, free and clear of any Adverse Claim.  The Seller owns and has good title to the Receivables free of any Adverse Claim other than the interests of the Purchasers (through the Agent) therein that are created hereby, and each Purchaser shall at all times have a valid and continuing undivided percentage ownership interest, which shall be a first priority perfected security interest for purposes of Article 9 of the applicable Uniform Commercial Code enforceable as such against creditors of and purchasers from the Seller, in the Receivables and Collections to the extent of its Purchase Interest then in effect.  Other than the ownership or security interest granted to the Agent pursuant to this Agreement, the Seller has not pledged, assigned, sold or granted a security interest in, or otherwise conveyed, the Receivables or the Collections.  The Seller has not authorized the filing of and is not aware of any financing statements against the Seller that include a description of collateral covering the Receivables or the Collections other than any financing statement relating to the security interest granted to the Agent hereunder.  The Seller has caused or will have caused, within ten days after the date hereof, the filing of all appropriate financing statements in the proper filing office in the appropriate jurisdictions under the applicable law in order to perfect the conveyance of Receivables by Seller hereunder.   (f)            Accuracy of Information.  The information furnished by the Seller, any Seller Entity or any Affiliate of any such Person to the Agent or any Purchaser in connection with any Transaction Document, or any transaction contemplated thereby, taken as a whole, is true and accurate in all material respects (and is not incomplete by omitting any information necessary to prevent such information from being materially misleading), provided that, with respect to projected financial information, Seller represents only that such information was prepared in good faith, subject to any express qualifications set forth in such projections, based upon assumptions believed to be reasonable at the time.   (g)           No Actions, Suits.  Except for such proceedings as are described in the Initial Collection Agent’s most recent Quarterly Report on Form 10–Q filed with the Securities Exchange Commission,there are no actions, suits or other proceedings (including matters relating to environmental liability) pending or threatened against or affecting the Seller, any Seller Entity or any Subsidiary, or any of their respective properties, that (i) have a reasonable likelihood of an adverse outcome and, if adversely determined (individually or in the aggregate), can reasonably be expected to have a material adverse effect on the financial condition of the Seller or the Parent and its Subsidiaries, taken as a whole, or on the collectibility of a material portion of the Receivables or (ii) involve any Transaction Document or any transaction contemplated thereby.  None of the Seller, any Seller Entity or any Subsidiary is in default of any contractual obligation or in violation of any order, rule or regulation of any Governmental Authority, which default or violation is reasonably likely to have a material adverse effect upon (i) the financial condition of the Seller, the Seller Entities and the Subsidiaries taken as a whole or (ii) the collectibility of a material portion of the Receivables.   (h)           No Material Adverse Change.  Except as described in the Parent’s Quarterly Reports on Form 10–Q for the fiscal quarters ended March 31, 2001 and June 30, 2001, there has been no material adverse change since December 31, 2000 in the collectibility of a material portion of the Receivables or the (i) financial condition, business, operations or prospects of the Seller or of the Parent and its Subsidiaries, taken as a whole, or (ii) ability of the Seller or any Seller Entity to perform its obligations under any Transaction Document.   (i)            Accuracy of Exhibits; Lock-Box Arrangements.  All information on Exhibits D-F (listing offices and names of the Seller and the Originators and where they maintain Records; the Subsidiaries; and Lock Boxes) is true and complete in all material respects, subject to any changes permitted by, and notified to the Agent in accordance with, Article V.  None of the Seller's or Originators’ locations (including without limitation their respective chief executive offices and principal places of business) has changed within the past 12 months (or such shorter period as the Seller has been in existence).  During the past 12 months, neither the Seller nor any Originator has used any corporate, fictitious or trade name other than a name set forth of Exhibit D.  Exhibit D lists the federal employer identification numbers of the Seller and the Originators.  The Seller has delivered a copy of all Lock-Box Agreements (or, with respect to Collections on the Receivables originated by the Canadian Originators, will deliver (or has delivered) such Lock-Box Agreements within 60 days after the date of this Agreement) to the Agent.  The Seller has not granted any interest in any Lock-Box or Lock-Box Account to any Person other than the Agent and, upon delivery to a Lock-Box Bank of the related Lock-Box Letter, the Agent will have exclusive ownership and control of the Lock-Box Account at such Lock-Box Bank.   (j)            Sales by the Originators.  Each sale by the Originators to the Seller of an interest in Receivables and their Collections has been made in accordance with the terms of the Purchase Agreement, including the payment by the Seller to the Originators of the purchase price described in the Purchase Agreement.  Each such sale has been made for “reasonably equivalent value” (as such term is used in Section 548 of the Bankruptcy Code) and not for or on account of “antecedent debt” (as such term is used in Section 547 of the Bankruptcy Code) owed by the Originators to the Seller.   (k)           Eligible Receivables.  Each Receivable listed on the Periodic Report as part of the Eligible Receivables Balance was an Eligible Receivable as of the date of such Periodic Report.   (l)            Location of Receivables.  The contracts relating to any Receivable are not governed by the laws of the Cayman Islands. None of the Receivables are located in the Cayman Islands within the meaning of Cayman Islands law.   Article V   Covenants   Section 5.1.           Covenants of the Seller.  The Seller hereby covenants and agrees to comply with the following covenants and agreements, unless the Agent (with the consent of the Instructing Group) shall otherwise consent:   (a)           Financial Reporting.  The Seller will maintain a system of accounting established and administered in accordance with GAAP and will furnish to the Agent and each Purchaser:   (i)            Annual Financial Statements.  Within 90 days after each fiscal year of (A) the Parent, a copy of Parent’s annual audited financial statements (including a consolidated balance sheet, consolidated statement of income and retained earnings and statement of cash flows, with related footnotes) certified by PriceWaterhouseCoopers or other independent certified public accountants of national standing and prepared on a consolidated basis in conformity with GAAP, and (B) each of the Seller and the Originators (other than the Parent) the balance sheet for such Person (and, additionally for the Seller, an annual profit and loss statement) certified by a Designated Financial Officer thereof, in each case prepared on a consolidated basis in conformity with GAAP as of the close of such fiscal year for the fiscal year then ended;   (ii)           Quarterly Financial Statements.  Within 45 days after each (except the last) fiscal quarter of each fiscal year of (A) the Parent, copies of its unaudited financial statements (including at least a consolidated balance sheet as of the close of such quarter and statements of income, retained earnings and cash flows for the period from the beginning of the fiscal year to the close of such quarter) certified by a Designated Financial Officer and prepared in a manner consistent with the financial statements described in part (A) of clause (i) of this Section 5.l(a) and (B) each of the Seller and the Originators (other than a Parent), the quarterly balance sheet as of the end of such quarter for such Person (and, additionally for the Seller, a profit and loss statement) for the period from the beginning of such fiscal year to the close of such quarter, in each case certified by a Designated Financial Officer thereof and prepared in a manner consistent with part (B) of clause (i) of Section 5.1(a);   (iii)          Officer’s Certificate.  Each time financial statements are furnished pursuant to clause (i) or (ii) of this Section 5.1(a), a compliance certificate (in substantially the form of Exhibit G) signed by a Designated Financial Officer, dated the date of such financial statements;   (iv)          Public Reports.  Promptly upon becoming available, a copy of each report or proxy statement filed by the Parent with the Securities Exchange Commission or any securities exchange; and   (v)           Other Information.  With reasonable promptness, such other information (including non-financial information) as may be reasonably requested by the Agent or any Purchaser (with a copy of such request to the Agent).   (b)           Notices.  Promptly upon a Financial Officer (as defined in the Credit Agreement) or other executive officer of Seller or any Seller Entity becoming aware of any of the following the Seller will notify the Agent and provide a description of:   (i)            Potential Termination Events.  The occurrence of any Potential Termination Event;   (ii)           Representations and Warranties.  The failure of any representation or warranty herein to be true (when made or at any time thereafter) in any material respect;   (iii)          Downgrading.  The downgrading, withdrawal or suspension of any rating by any rating agency of any indebtedness of any Seller Entity;   (iv)          Litigation.  The institution of any litigation, arbitration proceeding or governmental proceeding reasonably likely to be material to any Seller Entity or the collectibility or quality of a material portion of the Receivables;   (v)           Judgments.  The entry of any judgment, award or decree against any Seller Entity if the aggregate amount of all unsatisfied and unstayed judgments then outstanding against the Seller, the Seller Entities and the Subsidiaries exceeds $10,000,000or the entry of a judgment, award or decree against the Seller that exceeds $10,775; or   (vi)          Changes in Business.  Any change in the character of any Seller Entity’s business that is reasonably expected to impair the collectibility or quality of any material portion of the Receivables.   If the Agent receives such a notice, the Agent shall promptly give notice thereof to each Purchaser.   (c)           Conduct of Business.  The Seller will perform all actions necessary to remain duly incorporated, validly existing and in good standing in its jurisdiction of incorporation and to maintain all requisite authority to conduct its business in each jurisdiction in which it conducts business.   (d)           Compliance with Laws.  The Seller will comply with all laws, regulations, judgments and other directions or orders imposed by any Governmental Authority to which such Person or any Receivable, any Related Security or Collection may be subject, except to the extent non-compliance will have a material adverse effect on (i) the collectibility of the Receivables, or (ii) the financial condition, business or operations of Parent and its Subsidiaries, taken as a whole.   (e)           Furnishing Information and Inspection of Records.  The Seller will furnish to the Agent and the Purchasers such information concerning the Receivables and the Related Security as the Agent or a Purchaser may reasonably request.  The Seller will, and will cause the Originators to, permit, at any time during regular business hours, upon reasonable advance notice, the Agent or any Purchaser (or any representatives thereof) (i) to examine and make copies of all Records, (ii) to visit the offices and properties of the Seller and the Originators for the purpose of examining the Records and (iii) to discuss matters relating hereto with any of the Seller’s or the Originators’ officers, directors, employees or independent public accountants having knowledge of such matters.  Once during each calendar year in connection with any proposed extension of the Liquidity Termination Date or at any time after the occurrence and during the continuation of a Termination Event or a Potential Termination Event relating to a Termination Event described in clause (f) of the definition thereof, the Agent may (at the expense of the Seller) have an independent public accounting firm conduct an audit of the Records or make test verifications of the Receivables and Collections (it being understood that the Agent has already conducted such audit for calendar year 2001).   (f)            Keeping Records.  (i) The Seller will, and will cause the Originators to, have and maintain (A) administrative and operating procedures (including an ability to recreate Records if originals are destroyed), (B) adequate facilities, personnel and equipment and (C) all Records and other information necessary or advisable for collecting the Receivables (including Records adequate to permit the immediate identification of each new Receivable and all Collections of, and adjustments to, each existing Receivable).  The Seller will give the Agent prior notice of any material change in such administrative and operating procedures.   (ii)  The Seller will, (A) at all times from and after the date hereof, clearly and conspicuously mark its computer and master data processing books and records with a legend describing the Agent’s and the Purchasers’ interest in the Receivables and the Collections and (B) upon the request of the Agent after a Termination Event, so mark each contract relating to a Receivable and deliver to the Agent all such contracts (including all multiple originals of such contracts), with any appropriate endorsement or assignment, or segregate (from all other receivables then owned or being serviced by the Seller) the Receivables and all contracts relating to each Receivable and hold in trust and safely keep such contracts so legended in separate filing cabinets or other suitable containers at such locations as the Agent may specify.   (g)           Perfection.  (i) The Seller will, and will cause each Originator to, at its expense, promptly execute and deliver all instruments and documents and take all action necessary or reasonably requested by the Agent (including the execution and filing of financing or continuation statements, amendments thereto or assignments thereof) to enable the Agent to exercise and enforce all its rights hereunder and to vest and maintain vested in the Agent a valid, first priority perfected security interest in the Receivables, the Collections, the Related Security, the Purchase Agreement, the Lock-Box Accounts and proceeds thereof free and clear of any Adverse Claim (other than the Seller’s interest therein) (and a perfected ownership interest in the Receivables and Collections to the extent of the Sold Interest).  The Agent will be permitted to sign and file any continuation statements, amendments thereto and assignments thereof without the Seller’s signature.   (ii)  The Seller will, and will cause each Originator to, only change its name, identity structure or relocate its jurisdiction of organization or chief executive office or the Records following thirty (30) days advance written notice to the Agent and the delivery to the Agent of all financing statements, instruments and other documents (including direction letters) reasonably requested by the Agent.   (iii)  Each of the Seller and each Originator (other than the Canadian Originators) will at all times maintain its chief executive offices and each Originator will maintain its jurisdiction of organization within a jurisdiction in the USA in which Article 9 of the UCC is in effect.  The Canadian Originators will maintain their jurisdictions of organization and chief executive offices in the Province of Canada in which they are currently located.  If the Seller or any Originator moves its chief executive office to a location that imposes Taxes, fees or other charges to perfect the Agent’s and the Purchasers’ interests hereunder or the Seller’s interests under the Purchase Agreement, the Seller will pay all such amounts and any other costs and expenses incurred in order to maintain the enforceability of the Transaction Documents, the Sold Interest and the interests of the Agent and the Purchasers in the Receivables, the Related Security, Collections, Purchase Agreement and Lock-Box Accounts.   (h)           Performance of Duties.  The Seller will perform its respective duties or obligations in accordance with the provisions of each of the Transaction Documents.  The Seller (at its expense) will (i) fully and timely perform in all material respects all agreements required to be observed by it in connection with each Receivable, (ii) comply in all material respects with the Credit and Collection Policy, and (iii) refrain from any action that may materially impair the rights of the Agent or the Purchasers in the Receivables, the Related Security, Collections, Purchase Agreement or Lock-Box Accounts.   (i)            Payments on Receivables, Accounts.  The Seller will at all times instruct all Obligors to deliver payments on the Receivables (including Deemed Collections) to a Lock-Box or Lock-Box Account.  The provisions of the previous sentence shall only apply to payments on Receivables originated by the Canadian Originators on and after the 61st day following the date of this Agreement.  If any such payments or other Collections are received by the Seller or any Originator, it shall hold such payments in trust for the benefit of the Agent and the Purchasers and promptly (but in any event within two Business Days after receipt) remit such funds into a Lock-Box Account.  The Seller will cause each Lock-Box Bank to comply with the terms of each applicable Lock-Box Letter.  The Seller will not permit the funds of any Affiliate to be deposited into any Lock-Box Account.  If such funds are nevertheless deposited into any Lock-Box Account, the Seller will promptly identify and separate such funds for segregation.  The Seller will not commingle Collections or other funds to which the Agent or any Purchaser is entitled with any other funds.  The Seller shall only add, and shall only permit the Originators to add, a Lock-Box Bank, Lock-Box, or Lock-Box Account to those listed on Exhibit E if the Agent has received notice of and has consented to such addition, a copy of any new Lock-Box Agreement and an executed and acknowledged copy of a Lock-Box Letter substantially in the form of Exhibit F (with such changes as are acceptable to the Agent) from any new Lock-Box Bank.  The Seller shall only terminate a Lock-Box Bank or Lock-Box, or close a Lock-Box Account, upon 30 days advance notice to the Agent.   (j)            Sales and Adverse Claims Relating to Receivables.  Except as otherwise provided herein, the Seller will not (by operation of law or otherwise) dispose of or otherwise transfer, or create or suffer to exist any Adverse Claim upon, any Receivable or any proceeds thereof.   (k)           Extension or Amendment of Receivables.  Except as otherwise permitted in Section 3.2(b) and then subject to Section 1.5, the Seller will not extend, amend, rescind or cancel any Receivable.   (l)            Change in Business or Credit and Collection Policy.  The Seller will not make any material change in the character of its business and will not make any material adverse change to the Credit and Collection Policy.   (m)          Certain Agreements.  The Seller will not amend, modify, waive, revoke or terminate any Transaction Document to which it is a party or Section 3 of the Seller’s memorandum of association or Section 86 or Section 95(b) of the Seller’s Articles of Association.   (n)           Other Business.  The Seller will not:  (i) engage in any business other than the transactions contemplated by the Transaction Documents, (ii) create, incur or permit to exist any Debt of any kind (or cause or permit to be issued for its account any letters of credit or bankers’ acceptances) other than pursuant to this Agreement or the Note, or (iii) form any Subsidiary or make any investments in any other Person; provided, however, that the Seller shall be permitted to incur minimal obligations to the extent necessary for the day-to-day operations of the Seller (such as expenses for stationery, audits, maintenance of legal status, etc.).   (o)           Nonconsolidation.  The Seller will operate in such a manner that the separate corporate existence of the Seller and each Seller Entity and Affiliate thereof would not be disregarded in the event of the bankruptcy or insolvency of any Seller Entity and Affiliate thereof and, without limiting the generality of the foregoing:   (i)            the Seller will not engage in any activity other than those activities expressly permitted under the Seller’s organizational documents and the Transaction Documents, nor will the Seller enter into any agreement other than this Agreement, the other Transaction Documents to which it is a party and, with the prior written consent of the Agent, any other agreement necessary to carry out more effectively the provisions and purposes hereof or thereof;   (ii)           the Seller will maintain a business office separate from that of each of the Seller Entities and the Affiliates thereof (which office may be located within the physical premises of the Parent pursuant to an arms’ length agreement);   (iii)          the Seller will cause the financial statements and books and records of the Seller to reflect the separate corporate existence of the Seller;   (iv)          the Seller will not, except as otherwise expressly permitted hereunder, under the other Transaction Documents and under the Seller’s organizational documents, authorize any Seller Entity or Affiliate thereof to (A) pay the Seller’s expenses, (B) guarantee the Seller’s obligations, or (C) advance funds to the Seller for the payment of expenses or otherwise except that Parent may make contributions to the capital of Seller; and   (v)           the Seller will not act as agent for any Seller Entity or Affiliate, but instead will present itself to the public as a corporation separate from each such Person and independently engaged in the business of purchasing and financing Receivables.   (p)           Mergers, Consolidations and Acquisitions.  The Seller will not merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or purchase, lease or otherwise acquire (in one transaction or a series of transactions) all or substantially all of the assets of any other Person (whether directly by purchase, lease or other acquisition of all or substantially all of the assets of such Person or indirectly by purchase or other acquisition of all or substantially all of the capital stock of such other Person) other than the acquisition of the Receivables and Related Security pursuant to the Purchase Agreement.   Article VI   Indemnification   Section 6.1.           Indemnities by the Seller.  Without limiting any other rights any Person may have hereunder or under applicable law, the Seller hereby indemnifies and holds harmless, on an after-Tax basis, the Agent and each Purchaser and their respective officers, directors, agents and employees (each an “Indemnified Party”) from and against any and all damages, losses, claims, liabilities, penalties, Taxes, costs and expenses (including attorneys’ fees and court costs) (all of the foregoing collectively, the “Indemnified Losses”) at any time imposed on or incurred by any Indemnified Party arising out of or otherwise relating to any Transaction Document, the transactions contemplated thereby or any action taken or omitted by any of the Indemnified Parties (including any action taken by the Agent as attorney-in-fact for the Seller pursuant to Section 3.5(b)), whether arising by reason of the acts to be performed by the Seller hereunder or otherwise, excluding only Indemnified Losses to the extent (a) a final judgment of a court of competent jurisdiction holds such Indemnified Losses resulted from gross negligence or willful misconduct of the Indemnified Party seeking indemnification, (b) due to the credit risk of the Obligor and for which reimbursement would constitute recourse to the Seller or the Collection Agent for uncollectible Receivables, (c) such Indemnified Losses include Taxes on, or measured by, the overall net income of the Agent or any Purchaser computed in accordance with the Intended Tax Characterization or (d) such Taxes include Taxes imposed in any jurisdiction other than the United States, Canada or the Cayman Islands by reason of the organization of the Agent or any Purchaser (or any of their Affiliates) in such jurisdiction, the location of assets of the Agent or any Purchaser (or any of their Affiliates) in such jurisdiction, or the conduct of activities by the Agent or any Purchaser (or any of their Affiliates) in such jurisdiction.  Without limiting the foregoing indemnification, but subject to the limitations set forth in clauses (a), (b), (c) and (d) of the previous sentence, the Seller shall indemnify each Indemnified Party for Indemnified Losses relating to or resulting from:   (i)            any representation or warranty made by the Seller (or any employee or agent of the Seller) under or in connection with this Agreement, any Periodic Report or any other information or report delivered by the Seller, any Seller Entity or the Collection Agent pursuant hereto, which shall have been false or incorrect in any material respect when made or deemed made;   (ii)           the failure by the Seller to comply with any applicable law, rule or regulation related to any Receivable, or the nonconformity of any Receivable with any such applicable law, rule or regulation or the failure by the Seller to satisfy any of its obligations under any Transaction Document;   (iii)          the failure of the Seller to vest and maintain vested in the Agent, for the benefit of the Purchasers, a perfected ownership or security interest in the Sold Interest and the property conveyed pursuant to Section 1.1 and Section 1.8, free and clear of any Adverse Claim;   (iv)          any commingling of funds to which the Agent or any Purchaser is entitled hereunder with any other funds;   (v)           any failure of a Lock-Box Bank to comply with the terms of the applicable Lock-Box Letter;   (vi)          any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Receivable, or any other claim resulting from the sale or lease of goods or the rendering of services related to such Receivable or the furnishing or failure to furnish any such goods or services or other similar claim or defense not arising from the financial inability of any Obligor to pay undisputed indebtedness;   (vii)         any failure of the Seller to perform its duties or obligations in accordance with the provisions of this Agreement or any other Transaction Document to which it is a party;   (viii)        any action taken by the Agent  as attorney-in-fact for the Seller pursuant to Section 3.5(b); or   (ix)           any environmental liability claim, products liability claim or personal injury or property damage suit or other similar or related claim or action of whatever sort, arising out of or in connection with any Receivable or any other suit, claim or action of whatever sort relating to any of the Transaction Documents.   Section 6.2.           Increased Cost and Reduced Return.  If the adoption after the date hereof of any applicable law, rule or regulation, or any change therein after the date hereof, or any change after the date hereof in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof, or compliance by any Amsterdam Funding Source, the Agent or any Purchaser (collectively, the “Funding Parties”) with any request or directive (whether or not having the force of law) issued after the date hereof of any such Governmental Authority (a “Regulatory Change”) (a) subjects any Funding Party to any additional charge or withholding on or in connection with the Transfer Agreement or this Agreement (collectively, the “Funding Documents”) or any Receivable, (b) changes the basis of taxation of payments to any of the Funding Parties of any amounts payable under any of the Funding Documents, other than (i) any Taxes referred to in Section 6.4 or (ii) any Taxes imposed on or measured by the net income of the Funding Party, (c) imposes, modifies or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of, or any credit extended by, any of the Funding Parties, (d) has the effect of reducing the rate of return on such Funding Party’s capital to a level below that which such Funding Party could have achieved but for such adoption, change or compliance (taking into consideration such Funding Party’s policies concerning capital adequacy) or (e) imposes any other condition, and the result of any of the foregoing is (x) to impose a cost on, or increase the cost to, any Funding Party of its commitment under any Funding Document or of purchasing, maintaining or funding any interest acquired under any Funding Document, (y) to reduce the amount of any sum received or receivable by, or to reduce the rate of return of, any Funding Party under any Funding Document or (z) to require any payment calculated by reference to the amount of interests held or amounts received by it hereunder, then, upon demand by the Agent, the Seller shall pay to the Agent for the account of the Person such additional amounts as will compensate the Agent or such Purchaser (or, in the case of Amsterdam, will enable Amsterdam to compensate any Amsterdam Funding Source) for such increased cost or reduction.  Notwithstanding the foregoing, no Person shall be entitled to receive any amount under this Section to the extent that such amount relates to an increased cost or reduction incurred for a date that is more than 180 days prior to the date that the Seller first receives notice thereof, provided, that if such increased cost or reduction is imposed retroactively, such 180-day period shall be extended to include the period of the retroactive effect thereof.   Section 6.3.           Other Costs and Expenses.  The Seller shall pay to the Agent on demand all reasonable costs and expenses in connection with (a) the preparation, execution, delivery and administration (including amendments of any provision) of the Transaction Documents, (b) the sale of the Sold Interest, (c) the perfection of the Agent’s rights in the Receivables and Collections, (d) the enforcement by the Agent or the Purchasers of the obligations of the Seller under the Transaction Documents or of any Obligor under a Receivable and (e) the maintenance by the Agent of the Lock-Boxes and Lock-Box Accounts, including fees, costs and expenses of legal counsel for the Agent relating to any of the foregoing or, after the occurrence of a Termination Event, to advising the Agent and any Purchaser about its rights and remedies under any Transaction Document and all costs and expenses (including counsel fees and expenses) of the Agent and each Purchaser in connection with the enforcement of the Transaction Documents and in connection with the administration of the Transaction Documents following a Termination Event.  The Seller shall reimburse the Agent and Amsterdam for the cost of the Agent’s or Amsterdam’s auditors (which may be employees of such Person) auditing the books, records and procedures of the Seller.  Except as limited above, the Seller shall reimburse Amsterdam on demand for all other costs and expenses incurred by Amsterdam to the extent attributable to implementing the Transaction Documents or the transactions contemplated thereby, including the cost of the Rating Agencies confirming that the execution, delivery, and performance of the Transaction Documents will not adversely affect the Ratings.   Section 6.4.           Withholding Taxes.  (a) All payments made by the Seller hereunder shall be made without withholding for or on account of any present or future taxes (other than overall net income taxes on the recipient) imposed by the United States, Canada or the Cayman Islands or any political subdivision or taxing authority thereof.  If any such withholding is so required, the Seller shall make the withholding, pay the amount withheld to the appropriate authority before penalties attach thereto or interest accrues thereon and pay such additional amount as may be necessary to ensure that the net amount actually received by each Purchaser and the Agent free and clear of such taxes (including such taxes on such additional amount) is equal to the amount that Purchaser or the Agent (as the case may be) would have received had such withholding not been made; provided, however, that no such additional amounts shall be payable in respect of (i) any Taxes imposed on the net income of the Agent or Purchaser or franchise taxes imposed on the Agent or Purchaser by the jurisdiction under which the laws of which the Agent or Purchaser is organized or has its principal place of business or where it purchased its Purchase Interest or (ii) any Taxes imposed by reason of the Agent’s or Purchaser’s failure to comply with the provisions of Section 6.4(b).  If the Seller pays any such taxes, penalties or interest, it shall deliver official tax receipts evidencing that payment or certified copies thereof to the Purchaser or Agent on whose account such withholding was made (with a copy to the Agent if not the recipient of the original) promptly after the Seller’s receipt thereof.   (b)           (i) Before the first date on which any amount is payable hereunder for the account of any Purchaser not incorporated under the laws of the USA such Purchaser shall deliver to the Seller and the Agent each two (2) duly executed and completed originals of United States Internal Revenue Service Form W-8BEN or W-8ECI  (or successor applicable form) certifying that such Purchaser is entitled to receive payments hereunder without deduction or withholding of any United States federal income taxes.  Each such Purchaser shall replace or update such forms when necessary to maintain any applicable exemption and as requested by the Agent or the Seller.  Before the first date on which any amount is payable hereunder for the account of any Purchaser incorporated under the laws of the USA such Purchaser shall deliver to the Seller and the Agent each two (2) duly executed and completed originals of United States Internal Revenue Service Form W-9 (or successor applicable form) certifying that such Purchaser is entitled to receive payments hereunder without deduction or withholding of any United States federal income taxes.  Each such Purchaser shall replace or update such forms when necessary to maintain any applicable exemption and as requested by the Agent or the Seller.   (ii)           The Purchaser agrees to comply, before the first date on which any amount is payable hereunder, with any certification, identification, documentation, reporting or other similar requirement if such compliance is required by law, regulation, administrative practice or an applicable treaty as a precondition to exemption from, or reduction in the rate of, deduction or withholding of any taxes for which the Seller is required to pay additional amounts pursuant to Section 6.4(a) hereof.   Section 6.5.           Payments and Allocations.  If any Person seeks compensation pursuant to this Article VI, such Person shall deliver to the Seller and the Agent a certificate setting forth the amount due to such Person, a description of the circumstance giving rise thereto and the basis of the calculations of such amount.  Absent error, the Seller shall pay to the Agent (for the account of such Person) the amount shown as due on any such certificate within 10 Business Days after receipt of the notice.   Article VII   Conditions Precedent   Section 7.1.           Conditions to Closing.  This Agreement shall become effective on the first date all conditions in this Section 7.1 are satisfied.  On or before such date, the Seller shall deliver to the Agent the following documents in form, substance and quantity acceptable to the Agent:   (a)           A certificate of the Secretary of each of the Seller and each Seller Entity certifying (i) the resolutions of the Seller’s and each Seller Entity’s board of directors approving each Transaction Document to which it is a party, (ii) the name, signature, and authority of each officer who executes on the Seller’s or any Seller Entity’s behalf a Transaction Document (on which certificate the Agent and each Purchaser may conclusively rely until a revised certificate is received), (iii) the Seller’s certificate of incorporation, certified by the Registrar of Companies of the Cayman Islands, and each Seller Entity’s certificate or articles of incorporation, certified by the Secretary of State of its state of incorporation, (iv) a copy of the Seller’s memorandum and articles of association and of each Seller Entity’s by-laws and (v) good standing certificates issued by the Secretaries of State of each jurisdiction where the Seller or any Seller Entity has material operations.   (b)           All instruments and other documents required, or deemed desirable by the Agent, to perfect the Agent’s first priority interest in the Receivables, Collections, the Purchase Agreement and the Lock-Box Accounts in all appropriate jurisdictions.   (c)           UCC search reports (and equivalent reports for the Canadian Originators) from all jurisdictions the Agent requests.   (d)           Executed copies of (i) all consents and authorizations necessary in connection with the Transaction Documents (ii) all Lock-Box Letters (other than Lock-Box Letters relating to the Receivables of the Canadian Originators, which shall be delivered within 60 days after the date of this Agreement), (iii) a compliance certificate in the form of Exhibit G covering the period ending August 31, 2001, (iv) a Periodic Report covering the Settlement Period ended August 31, 2001 and (v) each Transaction Document.   (e)           Favorable opinions of counsel to the Seller and each Seller Entity covering such matters as Amsterdam or the Agent may request.   (f)            Such other approvals, opinions or documents as the Agent or Amsterdam may request.   (g)           All legal matters related to the Purchase are satisfactory to the Purchasers.   Section 7.2.           Conditions to Each Purchase.  The obligation of each Committed Purchaser to make any Purchase, and the right of the Seller to request or accept any Purchase, are subject to the conditions (and each Purchase shall evidence the Seller’s representation and warranty that clauses (a)-(d) of this Section 7.2 have been satisfied) that on the date of such Purchase before and after giving effect to the Purchase:   (a)           no representation or warranty set forth in Article IV hereof (other than, in the case of any Reinvestment Purchase, a representation or warranty set forth in Section 4.1(g) or (h) hereof) shall be incorrect in any material respect;   (b)           in the case of an Incremental Purchase, no Potential Termination Event shall then exist or shall occur as a result of the Purchase;   (c)           the Liquidity Termination Date has not occurred; and   (d)           after giving effect to the application of the proceeds of such Purchase, (x) the outstanding Matured Aggregate Investment would not exceed the Aggregate Commitment and (y) the outstanding Aggregate Investment would not exceed the Purchase Limit.   Nothing in this Section 7.2 limits the obligations of each Committed Purchaser to Amsterdam (including the Transfer Agreement).   Article VIII   The Agent   Section 8.1.           Appointment and Authorization. Each Purchaser hereby irrevocably designates and appoints ABN AMRO Bank N.V. as the “Agent” under the Transaction Documents and authorizes the Agent to take such actions and to exercise such powers as are delegated to the Agent thereby and to exercise such other powers as are reasonably incidental thereto.  The Agent shall hold, in its name, for the benefit of each Purchaser, the Purchase Interest of the Purchaser.  The Agent shall not have any duties other than those expressly set forth in the Transaction Documents or any fiduciary relationship with any Purchaser, and no implied obligations or liabilities shall be read into any Transaction Document, or otherwise exist, against the Agent.  The Agent does not assume, nor shall it be deemed to have assumed, any obligation to, or relationship of trust or agency with, the Seller.  Notwithstanding any provision of this Agreement or any other Transaction Document, in no event shall the Agent ever be required to take any action which exposes the Agent to personal liability or which is contrary to the provision of any Transaction Document or applicable law.   Section 8.2.           Delegation of Duties.  The Agent may execute any of its duties through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties.  The Agent shall not be responsible to any Purchaser for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.   Section 8.3.           Exculpatory Provisions.  Neither the Agent nor any of its directors, officers, agents or employees shall be liable to any Purchaser for any action taken or omitted (i) with the consent or at the direction of the Instructing Group or (ii) in the absence of such Person’s gross negligence or willful misconduct.  The Agent shall not be responsible to any Purchaser or other Person for (i) any recitals, representations, warranties or other statements made by the Seller, any Seller Entity or any of their Affiliates, (ii) the value, validity, effectiveness, genuineness, enforceability or sufficiency of any Transaction Document, (iii) any failure of the Seller, any Seller Entity or any of their Affiliates to perform any obligation or (iv) the satisfaction of any condition specified in Article VII.  The Agent shall not have any obligation to any Purchaser to ascertain or inquire about the observance or performance of any agreement contained in any Transaction Document or to inspect the properties, books or records of the Seller, any Seller Entity or any of their Affiliates.   Section 8.4.           Reliance by Agent. As between the Agent and Purchasers, the Agent shall in all cases be entitled to rely, and shall be fully protected in relying, upon any document, other writing or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person and upon advice and statements of legal counsel (including counsel to the Seller), independent accountants and other experts selected by the Agent.  As between the Agent and Purchasers, the Agent shall in all cases be fully justified in failing or refusing to take any action under any Transaction Document unless it shall first receive such advice or concurrence of the Purchasers, and assurance of its indemnification, as it deems appropriate.   Section 8.5.           Assumed Payments.  Unless the Agent shall have received notice from the applicable Purchaser before the date of any Incremental Purchase that such Purchaser will not make available to the Agent the amount it is scheduled to remit as part of such Incremental Purchase, the Agent may assume such Purchaser has made such amount available to the Agent when due (an “Assumed Payment”) and, in reliance upon such assumption, the Agent may (but shall have no obligation to) make available such amount to the appropriate Person.  If and to the extent that any Purchaser shall not have made its Assumed Payment available to the Agent, such Purchaser and the Seller hereby agrees to pay the Agent forthwith on demand such unpaid portion of such Assumed Payment up to the amount of funds actually paid by the Agent, together with interest thereon for each day from the date of such payment by the Agent until the date the requisite amount is repaid to the Agent, at a rate per annum equal to the Federal Funds Rate plus 2%.   Section 8.6.           Notice of Termination Events.  The Agent shall not be deemed to have knowledge or notice of the occurrence of any Potential Termination Event unless the Agent has received notice from any Purchaser or the Seller stating that a Potential Termination Event has occurred hereunder and describing such Potential Termination Event.  The Agent shall take such action concerning a Potential Termination Event as may be directed by the Instructing Group (or, if required for such action, all of the Purchasers), but until the Agent receives such directions, as between the Agent and Purchasers, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, as the Agent deems advisable and in the best interests of the Purchasers. Section 8.7.           Non-Reliance on Agent and Other Purchasers.  Each Purchaser expressly acknowledges that neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Agent hereafter taken, including any review of the affairs of the Seller or any Seller Entity, shall be deemed to constitute any representation or warranty by the Agent.  Each Purchaser represents and warrants to the Agent that, independently and without reliance upon the Agent or any other Purchaser and based on such documents and information as it has deemed appropriate, it has made and will continue to make its own appraisal of and investigation into the business, operations, property, prospects, financial and other conditions and creditworthiness of the Seller, the Seller Entities, and the Receivables and its own decision to enter into this Agreement and to take, or omit, action under any Transaction Document.  The Agent shall deliver each month to any Purchaser that so requests a copy of the Periodic Report(s) received covering the preceding Settlement Period.  Except for items specifically required to be delivered hereunder, the Agent shall not have any duty or responsibility to provide any Purchaser with any information concerning the Seller, any Seller Entity or any of their Affiliates that comes into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates.   Section 8.8.           Agent and Affiliates.  The Agent and its Affiliates may extend credit to, accept deposits from and generally engage in any kind of business with the Seller, any Seller Entity or any of their Affiliates and, in its role as a Committed Purchaser, ABN AMRO may exercise or refrain from exercising its rights and powers as if it were not the Agent.  The parties acknowledge that ABN AMRO acts as agent for Amsterdam and subagent for Amsterdam’s management company in various capacities, as well as providing credit facilities and other support for Amsterdam not contained in the Transaction Documents.   Section 8.9.           Indemnification.  Each Committed Purchaser shall indemnify and hold harmless the Agent and its officers, directors, employees, representatives and agents (to the extent not reimbursed by the Seller or any Seller Entity and without limiting the obligation of the Seller or any Seller Entity to do so), ratably in accordance with its Ratable Share from and against any and all liabilities, obligations, losses, damages, penalties, judgments, settlements, costs, expenses and disbursements of any kind whatsoever (including in connection with any investigative or threatened proceeding, whether or not the Agent or such Person shall be designated a party thereto) that may at any time be imposed on, incurred by or asserted against the Agent or such Person as a result of, or related to, any of the transactions contemplated by the Transaction Documents or the execution, delivery or performance of the Transaction Documents or any other document furnished in connection therewith (but excluding any such liabilities, obligations, losses, damages, penalties, judgments, settlements, costs, expenses or disbursements resulting solely from the gross negligence or willful misconduct of the Agent or such Person as finally determined by a court of competent jurisdiction).   Section 8.10.        Successor Agent.  The Agent may, upon at least five (5) days notice to the Seller and each Purchaser, resign as Agent.  Such resignation shall not become effective until a successor agent is appointed by an Instructing Group and has accepted such appointment.  Upon such acceptance of its appointment as Agent hereunder by a successor Agent, such successor Agent shall succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under the Transaction Documents.  After any retiring Agent’s resignation hereunder, the provisions of Article VI and this Article VIII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Agent.  Prior to the occurrence of a Termination Event, any successor Agent shall be subject to Seller’s reasonable approval.   Article IX   Miscellaneous   Section 9.1.           Termination.  Amsterdam shall cease to be a party hereto when the Amsterdam Termination Date has occurred, Amsterdam holds no Investment and all amounts payable to it hereunder have been indefeasibly paid in full.  This Agreement shall terminate following the Liquidity Termination Date when no Investment is held by a Purchaser and all other amounts payable hereunder have been indefeasibly paid in full, but the rights and remedies of the Agent and each Purchaser under Article VI and Section 8.9 shall survive such termination.   Section 9.2.           Notices.  Unless otherwise specified, all notices and other communications hereunder shall be in writing (including by telecopier or other facsimile communication), given to the appropriate Person at its address or telecopy number set forth on the signature pages hereof or at such other address or telecopy number as such Person may specify, and effective when received at the address specified by such Person.  Each party hereto, however, authorizes the Agent to act on telephone notices of Purchases and Discount Rate and Tranche Period selections from any person the Agent in good faith believes to be acting on behalf of the relevant party and, at the Agent’s option, to tape record any such telephone conversation.  Each party hereto agrees to deliver promptly a confirmation of each telephone notice given or received by such party (signed by an authorized officer of such party), butthe absence of such confirmation shall not affect the validity of the telephone notice.  The number of days for any advance notice required hereunder may be waived (orally or in writing) by the Person receiving such notice.   Section 9.3.           Payments and Computations.  Notwithstanding anything herein to the contrary, any amounts to be paid or transferred by the Seller or the Collection Agent to, or for the benefit of, any Purchaser or any other Person shall be paid or transferred to the Agent (for the benefit of such Purchaser or other Person).  The Agent shall promptly (and, if reasonably practicable, on the day it receives such amounts) forward each such amount to the Person entitled thereto and such Person shall apply the amount in accordance herewith.  All amounts to be paid or deposited hereunder shall be paid or transferred on the day when due in immediately available Dollars (and, if due from the Seller or Collection Agent, by 11:00 a.m. (Chicago time), with amounts received after such time being deemed paid on the Business Day following such receipt).  The Seller hereby authorizes the Agent to debit the Seller Account for application to any amounts owed by the Seller hereunder.  The Seller shall, to the extent permitted by law, pay to the Agent upon demand, for the account of the applicable Person, interest on all amounts not paid or transferred by the Seller or the Collection Agent when due hereunder at a rate equal to the Prime Rate plus 2%, calculated from the date any such amount became due until the date paid in full.  Any payment or other transfer of funds scheduled to be made on a day that is not a Business Day shall be made on the next Business Day, and any Discount Rate or interest rate accruing on such amount to be paid or transferred shall continue to accrue to such next Business Day.  All computations of interest, fees, Discount and Funding Charges shall be calculated for the actual days elapsed based on a 360 day year.   Section 9.4.           Sharing of Recoveries.  Each Purchaser agrees that if it receives any recovery, through set-off, judicial action or otherwise, on any amount payable or recoverable hereunder in a greater proportion than should have been received hereunder or otherwise inconsistent with the provisions hereof, then the recipient of such recovery shall purchase for cash an interest in amounts owing to the other Purchasers (as return of Investment or otherwise), without representation or warranty except for the representation and warranty that such interest is being sold by each such other Purchaser free and clear of any Adverse Claim created or granted by such other Purchaser, in the amount necessary to create proportional participation by the Purchasers in such recovery (as if such recovery were distributed pursuant to Section 2.3).  If all or any portion of such amount is thereafter recovered from the recipient, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest.   Section 9.5.           Right of Setoff.  During a Termination Event, each Purchaser is hereby authorized (in addition to any other rights it may have) to setoff, appropriate and apply (without presentment, demand, protest or other notice which are hereby expressly waived) any deposits and any other indebtedness held or owing by such Purchaser (including by any branches or agencies of such Purchaser) to, or for the account of, the Seller against amounts owing by the Seller hereunder (even if contingent or unmatured).   Section 9.6.           Amendments.  Except as otherwise expressly provided herein, no amendment or waiver hereof shall be effective unless signed by the Seller and the Instructing Group.  In addition, no amendment of any Transaction Document shall, without the consent of (a) all the Committed Purchasers, (i) extend the Liquidity Termination Date or the date of any payment or transfer of Collections by the Seller to the Collection Agent or by the Collection Agent to the Agent, (ii) reduce the rate or extend the time of payment of Discount for any Eurodollar Tranche or Prime Tranche, (iii) reduce or extend the time of payment of any fee payable to the Committed Purchasers, (iv) except as provided herein, release, transfer or modify any Committed Purchaser’s Purchase Interest or change any Commitment, (v) amend the definition of Required Committed Purchasers, Instructing Group, Termination Event or Section 1.1, 1.2, 1.5, 2.1, 2.2, 2.3, 7.2 or 9.6, Article VI, or any provision ofthe Limited Guaranty, (vi) consent to the assignment or transfer by the Seller or the Originators of any interest in the Receivables other than transfers under the Transaction Documents or permit any Seller Entity to transfer any of its obligations under any Transaction Document except as expressly contemplated by the terms of the Transaction Documents, or (vii) amend any defined term relevant to the restrictions in clauses (i) through (vi) in a manner which would circumvent the intention of such restrictions or (b) the Agent, amend any provision hereof if the effect thereof is to affect the indemnities to, or the rights or duties of, the Agent or to reduce any fee payable for the Agent’s own account.  Notwithstanding the foregoing, the amount of any fee or other payment due and payable from the Seller to the Agent (for its own account) or Amsterdam may be changed or otherwise adjusted solely with the consent of the Seller and the party to which such payment is payable.  Any amendment hereof shall apply to each Purchaser equally and shall be binding upon the Seller, the Purchasers and the Agent.   Section 9.7.           Waivers.  No failure or delay of the Agent or any Purchaser in exercising any power, right, privilege or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right, privilege or remedy preclude any other or further exercise thereof or the exercise of any other power, right, privilege or remedy.  Any waiver hereof shall be effective only in the specific instance and for the specific purpose for which such waiver was given.  After any waiver, the Seller, the Purchasers and the Agent shall be restored to their former position and rights and any Potential Termination Event waived shall be deemed to be cured and not continuing, but no such waiver shall extend to (or impair any right consequent upon) any subsequent or other Potential Termination Event.  Any additional Discount that has accrued after a Termination Event before the execution of a waiver thereof, solely as a result of the occurrence of such Termination Event, may be waived by the Agent at the direction of the Purchaser entitled thereto or, in the case of Discount owing to the Committed Purchasers, of the Required Committed Purchasers.   Section 9.8.           Successors and Assigns; Participations; Assignments.   (a)           Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.  Except as otherwise provided herein, the Seller may not assign or transfer any of its rights or delegate any of its duties without the prior consent of the Agent and the Purchasers.   (b)           Participations.  Any Purchaser may sell to one or more Persons (each a “Participant”) participating interests in the interests of such Purchaser hereunder and under the Transfer Agreement.  Such Purchaser shall remain solely responsible for performing its obligations hereunder, and the Seller and the Agent shall continue to deal solely and directly with such Purchaser in connection with such Purchaser’s rights and obligations hereunder and under the Transfer Agreement.  Each Participant shall be entitled to the benefits of Article VI and shall have the right of setoff through its participation in amounts owing hereunder and under the Transfer Agreement to the same extent as if it were a Purchaser hereunder and under the Transfer Agreement, which right of setoff is subject to such Participant’s obligation to share with the Purchasers as provided in Section 9.4.  A Purchaser shall not agree with a Participant to restrict such Purchaser’s right to agree to any amendment hereto or to the Transfer Agreement, except amendments described in clause (a) of Section 9.6.  Any Participant may not be a direct or indirect competitor of any Seller Entity and shall agree to be bound by a confidentiality agreement substantively identical to that set forth in Section 9.10.   (c)           Assignments by Committed Purchasers.  Any Committed Purchaser may assign to one or more financial institutions (“Purchasing Committed Purchasers”), acceptable to the Agent in its sole discretion, any portion of its Commitment as a Committed Purchaser hereunder and under the Transfer Agreement and Purchase Interest pursuant to a supplement hereto and to the Transfer Agreement (a “Transfer Supplement”) in form satisfactory to the Agent executed by each such Purchasing Committed Purchaser, such selling Committed Purchaser and the Agent.  Prior to the occurrence of a Termination Event, any such assignment shall require the prior written consent of the Seller which shall not be unreasonably withheld.  Any such assignment by a Committed Purchaser must be for an amount of at least Five Million Dollars.  Each Purchasing Committed Purchaser shall pay a fee of Three Thousand Dollars to the Agent.  Any partial assignment shall be an assignment of an identical percentage of such selling Committed Purchaser’s Investment and its Commitment as a Committed Purchaser hereunder and under the Transfer Agreement.  Upon the execution and delivery to the Agent of the Transfer Supplement and payment by the Purchasing Committed Purchaser to the selling Committed Purchaser of the agreed purchase price, such selling Committed Purchaser shall be released from its obligations hereunder and under the Transfer Agreement to the extent of such assignment and such Purchasing Committed Purchaser shall for all purposes be a Committed Purchaser party hereto and shall have all the rights and obligations of a Committed Purchaser hereunder to the same extent as if it were an original party hereto and to the Transfer Agreement with a Commitment as a Committed Purchaser, any Investment and any related Assigned Amsterdam Settlement described in the Transfer Supplement.   (d)           Replaceable Committed Purchasers.  If any Committed Purchaser other than ABN AMRO (a “Replaceable Committed Purchaser”) shall (i) petition the Seller for any amounts under Section 6.2 or (ii) have a short-term debt rating lower than the “A-1” by S&P and “P-1” by Moody’s, the Seller or Amsterdam may designate a replacement financial institution (a “Replacement Committed Purchaser”) reasonably acceptable to the Agent and, prior to the occurrence of a Termination Event, consented to by the Seller (which consent shall not be unreasonably withheld, it being deemed reasonable, without limitation, for the Seller not to consent to a proposed Replacement Committed Purchaser that is a direct or indirect competitor of any Seller Entity or that has not agreed to be bound by a confidentiality agreement substantively identical to that set forth in Section 9.10), to which such Replaceable Committed Purchaser shall, subject to its receipt of an amount equal to its Investment, any related Assigned Amsterdam Settlement, and accrued Discount and fees thereon (plus, from the Seller, any Early Payment Fee that would have been payable if such transferred Investment had been paid on such date) and all amounts payable under Section 6.2, promptly assign all of its rights, obligations and Commitment hereunder and under the Transfer Agreement, together with all of its Purchase Interest, and any related Assigned Amsterdam Settlement, to the Replacement Committed Purchaser in accordance with Section 9.8(c).   (e)           Assignment by Amsterdam.  Each party hereto agrees and consents (i) to Amsterdam’s assignment, participation, grant of security interests in or other transfers of any portion of, or any of its beneficial interest in, the Amsterdam Purchase Interest and the Amsterdam Settlement and (ii) to the complete assignment by Amsterdam of all of its rights and obligations hereunder to ABN AMRO or any other Person, and upon such assignment Amsterdam shall be released from all obligations and duties hereunder to the extent accruing thereafter; provided, however, that Amsterdam may not, without the prior consent of the Required Committed Purchasers and, prior to the occurrence of a Termination Event, the Seller, which consent of the Seller shall not be unreasonably withheld, transfer any of its rights hereunder or under the Transfer Agreement unless the assignee (i) is a corporation whose principal business is the purchase of assets similar to the Receivables, (ii) has ABN AMRO as its administrative agent and (iii) issues commercial paper with credit ratings substantially identical to the Ratings.  Amsterdam shall promptly notify each party hereto of any such assignment.  Upon such an assignment of any portion of Amsterdam’s Purchase Interest and the Amsterdam Settlement, the assignee shall have all of the rights of Amsterdam hereunder relate to such Amsterdam Purchase Interest and Amsterdam Settlement.  Any such assignee may not be a direct or indirect competitor of any Seller Entity and shall agree to be bound by a confidentiality agreement substantively identical to that set forth in Section 9.10.   (f)            Opinions of Counsel.  If required by the Agent or to maintain the Ratings, each Transfer Supplement must be accompanied by an opinion of counsel of the assignee as to such matters as the Agent may reasonably request.  The Seller shall not be responsible for the cost of any such opinion.   Section 9.9.           Intended Tax Characterization.  It is the intention of the parties hereto that, for the purposes of all Taxes, the transactions contemplated hereby shall be treated as a loan by the Purchasers (through the Agent) to the Seller that is secured by the Receivables (the “Intended Tax Characterization”).  The parties hereto agree to report and otherwise to act for the purposes of all Taxes in a manner consistent with the Intended Tax Characterization.   Section 9.10.        Confidentiality.  The parties hereto agree to hold the Transaction Documents or any other confidential or proprietary information received in connection therewith in confidence and agree not to provide any Person with copies of any Transaction Document or such other confidential or proprietary information other than to (i) any officers, directors, members, managers, employees or outside accountants, auditors or attorneys thereof, (ii) any prospective or actual assignee or participant which is not a direct or indirect competitor of any Seller Entity and which (in each case) has signed a confidentiality agreement containing provisions substantively identical to this Section, (iii) any rating agency, (iv) any surety, guarantor or credit or liquidity enhancer to the Agent or any Purchaser which (in each case) has signed a confidentiality agreement substantially in the form of the confidentiality agreement signed by the Agent prior to the date hereof, (v) any entity organized to loan, or make loans secured by, financial assets for which ABN AMRO provides managerial services or acts as an administrative agent which (in each case) has signed a confidentiality agreement substantially in the form of the confidentiality agreement signed by the Agent prior to the date hereof, (vi) Amsterdam’s administrator, management company, referral agents, issuing agents or depositaries or CP Dealers and (vii) Governmental Authorities with appropriate jurisdiction.  Notwithstanding the above stated obligations, provided that the other parties hereto are given notice of the intended disclosure or use, the parties hereto will not be liable for disclosure or use of such information which such Person can establish by tangible evidence: (i) was required by law, including pursuant to a valid subpoena or other legal process, (ii) was rightfully in such Person’s possession or known to such Person prior to receipt or (iii) is or becomes known to the public through disclosure in a printed publication (without breach of any of such Person’s obligations hereunder).   Section 9.11.        Agreement Not to Petition.  Each party hereto agrees, for the benefit of the holders of the privately or publicly placed indebtedness for borrowed money for Amsterdam, not, prior to the date which is one (1) year and one (1) day after the payment in full of all such indebtedness, to acquiesce, petition or otherwise, directly or indirectly, invoke, or cause Amsterdam to invoke, the process of any Governmental Authority for the purpose of (a) commencing or sustaining a case against Amsterdam under any federal or state bankruptcy, insolvency or similar law (including the Federal Bankruptcy Code), (b) appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official for Amsterdam, or any substantial part of its property, or (c) ordering the winding up or liquidation of the affairs of Amsterdam.   Section 9.12.        Excess Funds.  Other than amounts payable under Section 9.4, Amsterdam shall be required to make payment of the amounts required to be paid pursuant hereto only if Amsterdam has Excess Funds (as defined below).  If Amsterdam does not have Excess Funds, the excess of the amount due hereunder (other than pursuant to Section 9.4) over the amount paid shall not constitute a “claim” (as defined in Section 101(5) of the Federal Bankruptcy Code) against Amsterdam until such time as Amsterdam has Excess Funds.  If Amsterdam does not have sufficient Excess Funds to make any payment due hereunder (other than pursuant to Section 9.4), then Amsterdam may pay a lesser amount and make additional payments that in the aggregate equal the amount of deficiency as soon as possible thereafter.  The term “Excess Funds” means the excess of (a) the aggregate projected value of Amsterdam’s assets and other property (including cash and cash equivalents), over (b) the sum of (i) the sum of all scheduled payments of principal, interest and other amounts payable on publicly or privately placed indebtedness of Amsterdam for borrowed money, plus (ii) the sum of all other liabilities, indebtedness and other obligations of Amsterdam for borrowed money or owed to any credit or liquidity provider, together with all unpaid interest then accrued thereon, plus (iii) all taxes payable by Amsterdam to the Internal Revenue Service, plus (iv) all other indebtedness, liabilities and obligations of Amsterdam then due and payable, but the amount of any liability, indebtedness or obligation of Amsterdam shall not exceed the projected value of the assets to which recourse for such liability, indebtedness or obligation is limited.  Excess Funds shall be calculated once each Business Day.   Section 9.13.        No Recourse.  The obligations of Amsterdam, its management company, its administrator and its referral agents (each a “Program Administrator”) under any Transaction Document or other document (each, a “Program Document”) to which a Program Administrator is a party are solely the corporate obligations of such Program Administrator and no recourse shall be had for such obligations against any Affiliate, director, officer, member, manager, employee, attorney or agent of any Program Administrator.   Section 9.14.        Headings; Counterparts.  Article and Section Headings in this Agreement are for reference only and shall not affect the construction of this Agreement.  This Agreement may be executed by different parties on any number of counterparts, each of which shall constitute an original and all of which, taken together, shall constitute one and the same agreement.   Section 9.15.        Cumulative Rights and Severability.  All rights and remedies of the Purchasers and Agent hereunder shall be cumulative and non-exclusive of any rights or remedies such Persons have under law or otherwise.  Any provision hereof that is prohibited or unenforceable in any jurisdiction shall, in such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof and without affecting such provision in any other jurisdiction.   Section 9.16.        Governing Law; Submission to Jurisdiction.  This Agreement shall be governed by, and construed in accordance with, the internal laws (and not the law of conflicts) of the State of New York.  The Seller hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York state court sitting in Manhattan for purposes of all legal proceedings arising out of, or relating to, the Transaction Documents or the transactions contemplated thereby.  The Seller hereby irrevocably waives, to the fullest extent permitted by law, any objection it may now or hereafter have to the venue of any such proceeding and any claim that any such proceeding has been brought in an inconvenient forum.  Nothing in this Section 9.16 shall affect the right of the Agent or any Purchaser to bring any action or proceeding against the Seller or its property in the courts of other jurisdictions.   Section 9.17.        Waiver of Trial by Jury.  To the extent permitted by applicable law, each party hereto irrevocably waives all right of trial by jury in any action, proceeding or counterclaim arising out of, or in connection with, any transaction document or any matter arising thereunder.   Section 9.18.        Entire Agreement.  The Transaction Documents constitute the entire understanding of the parties thereto concerning the subject matter thereof.  Any previous or contemporaneous agreements, whether written or oral, concerning such matters are superseded thereby.   Section 9.19.        Appointment for Service of Process.  (a) The Seller has (or will within 30 days of the date hereof) irrevocably appointed CT Corporation System, with an office on the date hereof at 111 Eighth Avenue, New York, New York  10011 as its agent to receive, accept and acknowledge for and on its behalf, service of any and all legal process, summons, notices and documents which may be served in any such proceeding brought in any such court which may be made on such agent and will pay such agent’s fees when due.  If for any reason such agent shall cease to be available to act as such, the Seller agrees to designate a new agent in the State of New York on the terms satisfactory to the Agent and will pay such agent’s fees when due.   (b)           To the fullest extent it may legally and effectively do so, each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.2 hereof.  Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law.   Section 9.20.        Payments in Relevant Currency.  All payments to be made by the Seller hereunder shall be made in Dollars (the “relevant currency”).  To the fullest extent permitted by law, the obligation of the Seller in respect of any amount due in the relevant currency under this Agreement shall, notwithstanding any payment in any other currency (whether pursuant to a judgment or otherwise), be discharged only to the extent of the amount in the relevant currency that each Purchaser or the Agent may, in accordance with normal banking procedures, purchase with the sum paid in such other currency (after any premium and costs of exchange) on the Business Day immediately following the day on which the Purchaser or Agent, as applicable, receives such payment.  If the amount in the relevant currency that may be so purchased for any reason falls short of the amount originally due, the Seller shall pay such additional amounts, in the relevant currency, as may be necessary to compensate for the shortfall.  Any obligations of the undersigned not discharged by such payment shall, to the fullest extent permitted by applicable law, be due as a separate and independent obligation and, until discharged as provided herein, shall continue in full force and effect.   In Witness Whereof, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date hereof.       ABN AMRO Bank N.V., as the Agent ABN AMRO Bank N.V., as the Committed Purchaser         By     By   Title     Title           By     By   Title     Title   Address: Structured Finance, Address: Structured Finance,   Asset Securitization   Asset Securitization   135 South LaSalle Street   135 South LaSalle Street   Chicago, Illinois  60674-9135   Chicago, Illinois  60674-9135   Attention: Purchaser Agent–   Attention: Administrator-     Amsterdam     Amsterdam Telephone: (312) 904-6263 Telephone: (312) 904-6263 Telecopy: (312) 904-6376 Telecopy: (312) 904-6376         Amsterdam Funding Corporation           By       Title       Address: c/o Global Securitization Services, LLC     114 West 47th Street, Suite 1715     New York, New York  10036     Attention: Andrew Stidd   Telephone: (212) 302-5151   Telecopy: (212) 302-8767         Albany International Receivables Corporation, as Seller     By     Title     Address:             Attention:   Telephone:   Telecopy:       Albany International Corp., as Initial Collection Agent     By     Title     Address:             Attention:   Telephone:   Telecopy:     Schedule I   Definitions   The following terms have the meanings set forth, or referred to, below:   “ABN AMRO” means ABN AMRO Bank N.V. in its individual capacity and not in its capacity as the Agent.   “Adjusted Dilution Ratio” at any time means the 12-month rolling average of the Dilution Ratio for the 12 Settlement Periods then most recently ended.   “Adverse Claim” means, for any asset or property of a Person, a lien, security interest, charge, mortgage, pledge, hypothecation, assignment or encumbrance, or any other right or similar claim, in, of or on such asset or property in favor of any other Person, except those created by the Transaction Documents.   “Affiliate” means, for any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with such Person.  For purposes of this definition, “control” means the power, directly or indirectly, to either (i) vote ten percent (10%) or more of the securities having ordinary voting power for the election of directors of a Person or (ii) cause the direction of the management and policies of a Person.   “Agent” is defined in the first paragraph hereof.   “Agent’s Account” means the account designated to the Seller and the Purchasers by the Agent.   “Aggregate Commitment” means $51,000,000, as  such  amount   may be reduced pursuant to Section 1.6.   “Aggregate Investment” means the sum of the Investments of all Purchasers.   “Aggregate Reserve” means, at any time at which such amount is calculated, the sum of the Loss Reserve, Dilution Reserve, Discount Reserve and Canadian Currency Reserve.   “Amsterdam” is defined in the first paragraph hereof.   “Amsterdam Funding Source” means any Committed Purchaser and any provider or program credit enhancement for Amsterdam.   “Amsterdam Settlement” means the sum of all claims and rights to payment pursuant to Section 1.5 or 1.7 or any other provision owed to Amsterdam (or owed to the Agent or the Collection Agent for the benefit of Amsterdam) by the Seller that, if paid, would be applied to reduce Amsterdam’s Investment.   “Amsterdam Termination Date” means the earlier of (a) the Business Day designated by Amsterdam at any time to the Seller and (b) the Liquidity Termination Date.   “Assigned Amsterdam Settlement” is defined in the Transfer Agreement.   “Bankrupt Obligor” means any of the Obligors listed on Exhibit J.   “Bankruptcy Event” means, for any Person, that (a) such Person makes a general assignment for the benefit of creditors or any proceeding is instituted by or against such Person seeking to adjudicate it bankrupt or insolvent, or seeking the liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors and, if instituted against such Person, such proceeding remains undismissed and unstayed for a period of 30 days, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or any substantial part of its property or such Person generally does not pay its debts as such debts become due or admits in writing its inability to pay its debts generally or (b) such Person takes any corporate action to authorize any such action.   “Business Day” means any day other than (a) a Saturday, Sunday or other day on which banks in New York City, New York or Chicago, Illinois are authorized or required to close, (b) a holiday on the Federal Reserve calendar and, (c) solely for matters relating to a Eurodollar Tranche, a day on which dealings in Dollars are not carried on in the London interbank market.   “Canadian Currency Reserve” means an amount equal to the Canadian Currency Reserve Percentage multiplied by the Outstanding Balance of Eligible Receivables payable in Canadian dollars as shown on the most recent Periodic Report.   “Canadian Currency Reserve Percentage” means, at any time, the quotient obtained by dividing (i) the difference between the highest and lowest Exchange Rates for the most recent 12 calendar months, by (ii) the Exchange Rate currently in effect.   “Canadian Obligor” means an Obligor that is a resident of, or organized under the laws of, Canada or any province or territory thereof.   “Canadian Originators” means M & I Door Systems Ltd. and Albany International Canada Inc.   “Change in Control” means (a) the ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof) other than Permitted Shareholders, of shares representing more than 30% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of the Parent at a time when Permitted Shareholders together do not have the unrestricted power directly or indirectly to vote or direct the vote of shares representing more than 50% of such aggregate ordinary voting power, (b) occupation of the majority of the seats (other than vacant seats) on the board of directors of the Parent by Persons who were neither (i) nominated by the board of directors of the Parent nor (ii) appointed by directors so nominated, or (c) the occurrence of any “change of control” or similar event, however denominated, resulting in an obligation on the part of the Parent or any Subsidiary of the Parent to repay, redeem or repurchase, or to offer to repay, redeem or repurchase any indebtedness for borrowed money of the Parent or any Subsidiary of the Parent in an aggregate principal amount in excess of $10,000,000.  Notwithstanding the foregoing, a Change of Control shall be deemed not to occur solely as a result of a restructuring which installs a newly formed holding company as the sole shareholder of Parent (which holding company must also hold, directly or indirectly, 100% of the ownership interests in the Seller Entities), provided that, in the course of such restructuring, the shareholders of Parent (a) receive in exchange for their Parent shares corresponding shares of such new holding company having relative rights and preferences identical to those of the Parent’s shares immediately before the restructuring, and (b) receive respective percentage ownership interests in such new holding company which are identical to their respective percentage ownership interests in Parent immediately before the restructuring.  After any such restructuring, the name of such new holding company shall be substituted for the name of Parent where it appears in this definition of Change of Control.   “Charge-Off” means any Receivable that has or should have been (in accordance with the Credit and Collection Policy) charged off or written off by the Seller.   “Collection” means any amount paid, or deemed paid, on a Receivable or by the Seller as a Deemed Collection under Section 1.5(b).   “Collection Agent” is defined in Section 3.1(a).   “Collection Agent Fee” is defined in Section 3.6.   “Collection Agent Replacement Event” shall occur upon the giving of written notice by Agent to Seller after any one or more of the following has occurred (except that such event is automatic if attributable to (e) below):   (a)           the Collection Agent fails to turn over Collections or make any payment or transfer of funds in each case for purposes of reducing Aggregate Net Investment when required to do so pursuant to the terms of this Agreement and such failure continues unremedied for two Business Days after notice from the Agent of such failure;   (b)           the Collection Agent fails to turn over Collections for a purpose not described in clause (a) above or make any other payment or transfer of funds it is required to make hereunder when due and such failure continues unremedied for a period of five Business Days after notice from the Agent of such failure;   (c)           the Collection Agent (or any sub-collection agent) fails to observe or perform (i) any covenant set forth in Section 3.2(d) or 3.3 or (ii) any other material term, covenant or agreement under any Transaction Document and in the case of clause (ii) any, such failure continues for five Business Days after notice from the Agent;   (d)           any written representation, warranty, certification or statement made by the Collection Agent in, or pursuant to, any Transaction Document proves to have been incorrect in any material adverse respect when made;   (e)           the Collection Agent suffers a Bankruptcy Event; or   (f)            for so long as the Collection Agent is an Affiliate of the Seller, a Termination Event.   “Commitment” means, for each Committed Purchaser, the amount set forth on Schedule II, as adjusted in accordance with Sections 1.6 and 9.8.   “Committed Purchasers” is defined in Section 1.1(b).   “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise.  “Controlling” and “Controlled” have meanings correlative thereto.   “CP Dealer” means, at any time, each Person Amsterdam then engages as a placement agent or commercial paper dealer.   “CP Discount” means, for any Discount Period, the amount of interest or discount accrued, during such Discount Period on all the outstanding commercial paper, or portion thereof, issued by Amsterdam to fund its Investment, including all dealer commissions and other costs of issuing commercial paper, whether any such commercial paper was issued specifically to fund such Investment or is allocated, in whole or in part, to such funding.   “CP Rate” means, for any CP Tranche Period, a rate per annum equal to the weighted average of the rates at which commercial paper notes having a term equal to such CP Tranche Period may be sold by any CP Dealer selected by Amsterdam, as agreed between each such CP Dealer and Amsterdam.  If such rate is a discount rate, the CP Rate shall be the rate resulting from Amsterdam’s converting such discount rate to an interest-bearing equivalent rate.  If Amsterdam determines that it is not able, or that it is impractical, to issue commercial paper notes for any period of time, then the CP Rate shall be the Prime Rate.  The CP Rate shall include all costs and expenses to Amsterdam of issuing the related commercial paper notes, including all dealer commissions and note issuance costs in connection therewith.   “Credit Agreement” means the Credit Agreement dated as of August 11, 1999, among the Parent, the borrowing subsidiaries and lenders party thereto, The Chase Manhattan Bank, as administrative agent, Chase Manhattan International Limited, as London agent, Citibank, N.A., as syndication agent, Banc One Capital Markets, Inc., as documentation agent, and Chase Securities Inc., as arranger, as amended and supplemented through the date hereof, but without regard to any further amendment, supplement, waiver or termination of any provision thereof unless consented to by ABN AMRO as a lender under the Credit Agreement or consented to by the Instructing Group hereunder.   “Credit and Collection Policy” means the Seller’s credit and collection policy and practices relating to Receivables attached hereto as Exhibit H.   “CSP Receivable” means a Receivable for which no invoice has been issued but revenues from which would be recognized under GAAP and that is required to be payable in full within 365 days after the date of the delivery of the goods which give rise to such Receivable.   “Deemed Collections” is defined in Section 1.5(c).   “Default Ratio” means, a fraction (expressed as a percentage), for the Settlement Period, the numerator of which is the aggregate outstanding balance as of the end of such Settlement Period of all Defaulted Receivables less than 121 days past the due date plus the aggregate outstanding balance as of the end of such Settlement Period of all Charge–Offs and the denominator of which is the amount of sales generated during the month that ended four months prior to the last day of such Settlement Period.   “Defaulted Receivable” means any Receivable (a) on which any amount is unpaid more than 90 days past its original due date or (b) the Obligor on which has suffered a Bankruptcy Event.   “Delinquency Ratio” means, the ratio (expressed as a percentage), for any Settlement Period of (a) the aggregate outstanding balance of all Delinquent Receivables as of the end of such Settlement Period to (b) the sum of the aggregate outstanding balance of all Receivables (other than Receivables for which no invoice has been issued) as of the end of such Settlement Period.   “Delinquent Receivable” means any Receivable (other than a Charge-Off or Defaulted Receivable) on which any amount is unpaid more than 60 days after the invoice therefor.   “Designated Financial Officer” means the Controller, the Assistant Controller, Treasurer, Assistant Treasurer, any Vice President or the President of the Seller or the relevant Seller Entity, as applicable.   “Dilution” means, for any Settlement Period, the amount Deemed Collections deemed to be received during such Settlement Period pursuant to Section 1.5(b).   “Dilution Horizon Ratio” means, on any Settlement Date, an amount calculated by dividing (a) cumulative sales generated during the two most recent Settlement Periods by (b) the Eligible Receivables Balance as of the end of the most recent Settlement Period.   “Dilution Ratio” means, as of any Settlement Date, a percentage equal to a fraction, the numerator of which is the total amount of decreases in Outstanding Balances due to Dilutions during the most recent Settlement Period, and the denominator of which is the amount of sales generated during the Settlement Period one month prior to the most recent Settlement Period.   “Dilution Reserve” means, as of any Settlement Date, the amount obtained by multiplying (A) a percentage equal to the product of (x) the sum of  (i) 2.0 times the Adjusted Dilution Ratio, plus (ii) the Dilution Volatility Component, multiplied by (y) the Dilution Horizon Ratio by (B) the Eligible Receivables Balance as of the end of the most recent Settlement Period.   “Dilution Volatility Component” means, as of any Settlement Date, an amount (expressed as a percentage) equal to the product of (i) the difference between (a) the highest three month average Dilution Ratio for any three consecutive calendar months ending during the preceding 12 Settlement Periods and (b) the Adjusted Dilution Ratio, and (ii) a fraction, the numerator of which is equal to the amount calculated in (i)(a) of this definition and the denominator of which is equal to the amount calculated in (i)(b) of this definition.   “Discount” means, for any Tranche Period, (a) the product of (i) the Discount Rate for such Tranche Period, (ii) the total amount of Investment allocated to the Tranche Period, and (iii) the number of days elapsed during such Tranche Period divided by (b) 360 (for Tranches other than Prime Tranches) or 365 or 366 days, as applicable (for Prime Tranches).   “Discount Period” means, with respect to any Settlement Date or the Liquidity Termination Date, the period from and including the preceding Settlement Date (or if none, the date that the first Incremental Purchase is made hereunder) to but not including such Settlement Date or Liquidity Termination Date, as applicable.   “Discount Rate” means, (i) for any Tranche Period relating to a CP Tranche, the CP Rate applicable thereto, (ii) for any Tranche Period relating to a Eurodollar Tranche, the Eurodollar Rate applicable thereto and (iii) for any Tranche Period relating to a Prime Tranche, the Prime Rate applicable thereto.   “Discount Reserve” means, at any time, the product of (a) 1.5, (b) the rate announced by ABN AMRO as its “Prime Rate” (which  may not be its best or lowest rate) plus 2.00%, (c) Aggregate Investment, (d) a fraction, the numerator of which is the average Turnover Ratio for the most recent three Settlement Periods and the denominator of which is 365.   “Dollar” and “$” means lawful currency of the United States of America.   “Early Payment Fee” means, if any Investment of a Purchaser allocated (or, in the case of a requested Purchase not made by the Committed Purchasers for any reason other than their improper acts or omissions, scheduled to be allocated) to a Tranche Period for a CP Tranche or Eurodollar Tranche is reduced or terminated before the last day of such Tranche Period with the effect that Discount then ceases to accrue on the amount reduced or terminated (the amount of Investment so reduced or terminated being referred to as the “Prepaid Amount”), the cost to the relevant Purchaser of terminating or reducing such Tranche, which (a) for a CP Tranche means any compensation payable in prepaying the related commercial paper or, if not prepaid, any shortfall between the amount that will be available to Amsterdam on the maturity date of the related commercial paper from reinvesting the Prepaid Amount in Permitted Investments and the Face Amount of such commercial paper and (b) for a Eurodollar Tranche will be determined based on the difference between the LIBOR applicable to such Tranche and the LIBOR applicable for a period equal (or as close as possible) to the remaining maturity of the Tranche on the date the Prepaid Amount is received.   “Eligible Receivable” means, at any time, any Receivable:   (i)          the Obligor of which (a) is a resident of, or organized under the laws of, or with its chief executive office in, the USA or Canada; (b) is not an Affiliate of any of the parties hereto or any other Seller Entity; (c) is not a government or a governmental subdivision or agency; (d) has not suffered a Bankruptcy Event; (e) is a customer of the applicable Originator in good standing; and (f) is not the Obligor of Defaulted Receivables with an Outstanding Balance in excess of 20% of the Outstanding Balance of all Receivables for which it is the Obligor;   (ii)         for which an invoice has been issued and which is stated to be due and payable within 90 days after the invoice therefor, except, that up to 35% of the Outstanding Balance of Eligible Receivables may either (a) be due and payable within 365 days after the invoice therefor or (b) be CSP Receivables;   (iii)        which is not a Delinquent Receivable, Defaulted Receivable or a Charge-Off;   (iv)       which is an “account” or “chattel paper” within the meaning of Section 9–105 and Section 9–106, respectively of the UCC of all applicable jurisdictions;   (v)        which is denominated and payable only in Dollars in the USA, or in Canadian dollars in Canada;   (vi)       which arises under a contract, that is in full force and effect and constitutes the legal, valid and binding obligation of the related Obligor enforceable against such Obligor in accordance with its terms subject to no offset, counterclaim, defense or other Adverse Claim, and is not an executory contract or unexpired lease within the meaning of Section 365 of the Bankruptcy Code;   (vii)      which arises under a contract that (a) contains an obligation to pay a specified sum of money and is subject to no contingencies, (b) does not require the Obligor under such contract to consent to the transfer, sale or assignment of the rights and duties of the applicable Originator under such contract after delivery of the goods in question, (c) does not contain a confidentiality provision that purports to restrict any Purchaser’s exercise of rights under this Agreement, including, without limitation, the right to review such contract and (d) directs that payment be made to a Lock-Box or other collection account (except that such direction need not be made with respect to the Receivables originated by the Canadian Originators until the 61st day following the date of this Agreement);   (viii)     which does not, in whole or in part, contravene any law, rule or regulation applicable thereto (including, without limitation, those relating to usury, truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy); and   (ix)        which satisfies all applicable requirements of the Credit and Collection Policy and was generated in the ordinary course of the applicable Originator’s business from the sale of goods or provision of services to a related Obligor solely by such Originator.   “Eligible Receivables Balance” means, at any time, the aggregate Outstanding Balance of all Eligible Receivables minus the sum of (i) the amount by which the Outstanding Balance of all Eligible Receivables of such Obligor and its Affiliates exceeds the Obligor Concentration Limit for such Obligor, and (ii) to the extent not already included in the amounts described in clause (i) hereof, the amount by which the aggregate Outstanding Balance of all Eligible Receivables owed by Canadian Obligors exceeds 50% of Outstanding Balance of all Eligible Receivables).   “Eurodollar Rate” means, for any Tranche Period for a Eurodollar Tranche, the sum of (a) LIBOR for such Tranche Period divided by 1 minus the “Reserve Requirement” plus (b) for Investment of a Committed Purchaser, the amount specified in the Fee Letter plus (c) during the pendency of a Termination Event, 2.00% for Investment of a Committed Purchaser; where “Reserve Requirement” means, for any Tranche Period for a Eurodollar Tranche, the maximum reserve requirement imposed during such Tranche Period on “eurocurrency liabilities” as currently defined in Regulation D of the Board of Governors of the Federal Reserve System.   “Exchange Rate” means, as of any date of determination with respect to any foreign currency in which a Receivable is payable, (a) prior to the Liquidity Termination Date, the amount of such currency specified by the Collection Agent in good faith in the most recent periodic Report delivered hereunder as the amount of such currency that would be required to purchase a US Dollar based on the foreign exchange market for such currency, and (b) on and after the Liquidity Termination Date, the “Exchange Rate” described in clause (a) above as specified in the most recent Monthly Report delivered prior to the Liquidity Termination Date that demonstrated that the Eligible Receivables Balance exceeded the sum of the Aggregate Net Investment plus the Aggregate Reserve.  For purposes of calculating the Canadian Currency Reserve Percentage, the Exchange Rate for months prior to September, 2001 shall be as set forth on Exhibit I hereto.   “Face Amount” means the face amount of any Amsterdam commercial paper issued on a discount basis or, if not issued on a discount basis, the principal amount of such note and interest scheduled to accrue thereon to its stated maturity.   “Federal Funds Rate” means for any day the greater of (i) the highest rate per annum as determined by ABN AMRO at which overnight Federal funds are offered to ABN AMRO for such day by major banks in the interbank market, and (ii) if ABN AMRO is borrowing overnight funds from a Federal Reserve Bank that day, the highest rate per annum at which such overnight borrowings are made on that day.  Each determination of the Federal Funds Rate by ABN AMRO shall be conclusive and binding on the Seller except in the case of manifest error.   “Fee Letter” means the letter agreement dated as of the date hereof among the Seller, the Agent, Amsterdam and the Committed Purchasers.   “Funding Charges” means, for any day, the product of (i) the per annum rate (inclusive of dealer fees and commissions) paid or payable by Amsterdam in respect of commercial paper notes on such day that are allocated, in whole or in part, to fund or maintain its Investment for such day, as determined by the Agent and other costs reasonably  allocated by the Purchaser to fund or maintain its Investment associated with the funding by Amsterdam of small or odd lot amounts that are not funded with commercial paper notes and (ii) Amsterdam’s Investment as of the end of such day and (iii) 1/360.   “GAAP” means generally accepted accounting principles in the USA, applied on a consistent basis.   “Governmental Authority” means any (a) Federal, state, municipal or other governmental entity, board, bureau, agency or instrumentality, (b) administrative or regulatory authority (including any central bank or similar authority) or (c) court, judicial authority or arbitrator, in each case, whether foreign or domestic.   “Homer Receivable” means an obligation of an Obligor that would otherwise be a Receivable except that it is generated from the Parent’s plant in Homer, New York.   “Incremental Purchase” is defined in Section 1.1(b).   “Initial Collection Agent” is defined in the first paragraph hereof.   “Instructing Group” means the Required Committed Purchasers and, unless the Amsterdam Termination Date has occurred and Amsterdam has no Investment, Amsterdam.   “Intended Tax Characterization” is defined in Section 9.9.   “Interim Liquidation” means any time before the Liquidity Termination Date during which no Reinvestment Purchases are made by any Purchaser, as established pursuant to Section 1.2.   “Investment” means, for each Purchaser, (a) the sum of (i) all Incremental Purchases by such Purchaser and (ii) the aggregate amount of any payments or exchanges made by, or on behalf of, such Purchaser to any other Purchaser to acquire Investment from such other Purchaser minus (b) all Collections, amounts received from other Purchasers and other amounts received or exchanged and, in each case, applied by the Agent or such Purchaser to reduce such Purchaser’s Investment.  A Purchaser’s Investment shall be restored to the extent any amounts so received or exchanged and applied are rescinded or must be returned for any reason.   “LIBOR” means, for any Tranche Period for a Eurodollar Tranche or other time period, the rate per annum (rounded upwards, if necessary, to the next higher one hundred-thousandth of a percentage point) for deposits in Dollars for a period equal to such Tranche Period or other period, which appears on Page 3750 of the Telerate Service (or any successor page or successor service that displays the British Bankers’ Association Interest Settlement Rates for Dollar deposits) as of 11:00 a.m. (London, England time) two Business Days before the commencement of such Tranche Period or other period.  If for any Tranche Period for a Eurodollar Tranche no such displayed rate is available (or, for any other period, if such displayed rate is not available), the Agent shall calculate such rate to be the average of the rates ABN AMRO is offered deposits of such duration in the London interbank market at approximately 11:00 a.m. (London, England time) two Business Days prior to the date such rate is determined.   “Limited Guaranty” means the Limited Guaranty, dated the date hereof, by the Parent in favor of the Seller.   “Liquidation Period” means, for Amsterdam only, all times when Amsterdam is not making Reinvestment Purchases pursuant to Section 1.1(d) and, for all Purchasers, all times (x) during an Interim Liquidation and (y) on and after the Liquidity Termination Date.   “Liquidity Termination Date” means the earliest of (a) the date of the occurrence of a Termination Event described in clause (f) of the definition of Termination Event, (b) the date designated by the Agent to the Seller at any time after the occurrence and during the continuation of any other Termination Event, (c) the Business Day designated by the Seller with no less than five (5) Business Days prior notice to the Agent and (d) September 27, 2002.   “Lock-Box” means each post office box or bank box listed on Exhibit E, as revised pursuant to Section 5.1(i).   “Lock-Box Account” means each account maintained by the Collection Agent at a Lock-Box Bank for the purpose of receiving or concentrating Collections (whether or not there is a Lock-Box associated with such account).   “Lock-Box Agreement” means each agreement between the Collection Agent and a Lock-Box Bank concerning a Lock-Box Account.   “Lock-Box Bank” means each bank listed on Exhibit E, as revised pursuant to Section 5.1(i).   “Lock-Box Letter” means a letter in substantially the form of Exhibit F (or otherwise acceptable to the Agent) from the Seller and the Collection Agent to each Lock-Box Bank, acknowledged and accepted by such Lock-Box Bank and the Agent.   “Loss Horizon Ratio” means, at any time, a fraction (expressed as a ratio) the numerator of which is the aggregate Outstanding Balance of Receivables generated by the Originators during the most recent four month period and the denominator of which is the Eligible Receivables Balance as of the last day of such period.   “Loss Reserve” means, at any time, the product of (i) the greater of (a) 20.0% and (b) two times the product of the highest average Default Ratio for any consecutive three month period ended during the previous 12 months multiplied by the Loss Horizon Ratio calculated at the end of such period multiplied by (ii) the Eligible Receivables Balance at such time.   “Loss-to-Liquidation Ratio” means, for any Settlement Period, the ratio (expressed as a percentage) of the outstanding balance of Charge-Offs made during such Settlement Period to the aggregate amount of Collections during such Settlement Period.   “Matured Aggregate Investment” means, at any time, the Matured Value of Amsterdam’s Investment plus the total Investments of all other Purchasers then outstanding.   “Matured Value” means, of any Investment, the sum of such Investment and all unpaid Discount scheduled to become due (whether or not then due) on such Investment during all Tranche Periods to which any portion of such Investment has been allocated.   “Maximum Incremental Purchase Amount” means, at any time, the lesser of (a) the difference between the Purchase Limit and the Aggregate Investment then outstanding and (b) the difference between the Aggregate Commitment and the Matured Aggregate Investment then outstanding.   “Moody’s” means Moody’s Investors Service, Inc.   “Note” means each revolving promissory note issued by the Seller to an Originator under the Purchase Agreement.   “Obligor” means, for any Receivable, each Person obligated to pay such Receivable and each guarantor of such obligation.   “Obligor Concentration Limit” means, at any time, in relation to the aggregate Outstanding Balance of Receivables owed by any single Obligor and its Affiliates (if any), the applicable concentration limit shall be determined as follows for Obligors who have long term unsecured debt ratings currently assigned to them by S&P and Moody’s, the applicable concentration limit shall be determined according to the following table:   S&P Rating   Moody’s Rating   Allowable % of Eligible Receivables A- or higher   A3 or higher   20.0% BBB   Baa2   12.0% BBB-   Baa3   10.0% Below BBB- or Not Rated by either S&P or Moody’s   Below Baa3 or Not Rated by either S&P or Moody’s   5.0%   ; provided, however, that (a) if any Obligor has a split rating, the applicable rating will be the lower of the two, (b) if any Obligor is not rated by either S&P or Moody’s, the applicable Obligor Concentration Limit shall be the one set forth in the last line of the table above.   “Originators” means the Parent, M & I Door Systems Ltd., Albany International Canada Inc., Albany International Techniweave, Inc., Albany International Research Co. and Geschmay Corp.,   “Outstanding Balance” of any Receivable at any time means the then outstanding principal balance thereof.  For purposes of calculating the Outstanding Balance of any Receivable that is payable in Canadian dollars, such amount shall be converted into U.S. Dollars using the Exchange Rate in effect at the time of calculation.   “Parent” means Albany International Corp., a Delaware corporation.   “Periodic Report” is defined in Section 3.3.   “Permitted Investments” shall mean (a) evidences of indebtedness, maturing not more than thirty (30) days after the date of purchase thereof, issued by, or the full and timely payment of which is guaranteed by, the full faith and credit of, the federal government of the United States of America, (b) repurchase agreements with banking institutions or broker-dealers that are registered under the Securities Exchange Act of 1934 fully secured by obligations of the kind specified in clause (a) above, (c) money market funds denominated in Dollars rated not lower than A-1 (and without the “r” symbol attached to any such rating) by S&P and P-1 by Moody’s or otherwise acceptable to the Rating Agencies or (d) commercial paper denominated in Dollars issued by any corporation incorporated under the laws of the United States or any political subdivision thereof, provided that such commercial paper is rated at least A-1 (and without any “r” symbol attached to any such rating) thereof by S&P and at least Prime-1 thereof by Moody’s.   “Permitted Shareholders” means (a) J. Spencer Standish, (b) any of J. Spencer Standish’s descendants or legatees, (c) any executor, personal representative or spouse of J. Spencer Standish or any of his descendants, (d) any corporation, trust or other entity holding voting stock of the Parent as to which one or more of the Persons identified in the foregoing clauses (a) through (c) have Control, (e) any trust as to which Persons so identified in clauses (a) through (c) above hold at least 85% of the beneficial interest in the income and principal of the trust disregarding the interests of the contingent remaindermen and (f) any Employee Stock Ownership Plan for the benefit of employees of the Parent.   “Person” means an individual, partnership, corporation, limited liability company, association, joint venture, Governmental Authority or other entity of any kind.   “Potential Termination Event” means any Termination Event or any event or condition that with the lapse of time or giving of notice, or both, would constitute a Termination Event.   “Prime Rate” means, for any period, the daily average during such period of (a) the greater of (i) the floating commercial loan rate per annum of ABN AMRO (which rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer by ABN AMRO) announced from time to time as its prime rate or equivalent for Dollar loans in the USA, changing as and when said rate changes and (ii) the Federal Funds Rate plus 0.75% plus (b) during the pendency of a Termination Event, 2.00%.   “Purchase” is defined in Section 1.1(a).   “Purchase Agreement” means the Purchase and Sale Agreement dated as of the date hereof between the Seller and the Originators.   “Purchase Amount” is defined in Section 1.1(c).   “Purchase Date” is defined in Section 1.1(c).   “Purchase Interest” means, for a Purchaser, the percentage ownership interest in the Receivables and Collections held by such Purchaser, calculated when and as described in Section 1.1(a); provided, however, that (except for purposes of computing a Purchase Interest or the Sold Interest in Section 1.5, 1.7 and in the last sentence of both Section 2.3(a) and Section 2.3(b)) at any time the Sold Interest would otherwise exceed 100% each Purchaser then holding any Investment shall have its Purchase Interest reduced by multiplying such Purchase Interest by a fraction equal to 100% divided by the Sold Interest otherwise then in effect, so that the Sold Interest is thereby reduced to 100%.   “Purchase Limit” means $50,000,000.   “Purchaser Reserve Percentage” means, for each Purchaser, the Reserve Percentage multiplied by a fraction, the numerator of which is such Purchaser’s outstanding Investment and the denominator of which it the Aggregate Investment.   “Purchasers” means the Committed Purchasers and Amsterdam.   “Put” is defined in Section 2.1(a).   “Ratable Share” is defined in the Transfer Agreement.   “Rating Agency” means Moody’s, S&P and any other rating agency Amsterdam chooses to rate its commercial paper notes.   “Ratings” means the ratings by the Rating Agencies of the indebtedness for borrowed money of Amsterdam.   “Receivable” means each obligation of an Obligor (other than a Bankrupt Obligor) to pay for merchandise sold or services rendered by an Originator (other than a Homer Receivable) and includes such Originator’s rights to payment of any interest or finance charges and all proceeds of the foregoing.  During any Interim Liquidation and on and after the Liquidity Termination Date, the term “Receivable” shall only include receivables existing on the date such Interim Liquidation commenced or Liquidity Termination Date occurred, as applicable.  Deemed Collections shall reduce the outstanding balance of Receivables hereunder, so that any Receivable that has its outstanding balance deemed collected shall cease to be a Receivable hereunder after (x) the Collection Agent receives payment of such Deemed Collections under Section 1.5(b) or (y) if such Deemed Collection is received before the Liquidity Termination Date, an adjustment to the Sold Interest permitted by Section 1.5(c) is made.   “Records” means, for any Receivable, all contracts, books, records and other documents or information (including computer programs, tapes, disks, software and related property and rights) relating to such Receivable or the related Obligor.   “Reinvestment Purchase” is defined in Section 1.1(b).   “Related Security” means all of the applicable Originator’s rights in the merchandise (including returned goods) and under any contracts relating to the Receivables (but only to the extent so relating), all security interests, guaranties and property securing or supporting payment of the Receivables, all Records and all proceeds of the foregoing.   “Required Committed Purchasers” is defined in the Transfer Agreement.   “Reserve Percentage” means, at any time, the quotient obtained by dividing (a) the Aggregate Reserve by (b) the Eligible Receivables Balance.   “Seller” is defined in the first paragraph hereof.   “Seller Account” means the Seller’s account designated by the Seller to the Agent in writing.   “Seller Entity” means the Parent and the Originators.   “Settlement Date” means the 20th day of each calendar month.   “Settlement Period” means for each Settlement Date, the calendar month preceding such Settlement Date.   “Sold Interest” is defined in Section 1.1(a).   “Special Transaction Subaccount” means the special transaction subaccount established for this Agreement pursuant to Amsterdam’s depositary agreement.   “S&P” means Standard & Poor’s Ratings Services.   “Subsidiary” means any Person of which at least a majority of the voting stock (or equivalent equity interests) is owned or controlled by the Seller or any Seller Entity or by one or more other Subsidiaries of the Seller or such Seller Entity.  The Subsidiaries of the Parent on the date hereof are listed on Exhibit E.   “Taxes” means all taxes, charges, fees, levies or other assessments (including income, gross receipts, profits, withholding, excise, property, sales, use, license, occupation and franchise taxes and including any related interest, penalties or other additions) imposed by any jurisdiction or taxing authority (whether foreign or domestic).   “Termination Date” means (a) for Amsterdam, the Amsterdam Termination Date and (b) for the Committed Purchasers, the Liquidity Termination Date.   “Termination Event” means the occurrence of any one or more of the following:   (a)         any representation, warranty, certification or statement made by the Seller or any Seller Entity in, or pursuant to, any Transaction Document proves to have been incorrect in any material respect as of the date when made or deemed made (including pursuant to Section 7.2); or   (b)        any Seller Entity or the Seller fails to make any payment or other transfer of funds hereunder or under any other Transaction Document to be applied to reduce Aggregate Net Investment when due (including any payments under Section 1.5(a)) and such failure continues unremedied for a period of two Business Days after notice from the Agent of such failure; or   (c)         any Seller Entity or the Seller fails to make any other payment or other transfer of funds hereunder when due and such failure continues unremedied for a period of five Business Days after notice from the Agent of such failure; or   (d)        the Seller fails to observe or perform any covenant or agreement contained in Sections 5.1(b), 5.1(g), 5.1(i), 5.1(j), 5.1(k) or 5.1(p) of this Agreement, any Originator fails to perform any covenant or agreement in Sections 5.1(h), (i) or (j) of the Purchase Agreement or the Parent fails to perform any covenant or agreement in the Limited Guaranty; or   (e)         the Seller or any Seller Entity fails to observe or perform any other term, covenant or agreement under any Transaction Document, and such failure remains unremedied for thirty days or more after notice from the Agent of such failure; or   (f)         the Seller, any Seller Entity or any Subsidiary suffers a Bankruptcy Event; or   (g)        the average Delinquency Ratio for the three most recent Settlement Periods exceeds 15.0%, the average Default Ratio for the three most recent Settlement Periods exceeds 8.0%, the average Dilution Ratio for the three most recent Settlement Periods exceeds 5.0%, the Loss-to Liquidation Ratio for the most recent Settlement Period exceeds 1.0% or the average Turnover Ratio for the three most recent Settlement Periods exceeds 90 days; or   (h)        (i) the Seller, any Seller Entity or any Affiliate, directly or indirectly, disaffirms or contests the validity or enforceability of any Transaction Document or (ii) any Transaction Document fails to be the enforceable obligation of the Seller or any Affiliate party thereto in any material respect; or   (i)          any Seller Entity or any Subsidiary fails to pay any of its indebtedness (except in aggregate principal amount of less than $10,000,000) or defaults in the performance of any provision of any agreement under which such indebtedness was created or is governed and such default permits such indebtedness to be declared due and payable or to be required to be prepaid before the scheduled maturity thereof;   (j)          a Change in Control shall occur or the Parent shall fail to own and control, directly or indirectly, 100% of the outstanding voting stock of the Seller and each Originator;   (k)         a Collection Agent Replacement Event has occurred and is continuing with respect to the Initial Collection Agent; or   (l)          the occurrence of an “Event of Default” under and as defined in the Credit Agreement.   Notwithstanding the foregoing, a failure of a representation or warranty or breach of any covenant described in clause (a), (d) or (e) above related to a Receivable shall not constitute a Termination Event if the Seller has been deemed to have collected such Receivable pursuant to Section 1.5(b) or, before the Liquidity Termination Date, has adjusted the Sold Interest as provided in Section 1.5(c) so that such Receivable is no longer considered to be outstanding.   “Tranche” means a portion of the Investment allocated to a Tranche Period pursuant to Section 1.3.  A Tranche is a (i) CP Tranche, (ii) Eurodollar Tranche or (iii) Prime Tranche depending whether Discount accrues during its Tranche Period based on a (i) CP Rate, (ii) Eurodollar Rate, or (iii) Prime Rate.   “Tranche Period” means a period of days ending on a Business Day selected pursuant to Section 1.3, which (i) for a CP Tranche shall not exceed 270 days, (ii) for a Eurodollar Tranche shall not exceed 180 days, and (iii) for a Prime Tranche shall not exceed 30 days.   “Transaction Documents” means this Agreement, the Fee Letter, the Limited Guaranty, the Purchase Agreement, the Note(s), the Transfer Agreement, and all other documents, instruments and agreements executed or furnished in connection herewith and therewith.   “Transfer Agreement” means the Amsterdam Transfer Agreement dated the date hereof between Amsterdam, ABN AMRO Bank N.V., in its capacity as the Amsterdam Agent, Amsterdam’s Letter of Credit Provider and a Committed Purchaser and the Other Persons who become Committed Purchasers thereunder.   “Transfer Supplement” is defined in Section 9.8.   “Turnover Ratio” means, with respect to any Settlement Period, an amount, expressed in days, obtained by multiplying (a) a fraction, (i) the numerator of which is equal to the aggregate Outstanding Balance of the Receivables on the first day of such Settlement Period and (ii) the denominator of which is equal to Collections on the Receivables during such Settlement Period multiplied by (b) 30.   “UCC” means, for any state, the Uniform Commercial Code as in effect in such state.   “USA” means the United States of America (including all states and political subdivisions thereof).   “Unused Aggregate Commitment” means, at any time, the difference between the Aggregate Commitment then in effect and the outstanding Matured Aggregate Investment.   “Unused Commitment” means, for any Committed Purchaser at any time, the difference between its Commitment and its Investment then outstanding.   The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms.  Unless otherwise inconsistent with the terms of this Agreement, all accounting terms used herein shall be interpreted, and all accounting determinations hereunder shall be made, in accordance with GAAP.  Amounts to be calculated hereunder shall be continuously recalculated at the time any information relevant to such calculation changes.   Schedule II   Committed Purchasers and Commitments of Committed Purchasers   Name of Committed Purchaser Commitment     ABN AMRO Bank N.V. $51,000,000     Exhibit A   to   Receivables Sale Agreement   Form of Incremental Purchase Request   ____________, 200_   ABN AMRO Bank N.V., as Agent Asset Securitization, Structured Finance 135 South LaSalle Street, Suite 725 Chicago, Illinois 60674-9135 Attn:  Purchaser Agent-Amsterdam   Re:          Receivables Sale Agreement dated as of September 28, 2001 (the “Sale Agreement”) among Albany International Receivables Corporation, as Seller, Albany International Corp., as Initial Collection Agent, ABN AMRO Bank N.V., as Agent, and the Purchasers thereunder   Ladies and Gentlemen:   The undersigned Seller under the above-referenced Sale Agreement hereby confirms its has requested an Incremental Purchase of $___________ by Amsterdam under the Sale Agreement. [In the event Amsterdam is unable or unwilling to make the requested Incremental Purchase, the Seller hereby requests an Incremental Purchase of $____________ by the Committed Purchasers under the Sale Agreement at the [Eurodollar Rate with a Tranche Period of _______ months.] [Prime Rate]].   Attached hereto as Schedule I is information relating to the proposed Incremental Purchase required by the Sale Agreement.  If on the date of this Incremental Purchase Request (“Notice”), an Interim Liquidation is in effect, this Notice revokes our request for such Interim Liquidation so that Reinvestment Purchases shall immediately commence in accordance with Section 1.1(d) of the Sale Agreement.   The Seller hereby certifies that both before and after giving effect to [each of] the proposed Incremental Purchase[s] contemplated hereby and the use of the proceeds therefrom, all of the requirements of Section 7.2 of the Sale Agreement have been satisfied.     Very truly yours,               Albany International Receivables Corporation               By       Title     Schedule I to Incremental Purchase Requests   Summary of Information Relating to Proposed Sale(s)   1.             Dates, Amounts, Purchaser(s), Proposed Tranche Periods   A1           Date of Notice                                                                                                                                                 _________   A2           Measurement Date (the last Business Day of the month immediately preceding the month in which the Date of Notice occurs)                                                                                                                                                 _________   A3           Proposed Purchase Dates                    _________           _________             _________                  _________ (each of which is a Business Day)   A4           Respective Proposed Incremental Purchase on each such Purchase Date                     $_________         $_________           $_________              $_________                 (each Incremental                                           (A4A)                     (A4B)                       (A4C)                     (A4D)                 Purchase must be in a                 minimum amount of                 $1,000,000 and multiples                 thereof, or, if less, an                 amount equal to the                 Maximum Incremental                 Purchase Amount)   A5           Proposed Allocation among Purchasers   Amsterdam                  $_________         $_________           $_________              $_________   Committed   Purchasers                $_________         $_________           $_________              $_________ A6           For Committed Purchases, Tranche Period(s) and Tranche Rate(s)   Starting Date                       _________           _________             _________                  _________ Ending Date                        _________           _________             _________                  _________ Number of Days                 _________           _________             _________                  _________ Prime or Eurodollar            _________           _________             _________                  _________   Each proposed Purchase Date must be a Business Day.  The choice of Measurement Date is a risk undertaken by the Seller.  If a selected Measurement Date is not the applicable Purchase Date, the Seller’s choice and disclosure of such date shall not in any manner diminish or waive the obligation of the Seller to assure the Purchasers that, after giving effect to the proposed Purchase, the actual Sold Interest as of the date of such proposed Purchase does not exceed 100%.   Exhibit B to Receivables Sale Agreement   Form of Notification of Assignment to Amsterdam From the Committed Purchasers   ______________, 200_   Albany International Receivables Corporation 1373 Broadway Menands, New York  12204   ABN AMRO Bank N.V., as Agent Asset Securitization, Structured Finance Suite 725   135 South LaSalle Street Chicago, Illinois  60674-9135 Attn:  Administrator-Amsterdam   [Insert Name and Address of each   other Committed Purchaser]   Re:          Receivables Sale Agreement dated as of September 28, 2001 (the “Sale Agreement”) among Albany International Receivables Corporation, as Seller, Albany International Corp., as Initial Collection Agent, ABN AMRO Bank N.V., as Agent, and the Purchasers thereunder   Ladies and Gentlemen:   The Agent under the above referenced Sale Agreement hereby notifies each of you that Amsterdam has notified the Agent pursuant to Section 2.2 of the Sale Agreement that it will purchase from the Committed Purchasers on ________________ (the “Purchase Date”) that portion of the Committed Purchasers’ Investments identified on Schedule I hereto (the “Assigned Interest”).  As further provided in Section 2.2 of the Sale Agreement, upon payment by Amsterdam to the Agent of the purchase price of such Investments described on Schedule I hereto, effective as of the Purchase Date the assignment by the Committed Purchasers to Amsterdam of the Assigned Interest shall be complete and all payments thereon under the Sale Agreement shall be made to Amsterdam.   In accordance with the Sale Agreement, each Committed Purchaser’s acceptance of the portion of the purchase price payable to it described on Schedule I hereto constitutes its representation and warranty that it is the legal and beneficial owner of the portion of the Assigned Interest related to its Purchase Interest identified on Schedule I free and clear of any Adverse Claim created or granted by it and that on the Purchase Date it is not subject to a Bankruptcy Event.     Very truly yours,       ABN AMRO Bank N.V., as Agent             By       Name       Title               By       Name       Title     Schedule I to Notification of Assignment   Dated ______________, 200_   I.              Amount of Committed Purchaser Investment Assigned:  $________   II.            Information for each Committed Purchaser:   Purchaser Purchase Interest Purchase Price*                             III.           Information for Seller:   Aggregate amount of purchase price in excess of amount of Investment assigned:  $___________.     -------------------------------------------------------------------------------- *               Calculated in accordance with Section 2.2.   Exhibit C   Form of Periodic Report   Exhibit D   Addresses and Names of Seller and Originators                     1.       Locations.  (a) The chief executive office of the Seller and the Originators are located at the following addresses:   Albany International Receivables Corporation 1373 Broadway Menands, New York 12204   Albany International Corp. 1373 Broadway Menands, New York 12204 Taxpayer ID # 14-0462060   Geschmay Corp. 525 Old Piedmont Highway Greenville, SC  29605-4691 Taxpayer ID # 57-0655559   Albany International Techniweave, Inc. 112 Airport Drive Rochester, NH  03867 Taxpayer ID # 02-0370219   Albany International Research Co. 777 West Street Mansfield, MA  02048-9114 Taxpayer ID # 14-1767946   Albany International Canada Inc. 300 Westmount Street Cowansville, Quebec  J2K 1S9  Canada Business Number:  100109461   M & I Door Systems Ltd. 230 Bay View Drive - U1-7 Barrie, Ontario  L4N 5E9  Canada Business Number: 897599841   No such address was different at any time since September 29, 2000.   (b)       The following are all the locations where the Seller and the Originators directly or through its agents maintain any Records:   Same as (a) above   2.         Names.  The following is a list of all names (other than the legal names set forth above) (including trade names or similar appellations) used by the Seller and the Originators or any of its divisions or other business units that generate Receivables:   Albany International Corp. (“AIC”)   Nomafa, Nomafa Door Systems   Primaloft   Appleton Wire Works   Mount Vernon Dryer Fabrics   Albany Mount Vernon   Albany Felt   Geschmay Corp.   Wangner Systems Corporation   Wangner Forming Fabrics, Inc.   Geschmay Forming Fabrics, Inc.   Brandon Drying Fabrics, Inc.   Geschmay Wet Felts, Inc.   Exhibit E   Lock Boxes and Lock-Box Banks   Bank Lock-Box Numbers Collection Account       Wachovia Bank, N.A. 752020, 751538 and 75158 1868-085316       Fleet National Bank 3241 and 414034 502-59058       Nova Scotia Bank Not Established Not Established   Exhibit F   to Receivables Sale Agreement   Form of Lock Box Letter   [Name of Lock Box Bank]   Ladies and Gentlemen:   Reference is made to the lock-box numbers _______________ in __________ and the associated lock-box demand deposit account number ____________ maintained with you (such lock-boxes and associated lock-box demand deposit account, collectively, the “Accounts”), each in the name of [Name of Originator] (“[___]”).  [___] hereby confirms it has sold all Receivables (as defined below) to Albany International Receivables Corporation (the “Seller”).   In connection with the Receivables Sale Agreement, dated as of September 28, 2001 (as amended, supplemented or otherwise modified from time to time, the “Receivables Sale Agreement”), among the Seller, the Initial Collection Agent, Amsterdam Funding Corporation (“Amsterdam”), the financial institutions from time to time party thereto (collectively, the “Committed Purchasers”), ABN AMRO Bank N.V., as provider of the program letter of credit (the “Enhancer”), and ABN AMRO Bank N.V., as agent (the “Agent”) for Amsterdam, the Committed Purchasers (collectively, the “Purchasers”), the Seller has assigned to the Agent for the benefit of the Purchasers an undivided percentage interest in the accounts, chattel paper, instruments or general intangibles (collectively, the “Receivables”) under which payments are or may hereafter be made to the Accounts, and has granted to the Agent for the benefit of the Purchasers a security interest in its retained interest in such Receivables.  As is the customary practice in this type of transaction, we hereby request that you execute this letter agreement.  All references herein to “we” and “us” refer to [_____] and the Seller, jointly and severally.  Your execution hereof is a condition precedent to our continued maintenance of the Accounts with you.   We hereby transfer exclusive dominion and control of the Accounts to the Agent, subject only to the condition subsequent that the Agent shall have given you notice that a Collection Agent Replacement Event has occurred and is continuing under the Receivables Sale Agreement and of its election to assume such dominion and control, which notice shall be in substantially the form attached hereto as Annex A (the “Agent’s Notice”).   At all times prior to the receipt of the Agent’s Notice described above, all payments to be made by you out of, or in connection with the Accounts, are to be made in accordance with the instructions of the Seller or its agent.   We hereby irrevocably instruct you, at all times from and after the date of your receipt of the Agent’s Notice as described above, to make all payments to be made by you out of, or in connection with, the Accounts directly to the Agent, at its address set forth below its signature hereto or as the Agent otherwise notifies you, or otherwise in accordance with the instructions of the Agent.   We also hereby notify you that, at all times from and after the date of your receipt of the Agent’s Notice as described above, the Agent shall be irrevocably entitled to exercise in our place and stead any and all rights in connection with the Accounts, including, without limitation, (a) the right to specify when payments are to be made out of, or in connection with, the Accounts and (b) the right to require preparation of duplicate monthly bank statements on the Accounts for the Agent’s audit purposes and mailing of such statements directly to an address specified by the Agent.  At all times from and after the date of your receipt of the Agent’s Notice, neither we nor any of our affiliates shall be given any access to the Accounts.   The Agent’s Notice may be personally served or sent by telex, facsimile or U.S. mail, certified return receipt requested, to the address, telex or facsimile number set forth under your signature to this letter agreement (or to such other address, telex or facsimile number as to which you shall notify the Agent in writing).  If the Agent’s Notice is given by telex or facsimile, it will be deemed to have been received when the Agent’s Notice is sent and the answerback is received (in the case of telex) or receipt is confirmed by telephone or other electronic means (in the case of facsimile).  All other notices will be deemed to have been received when actually received or, in the case of personal delivery, delivered.   By executing this letter agreement, you acknowledge the existence of the Agent’s right to dominion and control of the Accounts and its ownership of and security interest in the amounts from time to time on deposit therein and agree that from the date hereof the Accounts shall be maintained by you for the benefit of, and amounts from time to time therein held by you as agent for, the Agent on the terms provided herein.  The Accounts are to be entitled “Albany International Receivables Corporationand ABN AMRO Bank N.V., as Agent for the Purchasers” with the subline “[Name of Originator]”.  Except as otherwise provided in this letter agreement, payments to the Accounts are to be processed in accordance with the standard procedures currently in effect.  All service charges and fees in connection with the Accounts shall continue to be payable by us under the arrangements currently in effect.   By executing this letter agreement, you (a) irrevocably waive and agree not to assert, claim or endeavor to exercise, (b) irrevocably bar and estop yourself from asserting, claiming or exercising and (c) acknowledge that you have not heretofore received a notice, writ, order or other form of legal process from any other party asserting, claiming or exercising, any right of set-off, banker’s lien or other purported form of claim with respect to the accounts or any funds from time to time therein.  Except for your right to payment of your service charge and fees and to make deductions for returned items, you shall have no rights in the Accounts or funds therein, except deductions for service charges, fees and returned or misplaced items.  To the extent you may ever have any additional rights, you hereby expressly subordinate all such rights to all rights of the Agent.   You may terminate this letter agreement by canceling the Accounts maintained with you, which cancellation and termination shall become effective only upon thirty (30) days prior written notice thereof from you to the Agent in the absence of fraud or abuse.  Incoming mail addressed to the Accounts (including, without limitation, any direct funds transfer to the Accounts) received after such cancellation shall be forwarded in accordance with the Agent’s instructions.  This letter agreement may also be terminated upon written notice to you by the Agent stating that the Receivables Sale Agreement is no longer in effect.  Except as otherwise provided in this paragraph, this letter agreement may not be terminated without the prior written consent of the Agent.   This letter agreement contains the entire agreement between the parties with respect to the subject matter hereof, and may not be altered, modified or amended in any respect, nor may any right, power or privilege of any party hereunder be waived or released or discharged, except upon execution by you, us and the Agent of a written instrument so providing.  The terms and conditions of any agreement between us and you (a “Lock-Box Service Agreement”) (whether now existing or executed hereafter) with respect to the lock-box arrangements, to the extent not inconsistent with this letter agreement, will remain in effect between you and us.  In the event that any provision in this letter agreement is in conflict with, or inconsistent with, any provision of any such Lock-Box Service Agreement, this letter agreement will exclusively govern and control.  Each party agrees to take all actions reasonably requested by any other party to carry out the purposes of this letter agreement or to preserve and protect the rights of each party hereunder.   In the event [___] becomes subject to a voluntary or involuntary proceeding under the United States Bankruptcy Code, or if you are otherwise served with legal process which you in good faith believe affects funds in the Account you may suspend disbursements from the Account otherwise required by the terms hereof until such time as you receive an appropriate court order or other assurances satisfactory to you establishing that the funds may continue to be disbursed according to the instructions contained in this Lock-Box Letter.   This letter agreement and the rights and obligations of the parties hereunder will be governed by and construed and interpreted in accordance with the laws of the state of __________.  This letter agreement may be executed in any number of counterparts and all of such counterparts taken together will be deemed to constitute one and the same instrument.   Please indicate your agreement to the terms of this letter agreement by signing in the space provided below.  This letter agreement will become effective immediately upon execution of a counterpart of this letter agreement by all parties hereto.     Very truly yours,       [Name of Originator]             By       Title         Albany International Receivables Corporation             By       Title     Accepted and confirmed as of the date first written above:         ABN AMRO Bank N.V., as Agent     By     Title         By     Title         Address of notice:   ABN AMRO Bank N.V.   Structured Finance, Asset Securitization   135 South LaSalle Street   Chicago, Illinois  60674   Attention:  Purchaser Agent-Amsterdam   Telephone Number:             (312) 904-6263   Telecopy Number:               (312) 904-6376     Acknowledged and agreed to as of the date first written above:   [Name of Bank]     By     Title       Address of notice:                       Annex A to Lock-Box Letter   [Name of Bank]     Re: Albany International Receivables Corporation     Lock Box Numbers_____________     Lock-Box Account Number________   Ladies and Gentlemen:   Reference is made to the letter agreement dated _________________ (the “Letter Agreement”) among [Name of Originator], Albany International Receivables Corporation, the undersigned, as Agent, and you concerning the above-described lock-boxes and lock-box account (collectively, the “Accounts”).  We hereby give you notice that aCollection Agent Replacement Event has occurred and is continuing under the Receivables Sale Agreement (as defined in the Letter Agreement) and of our assumption of dominion and control of the Accounts as provided in the Letter Agreement.   We hereby instruct you not to permit any other party to have access to the Accounts and to make all payments to be made by you out of or in connection with the Accounts directly to the undersigned upon our instructions, at our address set forth above.       Very truly yours,       ABN AMRO Bank N.V.               By       Title                 By       Title     cc:           Albany International Receivables Corporation   Exhibit G   To Receivables Sale Agreement   Compliance Certificate   To:          ABN AMRO Bank N.V., as Agent, and                 each Purchaser   This Compliance Certificate is furnished pursuant to Section 5.1(a)(iii) of the Receivables Sale Agreement, dated as of September 28, 2001 (as amended, supplemented or otherwise modified through the date hereof, the “Sale Agreement”), among Albany International Receivables Corporation(the “Seller”), [Name of Initial Collection Agent] (the “Initial Collection Agent”), the committed purchasers from time to time party thereto (collectively, the “Committed Purchasers”) and Amsterdam Funding Corporation (“Amsterdam” and, together with the Committed Purchasers, the “Purchasers”) and ABN AMRO Bank N.V. as agent for the Purchasers (in such capacity, the “Agent”).  Terms used in this Compliance Certificate and not otherwise defined herein shall have the respective meanings ascribed thereto in the Sale Agreement.   The undersigned hereby represents, warrants, certifies and confirms that:   1.        The undersigned is a duly elected Designated Financial Officer of the undersigned.   2.        Attached hereto is a copy of the financial statements described in Section 5.1(a)(i) or 5.1(a)(ii) of the Sale Agreement.   3.        The undersigned has reviewed the terms of the Transaction Documents and has made, or caused to be made under his/her supervision, a detailed review of the transactions and the conditions of the Seller and the Originators during and at the end of the accounting period covered by the attached financial statements.   4.        The examinations described in paragraph 3 hereof did not disclose, and the undersigned has no knowledge of, the existence of any condition or event which constitutes a Potential Termination Event, during or at the end of the accounting period covered by the attached financial statements or as of the date of this Compliance Certificate, except as set forth below.   5.        Based on the examinations described in paragraph 3 hereof, the undersigned confirms that the representations and warranties contained in Article IV of the Sale Agreement (except that in the case of Reinvestment Purchase no certification of the representation, set forth in Section 4.1(g) or (h) of the Sale Agreement) are true and correct as though made on the date hereof, except as set forth below.   Described below are the exceptions, if any, to paragraphs 4 and 5 listing, in detail, the nature of the condition or event, the period during which it has existed and the action the undersigned has taken, is taking or proposes to take with respect to each such condition or event:   The foregoing certifications, together with the computations set forth in Schedule I hereto and the financial statements delivered with this Compliance Certificate in support hereof, are made and delivered this ____ day of ___________, 200__.       Albany International Corp.                     By       Designated Financial Officer   Exhibit H   Credit and Collection Policy   Exhibit I   Exchange Rates   (Canadian Dollars/US Dollars)   September 2000 0.66860     October 2000 0.65400     November 2000 0.65080     December 2000 0.66140     January 2001 0.66600     February 2001 0.65400     March 2001 0.63940     April 2001 0.64570     May 2001 0.65010     June 2001 0.65920     July 2001 0.65230     August 2001 0.64960   Exhibit J   Bankrupt Obligors  

AMENDMENT NO. 4 TO EMPLOYMENT AGREEMENT AND AMENDMENT NO. 4 TO CHANGE OF CONTROL AGREEMENT                      This Amendment No. 4 to Employment Agreement and Amendment No. 4 to Change of Control Agreement is made as of the 31st day of October, 2000, by and between Stewart Enterprises, Inc., a Louisiana corporation (the "Company"), and Ronald H. Patron (the "Employee"). W I T N E S S E T H:                     WHEREAS, the Company has entered into an Employment Agreement with the Employee dated as of August 1, 1995, which has been previously amended three times (as amended, the "Employment Agreement");                     WHEREAS, the Company has entered into a Change of Control Agreement with the Employee dated as of December 5, 1995, which has been previously amended three times (as amended, the "Change of Control Agreement"); and                     WHEREAS, the Company and the Employee have agreed to an extension of the terms of the Employment Agreement and the Change of Control Agreement, as set forth herein.                     NOW, THEREFORE, for and in consideration of the continued employment of Employee by the Company and the payment of wages, salary and other compensation to Employee by the Company, the parties hereto agree as follows, effective October 31, 2000;                     Section 1.     Except as expressly amended herein, all of the terms and provisions of the Employment Agreement and Change of Control Agreement shall remain in full force and effect.                     Section 2.     Article I, Section 2 of the Employment Agreement is hereby amended to read in its entirety as follows: > >             Employment Term. The term of this Agreement (the "Employment > > Term") shall commence on the Agreement Date and shall continue through > > October 31, 2001, subject to any earlier termination of Employee's status as > > an employee pursuant to this Agreement.                     Section 3.     Article II, Section 2.1(a) of the Change of Control Agreement is hereby amended to read in its entirety as follows: > >             2.1     Employment Term and Capacity after Change of Control. > > (a) If a Change of Control occurs on or before October 31, 2001, then the > > Employee's employment term (the "Employment Term") shall continue through > > the second anniversary of the Change of Control, subject to any earlier > > termination of Employee's status as an employee pursuant to this Agreement.                     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and signed as of the date indicated above.       STEWART ENTERPRISES, INC. By:   /s/ James W. McFarland                                   James W. McFarland            Compensation Committee Chairman       EMPLOYEE:   /s/ Ronald H. Patron                                                           Ronald H. Patron  

Exhibit 10.24 MUTUAL RELEASE AGREEMENT              THIS MUTUAL RELEASE AGREEMENT ("Agreement") is dated for reference purposes and entered into as of December 20, 2000, by BYL BANCORP (the “Company”), a California corporation, BYL BANK GROUP (the “Bank”), a California banking corporation and wholly-owned subsidiary of the Company (collectively referred to herein as “Employer”), and ROBERT UCCIFERRI  ("Employee"). 1.          RECITALS.   1.1 WHEREAS, the Employee entered into an Employment Agreement (the “Employment Agreement”) with the Bank on November 28, 1995, and an Executive Salary Continuation Agreement also on November 28, 1995 (“SCA”);         1.2 WHEREAS, the Company and the Bank have entered into an Agreement and Plan of Reorganization with PBOC Holdings, Inc. and People’s Bank of California dated November 1, 2000 (“Reorganization Agreement”);         1.3 WHEREAS, upon consummation of the Reorganization Agreement, or if the Reorganization Agreement is not executed, then by March 31, 2001, Employee desires to terminate the Agreement with the Company and the Bank, including the release of the Bank for any liability for a change of control of the Bank as defined in paragraph 9(b) of the Agreement, and enter into a consulting agreement with the Company and the Bank, subject to any necessary regulatory approvals;         1.4 WHEREAS, the parties desire that after the termination of the consulting agreement, Employee shall begin to receive payments for ten years as provided in the SCA.         1.5 WHEREAS, Employer and Employee desire to resolve Employee’s employment status, to allow Employee to become a consultant to BYL and the Bank, and to make any and all necessary amendments to Employee’s SCA to accommodate the desires of the parties.              NOW, THEREFORE, IN VIEW OF THE FOREGOING, IN CONSIDERATION FOR THE SETTLEMENT OF CLAIM AND RELEASE CONTAINED HEREIN, AND FOR OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH ARE ACKNOWLEDGED, THE PARTIES AGREE AS FOLLOWS: 2.          SEVERANCE ARRANGEMENT   2.1 Termination of Employment.  In exchange for the consideration contained in this Agreement, the sufficiency of which is hereby acknowledged by Employee, Employee agrees to resign his employment with Employer and terminate the Employment Agreement and hereby release the Employer, as further detailed below, from any liability relating to his employment relationship with the Employer and termination thereof, upon consummation of the Reorganization Agreement, or if the Reorganization Agreement is not executed, then by March 31, 2001,         2.2 Board of Directors.  Upon consummation of the Reorganization Agreement, or if the Reorganization Agreement is not executed, then by March 31, 2001, Employee shall resign from the Board of the Company and the Bank.         2.3 Executive Salary Continuation Agreement and Consulting Agreement. Employee and the Bank have agreed to the SCA dated November 28, 1995.  It is the desire of Employer that Employee’s services be retained as a Consultant and the SCA be amended by a First Amendment to the SCA dated December 20, 2000 (the “First Amendment”).  The SCA and First Amendment are attached hereto as Exhibit “A” and incorporated herein by this reference.  In addition to the SCA and First Amendment, Employee is willing to continue to provide services to Employer as a consultant under a separate Consulting Agreement.  The Consulting Agreement, dated December 20, 2000, which is attached hereto as Exhibit “B” and incorporated herein by this reference provides, in part, that Consultant will receive the annualized sum of  $64,700, payable semi-monthly, plus certain benefits until December 31, 2003.  The SCA and First Amendment provides, in pertinent part, that Employer will pay to Employee, beginning immediately after December 31, 2003, the annualized sum of $64,700, payable semi-monthly, until he attains the age of sixty-seven (67); subject to the conditions and limitations set forth therein.  Employer agrees to undertake the obligations under the SCA and First Amendment and the Consulting Agreement in consideration of Employee agreeing to a full release of any and all claims that Employee has against Employer as provided in this Agreement.         2.4 Indemnification Agreement.  Notwithstanding any other provision of this Agreement, Employer agrees that the Indemnification  Agreement between the Company and Employee dated April 23, 1997, and the Bank and Employee dated June 3, 1998, (the “Indemnification Agreements”) shall not be terminated but shall remain in full force and effect.           2.5 Bank Accruals.  The Bank will expense on a discounted cash flow basis any and all payments needed to fully fund the SCA, which the parties acknowledge is in full force and effect, estimated to be a pre-tax payment of approximately $100,000.  Over the next three years, the Bank agrees to book the remaining accruals to reach the $434,862 retirement liability, estimated to be $97,577.  The Bank shall take no action to jeopardize Consultant’s Salary Continuation Agreement.                3.          SETTLEMENT OF CLAIMS.   3.1 Settlement Amount.  In full and complete settlement of any claims against Employer that Employee has, may have or may claim in the future, Employer agrees to the obligations under the SCA and First Amendment and the Consulting Agreement (the "Settlement Amount").         3.2 Payment of Settlement Amount.  Employee acknowledges that he has been advised that he has twenty-one (21) days to consider this settlement and that he was informed that he has the right to consult with counsel regarding this Agreement.  To the extent Employee has taken less than twenty-one (21) days to consider this Agreement, Employee acknowledges that he has had sufficient time to consider this Agreement and to consult with counsel and that he does not desire additional time. This Agreement is revocable by Employee for a period of seven (7) days following Employee's execution of this Agreement.  The revocation by Employee of this Agreement must be in writing, must specifically revoke this Agreement, and must be received by the Company prior to the eighth (8th) day following the execution of this Agreement by Employee.  This Agreement becomes effective, enforceable and irrevocable on the eighth (8th) day following Employee's execution of the Agreement. Employee represents and agrees that, prior to the execution of this Agreement, Employee has had the opportunity to discuss the terms of this Agreement with legal counsel of his choosing.   3.3 Regulatory Approval.  The validity and enforceability of this Agreement is expressly conditioned upon receipt of any legally required approval by the Federal Deposit Insurance Corporation (“FDIC”) or other applicable bank regulatory agencies.  Without such approval from the Company’s and/or the Bank’s regulators, the Employer’s obligations to pay the Settlement Amount under Section 2 of this Agreement shall be deemed null and void.           3.4 Employee Acknowledgment.  Employee acknowledges and agrees that in the absence of this Agreement, Employee would not be entitled to the Settlement Amount.  Employee further acknowledges and agrees that the Settlement Amount is received in consideration for Employee’s release set forth in Section 4 hereof, including, but not limited to, Employee’s release of any claims under ADEA. 4.          RELEASE.   4.1 Release by Employee.  Employee, for and on behalf of Employee, Employee's heirs, executors, administrators, successors, assigns, Employee's attorneys, and agents of each of the foregoing, and the respective predecessors, successors, assigns, heirs, executors, and administrators of each of the foregoing (collectively, "Employee Releasing Parties") do hereby covenant not to sue and fully and forever remise, release, discharge, and acquit Employer, its employees, present and former affiliates, parent and subsidiary corporations, companies and divisions, the respective present and former directors, stockholders, officers, employees, attorneys, and agents of each of the foregoing, and the respective predecessors, successors, and assigns of each of the foregoing (collectively, "Employer Parties") of, from, and against any and all claims, wages, covenants, suits, actions, demands, obligations, liabilities, indebtedness, accounts, judgments, breaches of contract, breaches of duty or any relationship, acts, omissions, misfeasance, malfeasance, cause or causes of action of every type, nature and kind or description, debts, amounts of money, accounts, compensations, contracts, controversies, promises, damages, costs, losses, and expenses, of every type, kind, nature, description, or character, whether known or unknown, suspected or unsuspected, liquidated or unliquidated, committed or omitted prior to this Agreement, each as though fully set forth herein at length that in any way arise out of, are connected with, or relate to (i) Employee's employment by Employer; (ii) termination of Employee’s employment with Employer; (iii) any violation of any law, statute or regulation by Employer pertaining to Employee's employment including, but not limited to, Title VII of the Civil Rights Act of 1964 and all subsequent amendments thereto, the federal Fair Labor Standards Act, Age Discrimination in Employment Act, as amended by the Older Workers Benefit Protection Act of 1980, Section 1981 of Title 42 of the United States Code, California Labor Code, any California Wage Orders, California Fair Employment and Housing Act, and regulations thereunder; (iv) Employer's breach of contract or other violation of rules by Employer pertaining to Employee's employment including, but not limited to, severance pay, sick leave, holiday pay, vacation pay, life insurance, group medical insurance or any other fringe benefit of the Employer or workers' compensation or disability claims, but not including any rights under the Indemnification Agreement; and (v) any other claim, loss, damages or injury, known or unknown, suspected or unsuspected, liquidated or unliquidated, which arises from any conduct of the Employer during the time of employment of Employee irrespective of the nature of the conduct (collectively "Released Claim(s)").     4.2 Release by Employer.  Employer, for and on behalf of Employer, Employer's attorneys, and agents of each of the foregoing, and its respective predecessors, successors, its employees, present and former affiliates, parent and subsidiary corporations, companies and divisions, the respective present and former directors, stockholders, officers, employees, attorneys, and agents of each of the foregoing, and the respective predecessors, successors, and assigns of each of the foregoing (collectively, "Employer Releasing Parties") do hereby covenant not to sue and fully and forever remise, release, discharge, and acquit Employee, and Employee Releasing Parties of, from, and against any and all claims, wages, covenants, suits, actions, demands, obligations, liabilities, indebtedness, accounts, judgments, breaches of contract, breaches of duty or any relationship, acts, omissions, misfeasance, malfeasance, cause or causes of action of every type, nature and kind or description, debts, amounts of money, accounts, compensations, contracts, controversies, promises, damages, costs, losses, and expenses, of every type, kind, nature, description, or character, whether known or unknown, suspected or unsuspected, liquidated or unliquidated, committed or omitted prior to this Agreement, each as though fully set forth herein at length that in any way arise out of, are connected with, or relate to (i) Employee's employment by Employer; (ii) termination of Employee’s employment with Employer; (iii) any violation of any law, statute or regulation by Employer pertaining to Employee's employment; (iv) Employee's breach of contract or other violation of rules pertaining to Employee's employment, but not including any Employer rights under the SCA and First Amendment, the Consulting Agreement and the  Indemnification Agreement; and (v) any other claim, loss, damages or injury, known or unknown, suspected or unsuspected, liquidated or unliquidated, which arises from any conduct of the Employee during the time of employment of Employee irrespective of the nature of the conduct (collectively "Released Claim(s)"). 5.          CONFIDENTIALITY. Employee agrees that the terms and conditions of this Agreement shall remain confidential as between the parties, and Employee shall not disclose them to any other person except to Employer's executive officers, directors or attorneys, or as required by law.  Without limiting the generality of the foregoing, Employee will not respond to or in any way participate in or contribute to any public discussion, notice or other publicity concerning, or in any way relating to, the execution of this Agreement or the events (including negotiations) which led to its execution.  Without limiting the generality of the foregoing, Employee specifically agrees not to disclose information regarding this Agreement to any current or former employee of Employer, except those senior officers, directors or managers in the organization of Employer who are already aware and have reviewed such Agreement.  The Employee and Employer hereby agree that the sections of this Agreement are severable and that disclosure by Employee of any of the terms and conditions of the Agreement in violation of the foregoing shall constitute a breach of this section of the Agreement and shall not constitute a breach of the entire Agreement which shall survive and be enforceable by its terms.   6.          DENIAL OF ANY VIOLATION.   6.1 No Admission by Employer or Employee.  The acceptance of this Agreement by Employee and Employer shall not be deemed or construed as an admission of liability by Employee, any other Employee Releasing Party, Employer or any other Employer Releasing Party, and Employee hereby acknowledges that Employer and its employees expressly deny liability of any nature whatsoever arising from or related to the subject of this Agreement.  Accordingly, this Agreement resolves all issues between Employer and Employee relating to any claims Employee may have regarding the termination of Employee’s employment.         6.2 Agreement Not Admissible.  Neither this Agreement nor anything in this Agreement shall be construed to be or shall be admissible in any proceeding as evidence of or an admission by the Employer or Employee of any violation of its policies, procedures, state or federal laws or regulations.  This Agreement may be introduced, however, in any proceeding to enforce the Agreement or any provision contained herein.  Such introduction shall be pursuant to an order protecting its confidentiality. 7.          WAIVER.   7.1 General Release by Employee.  In connection with the releases contained in Section 4, only Employee, for Employee and for other Employee Releasing Parties with respect to the matters released by the Employee Releasing Parties, hereby agrees, represents, and warrants that the Released Claim(s) in this Agreement are not limited to matters that are known or disclosed, and Employee, for Employee and for other Employee Releasing Parties, hereby waives any and all rights and benefits that Employee now has, or in the future may have conferred upon Employee, by virtue of any provisions of law (including, but not limited to, the provisions of California Civil Code Section 1542, set forth below) stating that a general release does not extend to claims that a releasing party does not know or suspect to exist in its favor at the time of executing the general release, which if known by it must have materially affected its settlement with the party being released.  Employee, for Employee and other Employee Releasing Parties, hereby acknowledges that Employee has been given the opportunity to consult legal counsel regarding such waiver and such waiver is made with full knowledge and understanding of its consequences and effects.  Employee, for Employee and other Employee Releasing Parties, also hereby acknowledges that such waiver is made with the full knowledge and understanding that California Civil Code Section 1542 provides as follows:                “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED ITS SETTLEMENT WITH THE DEBTOR."   7.2 General Release by Employer.  In connection with the releases contained in Section 4, Employer, for Employer and for other Employer Releasing Parties with respect to the matters released by the Employer Releasing Parties, hereby agrees, represents, and warrants that the Released Claim(s) in this Agreement are not limited to matters that are known or disclosed, and Employer, for Employer and for other Employer Releasing Parties, hereby waives any and all rights and benefits that Employer now has, or in the future may have conferred upon Employer, by virtue of any provisions of law (including, but not limited to, the provisions of California Civil Code Section 1542, set forth below) stating that a general release does not extend to claims that a releasing party does not know or suspect to exist in its favor at the time of executing the general release, which if known by it must have materially affected its settlement with the party being released.  Employer, for Employer and other Employer Releasing Parties, hereby acknowledges that Employer has been given the opportunity to consult legal counsel regarding such waiver and such waiver is made with full knowledge and understanding of its consequences and effects.  Employer, for Employer and other Employer Releasing Parties, also hereby acknowledges that such waiver is made with the full knowledge and understanding that California Civil Code Section 1542 provides as follows:              “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED ITS SETTLEMENT WITH THE DEBTOR."   7.3 Release of Unknown Facts by Employee.  Employee, for Employee and other Employee Releasing Parties, hereby agrees, represents and warrants that Employee realizes and acknowledges that factual matters now unknown to Employee may have given or hereafter may give rise to causes of action, claims, demands, debts, controversies, damages, costs, losses and expenses that are presently unknown, unanticipated, and unsuspected; and Employee further agrees, represents, and warrants that this Release has been negotiated and agreed upon in light of that realization and that, nevertheless, Employee specifically and expressly intends for the release set forth above to extend to such unknown causes of action, claims, demands, debts, controversies, damages, costs, losses and expenses that are in any way set forth in or related to the matters identified hereinabove.           7.4 Release of Unknown Facts by Employer.  Employer, for Employer and other Employer Releasing Parties, hereby agrees, repre­sents and warrants that Employer realizes and acknowledges that factual matters now unknown to Employer may have given or hereafter may give rise to causes of action, claims, demands, debts, controversies, damages, costs, losses and expenses that are presently unknown, unanticipated, and unsuspected; and Employer further agrees, represents, and warrants that this Release has been negotiated and agreed upon in light of that realization and that, nevertheless, Employer specifically and expressly intends for the release set forth above to extend to such unknown causes of action, claims, demands, debts, controversies, damages, costs, losses and expenses that are in any way set forth in or related to the matters identified hereinabove. 8.          EMPLOYEE'S RIGHTS UNDER THE ADEA.   8.1 Consultation With an Attorney.  Employee has the right and is encouraged to consult with an attorney regarding the meaning and legal effect of the provisions of this Agreement.         8.2 Review Period.  Pursuant to Section 3.2 of this Agreement, Employee shall have not less than twenty-one (21) days from the date on which Employee receives a final copy of this Agreement in which to consider the terms of this Agreement.  However, Employee may waive such minimum review period by signing and delivering this Agreement to Employer in advance of the expiration of such 21-day period.         8.3 Waiver of Future Rights and Claims.  Employee's and Employer’s releases and waivers contained in this Agreement shall not cover or relate to any Employee or Employer rights or claims that may arise or result from any transactions or relationship between Employer and Employee that occur after the date of consummation of the Reorganization Agreement.         8.4 Right of Revocation. Pursuant to Section 3.2 of this Agreement, Employee shall have the right to revoke this Agreement at any time during the seven-day period beginning on the date Employee executes this Agreement. 9.          REPRESENTATIONS AND WARRANTIES.   9.1 Representations and Warranties by Employee.  Employee, for Employee and other Employee Releasing Parties, hereby represents and warrants to Employer that:           9.1.1 Employee has carefully read this Agreement, has been given the opportunity to consult legal counsel regarding this Agreement and understands the contents and legal effect of each provision of this Agreement;             9.1.2 Employee has executed this Agreement voluntarily and without any duress or undue influence on the part of, or on behalf of, the parties hereto;             9.1.3 Employee has not previously assigned, encumbered, or in any manner transferred all or any portion of any Released Claim(s) covered by this Agreement;             9.1.4 No representation, warranty, or promise what­soever, express or implied, concerning the subject matter hereof and not contained herein, has been made by Employer, or any other Employer Party, to induce Employee to enter into this Agreement, and Employee has not entered into this Agreement in reliance upon any such representation, warranty, or promise; and             9.1.5 Employee has carefully read and understands the provisions of Section 7, which describes Employee’s rights under the ADEA.         9.2 Representations and Warranties by Employer.  Employer, for itself and other Employer Parties, hereby represents and warrants to Employee that:           9.2.1 It has carefully read this Agreement and understands the contents and legal effect of each provision of this Agreement;             9.2.2 It has executed this Agreement voluntarily and without any duress or undue influence on the part of, or on behalf of, the parties hereto;             9.2.3 It has not previously assigned, encumbered, or in any manner transferred all or any portion of any Released Claim(s) covered by this Agreement; and             9.2.4 No representation, warranty, or promise whatsoever, express or implied, concerning the subject matter hereof and not contained herein, has been made by Employer to induce Employee to enter into this Agreement, and Employee has not entered into this Agreement in reliance upon any such representa­tion, warranty, or promise. 10.        MISCELLANEOUS.   10.1 No Warranty of Tax Treatment of Consideration.  Employer makes no warranty or representation as to the tax effect or treatment of any consideration paid Employee pursuant to this Agreement.  Employee shall be responsible to obtain independent tax advice to determine if the monies paid hereunder constitute taxable income and Employee shall indemnify and hold the Employer harmless with respect to any taxes due and owing.           10.2 Entire Agreement.  This Agreement contains the entire agreement and understanding concerning the subject matter of this Agreement, supersedes and replaces all prior and contemporaneous negotiations and agreements between the parties hereto, whether written or oral.  There are no other agreements, representations or warranties, written or oral, by any party hereto to any other party hereto concerning the subject matter of this Agreement.  Any amendment, modification or change to this Agreement shall not be binding unless set forth in a writing duly executed by all parties to be bound or affected by such amendment, modification or change.         10.3 Jurisdiction.  This Agreement shall be deemed to be an agreement made under the laws of the State of California and for all purposes shall be governed by and construed in accordance with such laws.         10.4 Headings.  The headings contained in this Agreement are for ease of reference only, and may not be relied upon in construing or interpreting any provision hereof.         10.5 Attorneys' Fees.  In the event that any party hereto, or any of them, shall bring any action or proceeding against another party hereto, or any of them, with respect to a Released Claim(s) covered by this Agreement, then the prevailing party or parties in such action shall be entitled to recover all reasonable costs of litigation, including reasonable attorneys' fees and costs, in such amount as may be determined by the court having jurisdiction, including matters on appeal.         10.6 Counterparts.  This Agreement may be executed in one or more counterparts or duplicate originals, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument.         10.7 Survival of Representations and Warranties.  The representations and warranties contained herein shall survive the termination of this Agreement.         10.8 Severability.  In case any provision of this Agreement shall be invalid, illegal or unenforceable, such provision shall be severable from the rest of this Agreement and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.         10.9 Modifications.  This Agreement cannot be changed, modified or supplemented except in a writing signed by all of the parties hereto.                IN WITNESS WHEREOF, the undersigned has executed and delivered this Settlement and Release Agreement as of the date first set forth hereinabove. Dated:  December 26, 2000       /s/ Robert Ucciferri     --------------------------------------------------------------------------------     ROBERT UCCIFERRI                 Dated:  December 26, 2000_           BYL BANCORP,   BYL BANK GROUP, a California corporation   a California state banking corporation       By  /s/ H. Rhoads Martin   By /s/ H. Rhoads Martin   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------     H. Rhoads Martin H. Rhoads Martin     Chairman of the Board Chairman of the Board    

FIRST AMENDMENT TO THIRD AMENDED AND RESTATED LOAN AGREEMENT               THIS FIRST AMENDMENT TO THIRD AMENDED AND RESTATED LOAN AGREEMENT is dated and effective as of March 31, 2001 (the "First Amendment"), among OMNI ENERGY SERVICES CORP., a Louisiana corporation (the "Borrower"), American Aviation L.L.C., a Missouri limited liability company ("Aviation"), OMNI ENERGY SERVICES CANADA CORP., an Alberta, Canada corporation formerly known as Hamilton Drill Tech Inc. ("Omni Canada"), OMNI ENERGY SERVICES-ALASKA, INC., an Alaska corporation ("Omni Alaska"; Aviation, Omni Canada, and Omni Alaska are herein collectively called the "Guarantor"), and HIBERNIA NATIONAL BANK, a national banking association (the "Bank"). RECITAL             1.             The Borrower, each Guarantor, and the Bank have heretofore entered into that certain Third Amended and Restated Loan Agreement dated as of October 30, 2000 ("Loan Agreement"), pursuant to which the Bank established in favor of the Borrower certain credit facilities consisting of an Amortizing Term Loan and Revolving Loans;             2.             The Loans by the Bank to the Borrower are guaranteed, in solido, by Aviation, Omni Canada, and Omni Alaska as the Guarantors;             3.             The Borrower, with the consent of the Guarantors, has agreed to make a $2,000,000.00 pay-down on the Amortizing Term Loan.             4.             In connection with the aforementioned pay-down, the Borrower, with the consent of each Guarantor, has requested that the Bank (i) waive certain Advance Rate reductions, (ii) restructure all subsequent Advance Rates, (iii) revise the definition of Qualified Receivables, (iv) extend the Termination Date from January 31, 2002 to August 31, 2002, (v) reduce the Applicable Margin from 3.0% to 1.50%, and (vi) make certain other changes to the Loan Agreement; and             5.             Subject to the terms and conditions of the Loan Agreement, as amended by this First Amendment, the Bank is willing to honor the Borrower's requests.             NOW, THEREFORE, the parties hereto, in consideration of the mutual covenants hereinafter set forth and intending to be legally bound hereby, agree as follows:             A.             Defined Terms. Capitalized terms used herein which are defined in the Loan Agreement are used herein with such defined meanings, except as may be expressly set forth in this First Amendment.             B.             Defined Terms Revision.                         (1)    The definition of the term "Advance Rate" appearing in Section 1.1. of the Loan Agreement is hereby deleted and replaced with the following:  > > > > > > "Advance Rate" > > > > > > > > > > > > shall mean the following: The Advance Rate is a fixed percentage > > > > > > that will reduce over time. In the event the Borrower does not > > > > > > receive proceeds from that certain New York Life Insurance Policy > > > > > > No. 46 859 506 on the life of David A. Jeansonne prior to May 31, > > > > > > 2001, then the Advance Rate will be as follows: > > > > > > > > > > > > > > > > > > > > > > > > (a) from the date of the First Amendment through May 31, 2001, the > > > > > > Advance Rate will be 50%; > > > > > > > > > > > > (b) for the month of June 2001, the Advance Rate will be 40%; > > > > > > > > > > > > (c) for the month of July 2001, the Advance Rate will be 30%; > > > > > > > > > > > > (d) for the month of August 2001, the Advance Rate will be 20%; > > > > > > > > > > > > (e) for the month of September 2001, the Advance Rate will be 10%; > > > > > > and > > > > > (f) for the month of October 2001 and thereafter, the Advance Rate > > > > > will be 0.00%. > > > > > > In the event the Borrower receives proceeds from that certain New York > > > > Life Insurance Policy No. 46 859 506 on the life of David A. Jeansonne > > > > prior to May 31, 2001, then the Advance Rates set forth in (a) through > > > > (f) above shall not apply. Instead, the Advance Rate will be as follows: > > > > > > > (g) from the date of the First Amendment through the day on which the > > > > > Borrower receives the said life insurance proceeds (the "Receipt > > > > > Period"), the Advance Rate will be 50%; > > > > > > > > > > (h) commencing on the first day of the month after the Receipt Period > > > > > and continuing through the end of that month (the "Second Period"), > > > > > the Advance Rate will be 40%; > > > > > > > > > > (i) commencing on the first day of the month after the Second Period > > > > > and continuing until the last day of such month (the "Third Period"), > > > > > the Advance Rate will be 30%; > > > > > > > > > > (j) commencing on the first day of the month after the Third Period > > > > > and continuing until the last day of such month (the "Fourth Period"), > > > > > the Advance Rate will be 20%; > > > > > > > > > > (k) commencing on the first day of the month after the Fourth Period > > > > > and continuing until the last day of such month (the "Fifth Period"), > > > > > the Advance Rate will be 10%; and > > > > > > (l) commencing on the first day of the month after the Fifth Period > > > > > > and continuing thereafter, the Advance Rate will be 0.00%.                         (2)     The definition of the term "Amortizing Term Note" appearing in Section 1.1. of the Loan Agreement is hereby deleted and replaced with the following: > > > > > > "Amortizing Term Note" shall mean that certain promissory note of > > > > > > even date with the First Amendment by Borrower in the principal > > > > > > amount of $4,919,611.00, payable to the order of the Bank with > > > > > > interest at the Base Rate plus the Applicable Margin, together with > > > > > > all renewals, extensions, and refinancing of said indebtedness. The > > > > > > Amortizing Term Note constitutes a renewal and restructure of that > > > > > > certain promissory note by Borrower dated October 30, 2000 in the > > > > > > principal amount of $7,466,111.00 payable to the order of Bank.                         (3)     The definition of the term "Applicable Margin" appearing in Section 1.1. of the Loan Agreement is hereby deleted and replaced with the following: > > > > > > "Applicable Margin" shall mean 1.50%.                         (4)     The term "Qualified Receivables", as defined in the Loan Agreement, has historically meant eighty percent (80%) of the Receivables of the Borrower and/or the Guarantor. In order to revise temporarily the percentage of Receivables to be used in calculating Qualified Receivables, the definition of the term "Qualified Receivables" appearing in Section 1.1. of the Loan Agreement is hereby deleted and replaced with the following: > > > > > > "Qualified Receivables" > > > > > > > > > > > > shall mean a fixed percentage (as set forth below) of the > > > > > > Receivables of the Borrower and/or the Guarantor, carried on their > > > > > > respective books of account, which, on the date as of which the > > > > > > determination is made, (a) are subject to a first priority perfected > > > > > > Encumbrance in favor of the Bank, (b) arose in the ordinary course > > > > > > of business of the Borrower and/or the Guarantor, (c) arose from the > > > > > > sale of goods or performance of services by the Borrower and/or the > > > > > > Guarantor, (d) are evidenced by an "invoice" (i.e., an invoice, > > > > > > shipping order or similar writing), (e) are not subject to setoff, > > > > > > counterclaim, defense, or a dispute of any kind or nature, (f) are > > > > > > not more than 90 days old, (g) are payable by Persons other than any > > > > > > Person who is an affiliate (as defined in accordance with GAAP) of > > > > > > the Borrower and/or the Guarantor or an officer or director of the > > > > > > Borrower and/or the Guarantor or an officer or director of an > > > > > > affiliate of the Borrower and/or the Guarantor, (h) are not payable > > > > > > by the United States of America or any agency or department thereof > > > > > > (unless such Receivable has been assigned to the Bank pursuant to a > > > > > > properly perfected assignment under the Federal Assignment of Claims > > > > > > Act, 31 U.S.C. § 3727), (i) do not by their own terms prohibit the > > > > > > collateral assignment thereof or require the consent of the obligor > > > > > > thereon to any collateral assignment thereof, (j) do not arise out > > > > > > of a transaction with an account debtor outside the United States of > > > > > > America (unless covered by a letter of credit acceptable to the > > > > > > Bank), (k) are not Receivables due by a Person from whom over 50% of > > > > > > its entire accounts receivable balance with the Borrower or the > > > > > > Guarantor is unpaid for more than 90 days past the invoice date(s) > > > > > > related thereto, (l) are not credit balances, (m) are not > > > > > > Receivables which the Bank believes, in its sole credit judgment > > > > > > reasonably applied, that collection of such Receivables is insecure > > > > > > or that such Receivables may not be paid by reason of the account > > > > > > debtor's financial inability to pay or that such Receivables are > > > > > > otherwise unacceptable collateral, (n) are not that portion of the > > > > > > Receivables due by a single Person which are in excess of 25% of all > > > > > > of the Receivables due to the Borrower and/or the Guarantor, (o) > > > > > > commencing 90 days from the date hereof, are owed by a Person who > > > > > > has either signed an acceptance of the work giving rise to the > > > > > > Receivable or signed an acceptance of the proposal for work giving > > > > > > rise to the Receivable, and (p) Receivables that have been sold, > > > > > > assigned or factored to another entity. For purposes of this > > > > > > Agreement, a Receivable is 90 days old on the 90th day after the > > > > > > date of the invoice evidencing such Receivable (regardless of the > > > > > > due date of such invoice). The fixed percentage of Receivables shall > > > > > > be: (i) from the date of the First Amendment through May 31, 2001, > > > > > > or through the date on which the Borrower receives proceeds from > > > > > > that certain New York Life Insurance Policy No. 46 859 506 on the > > > > > > life of David A. Jeansonne, whichever occurs first, the fixed > > > > > > percentage shall be eighty-five percent (85%); and (ii) thereafter, > > > > > > the fixed percentage shall be eighty percent (80%).                         (5)     The definition of the term "Termination Date" appearing in Section 1.1. of the Loan Agreement is hereby deleted and replaced with the following: > > > > > > "Termination Date" > > > > > > > > > > > > shall mean, with respect to the Bank's Commitment the earlier to > > > > > > occur of (i) August 31, 2002, or (ii) the date of termination of the > > > > > > Commitment pursuant to Article XII hereof. > > > > > > > > > > > > > > > > > > > > > > > >                           (6)     The following new definition is hereby added to Section 1.1. of the Loan Agreement: > > > > > > "First Amendment" > > > > > > > > > > > > shall mean that certain First Amendment to Third Amended and > > > > > > Restated Loan Agreement dated as of March 31, 2001 by and among the > > > > > > Borrower, Aviation, Omni Canada, Omni Alaska, and the Bank.             C.            Revisions to Article III (Term Loan)                         1.     Section 3.1. of the Loan Agreement is hereby deleted and restated as follows: > > > > Section 3.1. The Amortizing Term Loan. > > > > > > > > Subject to the terms, conditions and provisions of the Agreement, as > > > > amended by the First Amendment, the Bank agrees to renew the Amortizing > > > > Term Loan to the Borrower, which Amortizing Term Loan shall constitute a > > > > renewal and restructure of the indebtedness evidenced by the promissory > > > > note of Borrower dated October 30, 2000 in the principal amount of > > > > $7,466,111.00. > > > > > > > > > > > > > > > >                           2.     Section 3.2. of the Loan Agreement is hereby deleted and restated as follows: > > > > Section 3.2. The Amortizing Term Note. The Borrower's indebtedness to > > > > the Bank pursuant to the Amortizing Term Loan shall be evidenced by the > > > > Amortizing Term Note. The Amortizing Term Note shall be due and payable > > > > as follows: (i) in monthly principal payments of $100,000.00 each > > > > payable on the last day of each month commencing April 30, 2001, and > > > > continuing through the Termination Date; and (ii) in weekly installments > > > > of accrued unpaid interest, payable on Monday of each week and on the > > > > Termination Date; provided, however, if the Borrower's Debt to EBITDA > > > > ratio is equal to or less than 5:00 to 1.0 (and such ratio is > > > > maintained), then Borrower will be permitted to make monthly payments of > > > > accrued unpaid interest.             D.            Revision to Article V (Fees). Article V of the Loan Agreement is hereby amended and supplemented to include the following new and additional fee: > > > > Section 5.4. Upfront Fee > > > > > > > > . In consideration of the Bank's agreement to enter into the First > > > > Amendment, the Borrower shall pay the Bank, upon execution of the First > > > > Amendment by the Borrower, a fee equal to 0.50% of the $9,919,611, which > > > > fee amount is $49,598.00.             E.             Revisions to Affirmative Covenants.                         1.     Section 10.1 (g) of the Loan Agreement is hereby deleted and restated as follows: > > > > (g) within fifteen (15) days following the end of each calendar month, > > > > on a weekly basis, each time the Borrower submits a Request for Advance, > > > > and at any other time upon the request by the Bank, a borrowing base > > > > certificate showing the Borrower's total Receivables, minus ineligibles, > > > > total Qualified Receivables, in form and substance acceptable to the > > > > Bank, accompanied by such supporting documents as may be required by the > > > > Bank, with the Borrower's borrowing base certificate to be certified by > > > > the chief financial officer of the Borrower,                         2.     Section 10.1. of the Loan Agreement is hereby amended and supplemented to include the following new provision as subparagraph (j): > > > > (j) on a weekly basis a cash needs report in substantially the same form > > > > as submitted to the Bank prior to the date of the First Amendment.                         3.     Section 10.9. (a) of the Loan Agreement is hereby deleted and replaced with the following: > > > > > > (a) Minimum EBITDA. The Borrower shall maintain a minimum EBITDA on > > > > > > a cumulative basis as follows: Quarter Ended  Minimum EBITDA -------------------------------------------------------------------------------- 3/31/01  $ 1 6/30/01  $ 500,000 9/30/01  $1,000,000 12/31/01   $1,750,000 3/31/02  $2,500,000 6/30/02  $3,000,000                         4.     Section 10.9 (b) of the Loan Agreement is hereby deleted and replaced with the following: > > > > > > (b) Maximum Debt to EBITDA. The Borrower shall maintain a maximum > > > > > > Debt to EBITDA ratio on a cumulative basis as follows: Quarter Ended  Minimum EBITDA -------------------------------------------------------------------------------- 3/31/01 11:1 6/30/01 10:1 9/30/01   8:1 12/31/01    5:1 3/31/02   5:1 6/30/02   4:1             F.             Revision to Negative Covenants. Section 11.7 of the Loan Agreement is hereby deleted.           G.             Revision to Events of Default. Section 12.1. of the Loan Agreement is hereby amended and supplemented to include the following new and additional Event of Default: > > > > > > Change in Executive Management. Any change in the executive management of the Borrower.             H.             Confirmation of Collateral Documents. All of the liens, privileges, priorities and equities existing and to exist under and in accordance with the terms of the Collateral Documents are hereby renewed, extended and carried forward as security for all of the Loans and all other debts, obligations and liabilities of the Borrower to the Bank. Further, the Guarantors hereby consent to the terms and conditions of this First Amendment, and confirm their solidary liability for all Loans.             I.             Covenants and Conditions Precedent. The agreements and obligations of the Bank as set forth in this First Amendment are subject to satisfaction of the following covenants and conditions precedent as of the date of execution of this First Amendment and the continued satisfaction of said covenants and conditions precedent:                     (1)     The Borrower and each Guarantor shall have executed and delivered to the Bank this First Amendment, the Borrower shall have executed the renewal promissory note evidencing the renewed Amortizing Term Note, and the Borrower shall have executed an allonge to the Revolving Note, all in form and substance satisfactory to the Bank;                     (2)     The representations, warranties, and covenants of the Borrower and the Guarantors as set forth in the Loan Agreement, as amended by this First Amendment, or in any Related Document furnished to the Bank in connection herewith, shall be and remain true and correct;                     (3)     The Bank shall have received certified resolutions of the Borrower and the Guarantors authorizing the execution of all documents and instruments contemplated by this First Amendment;                      (4)    There shall have occurred no Default and/or Material Adverse Change;                     (5)     The Borrower shall have paid to the Bank's counsel, Liskow & Lewis, the sum of $12,856.11 for outstanding legal fees; and                      (6)     In addition to the foregoing, the following conditions precedent must be satisfied by the Borrower upon execution of this First Amendment, and satisfactory evidence thereof must be delivered to the Bank: (i) Borrower shall deliver to Bank the sum of $2,000,000.00 for applications to the Amortizing Term Loan (prior to the renewal thereof as set forth in this First Amendment), resulting in a principal reduction of the existing Amortizing Term Note, from $6,919,611 to $4,919,611; (ii) Advantage Capital Group shall have released (or the Borrower shall have paid) all outstanding indebtedness owed by the Borrower to the Advantage Capital Group, and the Advantage Capital Group shall have released and terminated its second lien on Borrower's and Guarantor's assets; (iii) There shall exist no Subordinated Debt; (iv) The Borrower shall have not less than $1,000,000 in working capital (as defined in Section 10.9. (c) of the Loan Agreement); and (v)             All outstanding interest, fees and expenses due Bank under the Loan Agreement, as amended by this First Amendment, shall be paid to Bank by Borrower. Bank reserves the right, in its sole discretion, to waive in writing compliance with any of the foregoing conditions and covenants. A violation of any of the foregoing conditions and covenants shall constitute an Event of Default.             J.             Representation. On and as of the date hereof, and after giving effect to this First Amendment, the Borrower and each Guarantor confirm, reaffirm and restate the representations and warranties set forth in the Loan Agreement and the Collateral Documents; provided, that each reference to the Loan Agreement herein shall be deemed to include the Loan Agreement as amended by this First Amendment.             K.             Warrants. The Borrower hereby confirms the option in favor of Bank to purchase 4,545 shares of stock issued by Borrower at a strike price of $1.50 per share. The term of the option shall last until January 31, 2002; provided, however, any extension of the Termination Date (as defined in the Loan Agreement) by Bank and Borrower shall also act as an extension of the term of the said option.             L.             Payment of Expenses. The Borrower agrees to pay or reimburse the Bank for all legal fees and expenses of counsel to the Bank in connection with the transactions contemplated by this First Amendment.            M.             WAIVER OF DEFENSES; RELEASE OF LIABILITIES. IN CONSIDERATION OF THE BANK'S EXECUTION OF THIS FIRST AMENDMENT, THE BORROWER AND THE GUARANTORS DO HEREBY IRREVOCABLY WAIVE ANY AND ALL CLAIMS, CAUSES OF ACTION, AND/OR DEFENSES TO PAYMENT ON ANY INDEBTEDNESS OWED BY ANY OF THEM TO THE BANK THAT MAY EXIST AS OF THE DATE OF EXECUTION OF THIS FIRST AMENDMENT. FURTHER, BORROWER AND THE GUARANTORS HEREBY AGREE THAT ALL DISPUTES AND CLAIMS WHATSOEVER OF ANY KIND OR NATURE WHICH BORROWER AND/OR ANY OF THE GUARANTORS PRESENTLY HAS OR MAY HAVE AGAINST BANK, WHETHER PRESENTLY KNOWN OR UNKNOWN, WHICH BORROWER AND/OR ANY OF THE GUARANTORS COULD HAVE ASSERTED AGAINST BANK, ARE FULLY AND FINALLY RELEASED, COMPROMISED AND SETTLED. BORROWER AND THE GUARANTORS, INDIVIDUALLY AND FOR THEMSELVES, THEIR, SUCCESSORS IN INTEREST AND ASSIGNS, DO HEREBY EXPRESSLY RELEASE AND FOREVER RELIEVE, DISCHARGE AND GRANT FULL ACQUITTANCE TO BANK FOR AND FROM ANY AND ALL CAUSES OF ACTION, SUITS, CLAIMS, DEBTS, OBLIGATIONS OR LIABILITIES OF ANY NATURE WHATSOEVER, KNOWN OR UNKNOWN, ALLEGED OR NOT ALLEGED, WHICH BORROWER AND/OR ANY OF THE GUARANTORS HAS OR MAY HAVE AGAINST BANK, ITS AGENTS, OFFICERS, EMPLOYEES, DIRECTORS AND SHAREHOLDERS AS OF THE DATE HEREOF. ACCEPTANCE OF THE PROCEEDS OF EACH REVOLVING LOAN AFTER THE DATE HEREOF SHALL CONSTITUTE A RATIFICATION, ADOPTION AND CONFIRMATION BY BORROWER AND GUARANTORS OF THE FOREGOING GENERAL RELEASE OF RELEASED CLAIMS AND LIABILITIES THAT ARE BASED IN WHOLE OR IN PART ON FACTS, WHETHER OR NOT KNOWN OR UNKNOWN, EXISTING ON OR PRIOR TO THE DATE OF RECEIPT OF ANY SUCH REVOLVING LOAN. THIS WAIVER AND RELEASE SHALL BE CONSTRUED TO HAVE THE BROADEST POSSIBLE SCOPE.             N.             Amendments. THE LOAN AGREEMENT AND THIS FIRST AMENDMENT ARE CREDIT OR LOAN AGREEMENTS AS DESCRIBED IN LA. R.S. 6:§1121, ET SEQ. THERE ARE NO ORAL AGREEMENTS BETWEEN THE BANK, THE BORROWER, OMNI ALASKA, AVIATION, AND OMNI CANADA. THE LOAN AGREEMENT, AS AMENDED BY THIS FIRST AMENDMENT, SETS FORTH THE ENTIRE AGREEMENT OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDES ALL PRIOR WRITTEN AND ORAL UNDERSTANDINGS BETWEEN THE BORROWER, AVIATION, OMNI ALASKA, OMNI CANADA AND THE BANK, WITH RESPECT TO THE MATTERS HEREIN SET FORTH. THE LOAN AGREEMENT, AS AMENDED BY THIS FIRST AMENDMENT, MAY NOT BE MODIFIED OR AMENDED EXCEPT BY A WRITING SIGNED AND DELIVERED BY THE BORROWER, AVIATION, OMNI ALASKA, OMNI CANADA AND THE BANK.             O.             Governing Law: Counterparts. This First Amendment shall be governed by and construed in accordance with the laws of the State of Louisiana. This First Amendment may be executed in any number of counterparts, all of which counterparts, when taken together, shall constitute one and the same instrument.               P.             Continued Effect. Except as expressly modified herein, the Loan Agreement shall continue in full force and effect. The Loan Agreement as amended by this First Amendment is hereby ratified and confirmed by the parties hereto.   (The remainder of the page has been intentionally left blank.)                   IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be executed and delivered as of the date hereinabove provided by the authorized officers each hereunto duly authorized. OMNI ENERGY SERVICES CORP. By: Name: Burton T. Zaunbrecher Title: Vice President and Chief Operating Officer AMERICAN AVIATION L.L.C. By: Omni Energy Services Corp., as Sole Member By: Name: Burton T. Zaunbrecher Title: Vice President and Chief Operating Officer OMNI ENERGY SERVICES CANADA CORP. (f/k/a HAMILTON DRILL TECH INC.) By: Name: Burton T. Zaunbrecher Title: Vice President and Chief Operating Officer OMNI ENERGY SERVICES - ALASKA, INC. By: Name: Burton T. Zaunbrecher Title: Vice President and Chief Operating Officer HIBERNIA NATIONAL BANK By: Name: Tammy M. Angelety Title: Vice President

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.2 This instrument and the rights and obligations evidenced hereby are subordinate in the manner and to the extent set forth in that certain Subordination and Intercreditor Agreement dated as of November 26, 2001 among Purchaser (as defined below), the Company (as defined below) and LaSalle Bank National Association, to the indebtedness (including interest) owed by the Company pursuant to that certain Amended and Restated Credit Agreement dated as of August 14, 2001 among the Company and LaSalle Bank National Association, as such Credit Agreement has been and hereafter may be amended, supplemented or otherwise modified from time to time and to indebtedness refinancing the indebtedness under that agreement as contemplated by the Subordination and Intercreditor Agreement; and each holder of this instrument, by its acceptance hereof, irrevocably agrees to be bound by the provisions of the Subordination and Intercreditor Agreement. CTN MEDIA GROUP, INC. SUBORDINATED BRIDGE NOTE       $1,500,000.00   November 26, 2001     FOR VALUE RECEIVED, CTN Media Group, Inc., a Delaware corporation (the "Company"), hereby promises to pay to the order of U-C Holdings, L.L.C. ("Purchaser") the principal sum of     One Million Five Hundred Thousand and 00/100 Dollars ($1,500,000.00) together with interest thereon calculated from the date hereof in accordance with the provisions of this Note.     This Note was issued pursuant to a Subordinated Bridge Note Purchase Agreement, dated as of November 26, 2001 (as amended and modified from time to time, the "Purchase Agreement"), between the Company and certain investors, and this Note is one of the "Notes" referred to in the Purchase Agreement. The Purchase Agreement contains terms governing the rights of the holder of this Note, and all provisions of the Purchase Agreement are hereby incorporated herein in full by reference. Except as otherwise indicated herein, capitalized terms used in this Note have the same meanings set forth in the Purchase Agreement.     1.  Payment of Interest. Except as otherwise expressly provided in Section 2.06 or Section 5.02 of the Purchase Agreement, interest shall accrue at the rate of twelve percent (12%) per annum (computed on the basis of a 360-day year and the actual number of days elapsed in any year) on the unpaid principal amount of this Note outstanding on a daily basis, or (if less) at the highest rate then permitted under applicable law. The Company shall pay to the holder of this Note all accrued interest on the earlier to occur of 90 days following (a) the scheduled maturity of the indebtedness owed by the Company pursuant to that certain Amended and Restated Credit Agreement dated as of August 14, 2001 among the Company and LaSalle Bank National Association, as amended, supplemented or modified from time to time (the "Credit Agreement"), or (b) the discharge of the indebtedness owed by the Company pursuant to the Credit Agreement (the "Maturity Date"), unless the Note has been converted prior to the Maturity Date pursuant to Section 2.06 of the Purchase Agreement. Unless prohibited under applicable law, in accordance with Section 2.06 of the Purchase Agreement, after the Commitment Termination Date, any accrued but unpaid interest shall bear interest at the rate of eighteen percent (18%) per annum (computed on the basis of a 360-day year and the actual number of days elapsed in any year) on the unpaid interest on a daily basis, or (if less) at the highest rate then permitted under applicable law. Interest shall accrue on any principal payment due under this Note until such time as payment therefor is actually delivered to the holder of this Note.     2.  Payment of Principal. The Company shall pay the principal amount of $1,500,000.00 (or such lesser principal amount then outstanding) to the holder of this Note on the Maturity Date, together with all accrued and unpaid interest on the principal amount being repaid, unless this Note has been -------------------------------------------------------------------------------- converted prior to the Maturity Date pursuant to the terms of this Note and the Purchase Agreement. In accordance with Section 2.06 of the Purchase Agreement, any principal amount which is outstanding after the Commitment Termination Date shall bear interest at the rate of eighteen percent (18%) per annum (computed on the basis of a 360-day year and the actual number of days elapsed in any year) on the unpaid principal amount of this Note outstanding on a daily basis, or (if less) at the highest rate then permitted under applicable law.     3.  Prepayment. The Company may prepay amounts due on this Note in whole or in part without penalty or premium at any time after three Business Days' notice to the holder so long as such holder has not elected to convert this Note prior to the date of prepayment. Any payment of principal by the Company will be accompanied by all accrued and unpaid interest on the principal sum being repaid. The holder of this Note will note all partial payments of principal and accompanying payments of interest on the face or reverse side of this Note.     4.  Security Interest. The Company's obligations under this Note and under the Purchase Agreement are secured by security interests and liens granted under the Subordinated Security Agreement, which security interests and liens of are subordinate to the security interests and liens of LaSalle Bank National Association.     5.  Transfer and Exchange; Replacement; Cancellation.     5.1. Transfer and Exchange. Subject to the restrictions on transfer set forth in the Purchase Agreement and in the Subordination Agreement, upon surrender of any Note for transfer or for exchange to the Company at its principal office, the Company at its expense will (subject to the conditions set forth herein and in the Purchase Agreement) execute and deliver in exchange therefor a new Note or Notes, as the case may be, as requested by the holder or transferee, which aggregate the unpaid principal amount of such Note, issued as such holder or transferee may request, dated so that there will be no gain or loss of interest on such surrendered Note and otherwise of like tenor. The issuance of new Notes shall be made without charge to the holder(s) of the surrendered Note for any issuance tax in respect thereof or other cost incurred by the Company in connection with such issuance.     5.2. Replacement. Upon receipt of evidence reasonably satisfactory to the Company (an affidavit of the holder of this Note shall be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any Note and, in the case of any such loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the Company (provided that, if the holder is a financial institution or other institutional investor, its own agreement shall be satisfactory), or, in the case of any such mutilation, upon the surrender of such Note to the Company at its principal office, the Company shall (at its expense) execute and deliver, in lieu thereof, a new Note of the same class and representing the same rights represented by such lost, stolen, destroyed or mutilated Note and dated so that there will be no loss of interest on such Note. Any Note in lieu of which any such new Note has been so executed and delivered by the Company shall not be deemed to be an outstanding Note for any purpose of the Purchase Agreement.     5.3. Cancellation. After all principal, accrued interest, premium and all other amounts at any time owed on this Note have been paid in full, this Note shall be surrendered to the Company for cancellation.     6.  Place of Payment. Payments of principal, interest and other amounts shall be made by wire transfer of immediately available funds to the account of the holder hereof as specified by prior written notice to the Company. Any payment received by the holder of this Note after 1:00 P.M. (Chicago time) on any day, will be deemed to have been received on the next following Business Day.     7.  Business Days. If any payment is due, or any time period for giving notice or taking action expires, on a day which is not a Business Day, the payment shall be due and payable on, and the time 2 -------------------------------------------------------------------------------- period shall automatically be extended to, the next Business Day immediately following, and interest shall continue to accrue at the required rate hereunder until any such payment is made.     8.  Governing Law. This Note shall be governed by and construed in accordance with the domestic laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.     9.  Usury Laws. It is the intention of the Company and the holder of this Note to conform strictly to all applicable usury laws now or hereafter in force, and any interest payable under this Note shall be subject to reduction to the amount not in excess of the maximum legal amount allowed under the applicable usury laws as now or hereafter construed by the courts having jurisdiction over such matters. If the maturity of this Note is accelerated by reason of voluntary prepayment by the Company or otherwise, then earned interest may never include more than the maximum amount permitted by law, computed from the date hereof until payment, and any interest in excess of the maximum amount permitted by law shall be canceled automatically and, if theretofore paid, shall at the option of the holder hereof either be rebated to the Company or credited on the principal amount of this Note, or if this Note has been paid, then the excess shall be rebated to the Company. The aggregate of all interest (whether designated as interest, service charges, points or otherwise) contracted for, chargeable, or receivable under this Note shall under no circumstances exceed the maximum legal rate upon the unpaid principal balance of this Note remaining unpaid from time to time. If such interest does exceed the maximum legal rate, it shall be deemed a mistake and such excess shall be canceled automatically and, if theretofore paid, rebated to the Company or credited on the principal amount of this Note, or if this Note has been repaid, then such excess shall be rebated to the Company. * * * * * * 3 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the undersigned has duly executed this Subordinated Bridge Note as of the date first written above.     CTN MEDIA GROUP, INC.     By:   /s/ NEIL H. DICKSON    -------------------------------------------------------------------------------- Neil H. Dickson Its: Chief Operating Officer 4 -------------------------------------------------------------------------------- QuickLinks CTN MEDIA GROUP, INC. SUBORDINATED BRIDGE NOTE

ALBANY INTERNATIONAL CORP.   EXECUTIVE DEFERRED COMPENSATION PLAN*   PLAN AND ELECTION AGREEMENT   -------------------------------------------------------------------------------- * Amended and Restated as of June 15, 2001. Reflects Amendments dated 2/11/97, 2/10/98, 5/25/01, 6/15/01 and 8/8/01.   TABLE OF CONTENTS   I. PURPOSE     II. DEFINITIONS AND CERTAIN PROVISIONS     III. PARTICIPATION AND COMPENSATION REDUCTION     IV. BENEFITS     V. CLAIMS FOR BENEFITS PROCEDURE     VI. ADMINISTRATION     VII. AMENDMENT AND TERMINATION     VIII. MISCELLANEOUS       ALBANY INTERNATIONAL CORP. EXECUTIVE DEFERRED COMPENSATION PLAN   I.              PURPOSE   The Albany International Corp. Executive Deferred Compensation Plan (the “Plan”) provides designated executives of Albany International Corp. (the “Company”) with a tax-favored investment opportunity.  By providing a means whereby compensation may be deferred into the future, the Plan will aid in attracting and retaining executives of exceptional ability.   Compensation reductions and transfers of account balances from such other deferred compensation plans maintained by the Company as the Committee may designate (such account balances referred to herein as “Prior Deferrals” and such plans referred to herein as “Prior Deferred Compensation Plans”) made pursuant to the Plan will be credited with interest for the benefit of each Participant.  The value of a Participant’s deferrals, and interest earned on those deferrals, will vary by such factors as the amount and duration of the compensation reductions, the amount of transfers of Prior Deferrals, the Participant’s age at the time of reduction or transfer, and the date benefits commence.  The intent of the Plan is to credit Participants’ compensation reductions and transfers to Prior Deferrals with a specified rate of interest rather than to provide defined benefits.  However, to provide additional financial security, and to protect the purpose of the Plan, miscellaneous death and disability benefits are provided to qualifying Participants.   To the extent that compensation reductions made by an executive pursuant to the Plan may reduce retirement benefits provided in the Albany International Corp. Pension Plan For Salaried Employees (the “Pension Plan” ), the amount by which benefits are reduced, if any, will be restored to Participants as provided in the Plan.   II.            DEFINITIONS AND CERTAIN PROVISIONS   2.1        “Agreement” means the Albany International Corp. Executive Deferred Compensation Election Agreement executed by a Participant and the Company, whereby a Participant agrees to defer a portion of his/her compensation or transfer Prior Deferrals pursuant to the provisions of the Plan, and the Company agrees to make benefit payments in accordance with the provisions of the Plan.   2.2      “Participant” means an executive of the Company who is designated to be eligible pursuant to Section 3.1 hereof and who enters into an Agreement.   2.3      Normal Benefit Date” means the date of Termination of Service of the Participant on or after the earlier of (i) his/her Normal Retirement Date or the date on which he/she would be eligible for Early Retirement, as defined in the Pension Plan, or (ii) his/her retirement date as determined by the Committee.   2.4      “Compensation” for any Deferral Year means (i) twelve times the Participant’s base salary (before reductions are made pursuant to the 401(k) Plan) earned during August, 1985, (or, in the case of a Participant with an Eligibility Date (as defined in Section 3.6) after 1985, during the month including his/her Eligibility Date), plus (ii) the Participant’s standard bonus with respect to 1985 (or, in the case of a Participant with an Eligibility Date after 1985, the standard bonus for the Participant with respect to the Deferral Year including his/her Eligibility Date).   2.5      “Adjusted Compensation” means for purposes of the Alternate Disability Benefit, a Participant’s base salary in effect on the date the Disability was incurred, adjusted as of January 1 of each year thereafter by the ratio of (a) the composite Consumer Price Index, as published by the Bureau of Labor Statistics (or, if such monthly index is no longer published, a substantially similar one selected by the Committee), for January of such year to (b) such index for the month in which the Disability was incurred.   2.6      “Deferral Year” means any calendar year, 1886 through 1989.  For purposes of 1985, the Deferral Year means the Plan Effective Date through December 31, 1985.   2.7      “Termination of Service” means the Participant’s ceasing his/her service with the Company, and its successors and assigns, for any reason whatsoever, whether voluntarily or involuntarily, including by reason of death or Disability.   2.8      “Disability” means a condition, as determined by the Company, that totally and continuously prevents the Participant, for at least six consecutive months, from engaging in an “occupation” for compensation or profit.  During the first twenty-four (24) months of Disability, “occupation” means the Participant’s occupation at the time the disability was incurred.  After that period, “occupation” means any occupation for which the Participant is or becomes reasonably fitted by education, training or experience.  Notwithstanding the foregoing, a Disability shall not exist for purposes of the Plan if the Participant fails to qualify for disability benefits under the Social Security Act, unless the Company determines, in its sole discretion, that a Disability exists.   2.9      “Beneficiary” means the person or persons so designated by a Participant pursuant to Section 4.12 hereof or, in the absence of such a designation, the person or persons entitled to benefits pursuant to Section 4.12 upon the death of the Participant.   2.10      “Board of Directors” means the Board of Directors of Albany International Corp.   2.11      “Plan” means this Albany International Corp. Executive Deferred Compensation Plan, as amended from time to time.   2.12     “401(k) Plan” means the Albany International Corp. Investment Plan for Salaried Employees, as amended from time to time, intended to be qualified under Section 401(k) of the Internal Revenue Code, as amended, and any successor plan thereto.   2.13      “Account” means the account maintained on the books of the Company for each Participant pursuant to Article III hereof.  A Participant’s Account shall not constitute or be treated as a trust fund of any kind.   2.14      “Valuation Date” means the last day of each calendar month.   2.15    “Retirement Interest Yield” with respect to any calendar month means a rate of interest equal to one-twelfth (1/12) of the average of the sum of the monthly composite yields on Moody’s Seasoned Corporate Bond Yield Index for the immediately preceding calendar year, plus three (3) percentage points, as determined from Moody’s Bond Record monthly yields published by Moody’s Investors Service, Inc. (or any successor thereto), or, if such monthly yield is no longer published, a substantially similar average selected by the Committee.   2.16     “Committee” means the Plan Committee appointed to administer the Plan pursuant to Article VI.   2.17      “Plan Effective Date” means September 1, 1985.   2.18      “Deposits” means the amount of the Participant’s deferral of base salary and/or bonus and the Participant’s transfers of Prior Deferrals to the Plan.   III.           PARTICIPATION AND COMPENSATION REDUCTION   3.1        Participation.  Participation in the Plan shall be limited to executives of the Company, designated to be eligible by the Board of Directors, who elect to participate in the Plan by filing an Agreement with the Company.  The election to participate shall be effective upon receipt by the Committee of an Agreement that is properly completed and executed in conformity with the Plan.   3.2        Deposits and Length of Participation.  A Participant who elects to participate in the Plan must agree to make Deposits for one or more Deferral Years for a term not to extend beyond December 31, 1989.  For calendar year 1985, a Participant may elect to make Deposits in an amount equal to:   (i)            5, 10, 15 or 20 percent of his/her base salary remaining due between his/her Eligibility Date and December 31, 1985, or   (ii)           5, 10, 15 or 20 percent of Compensation but not to exceed, however, the amount of his/her base salary remaining due between his/her Eligibility Date and December 31, 1985.  For calendar years 1986 through 1989, a Participant may elect to make Deposits in consecutive years commencing with 1986 (or the year of his/her Eligibility Date, if later) in an amount in each of the elected Deferral Years equal to 5, 10, 15 or 20 percent of his/her Compensation.   3.3        Maximum Deposit Limitation.   (a)           For each Deferral Year, the Committee shall establish a maximum amount of Deposits (the “Maximum Deposit Limitation”) that may be made by Participants in the aggregate.  In the event that the aggregate amount of Deposits that Participants have elected to make for a Deferral Year exceeds the Maximum Deposit Limitation for such Deferral Year, the amount of Deposits that may be made by Participants shall be reduced by reducing the Deposits elected to be made by each Participant who has elected to make Deposits in excess of 10% of his/her Compensation in proportion to the amount the respective excess Deposits of each such Participant bear to the aggregate amount of such excess for all Participants.   (b)           In the event that the aggregate amount of Deposits to be made by Participants for a Deferral Year is less than the Maximum Deposit Limitation, then the amount of each Participant’s Deposit for such Deferral Year shall (subject to the limitation contained in the next sentence) be increased by an amount equal to the amount of Deposits elected to be made by the Participant in his/her Agreement for prior Deferral Years that have not been credited to his/her Account due to the Maximum Deposit Limitation.  In the event that the increased aggregate amount to be deposited pursuant to the preceding sentence shall exceed the Maximum Deposit Limitation, the amount by which each Participant’s Deposit shall have been increased shall be reduced by whatever percentage the aggregate increase must be reduced so that the aggregate amount of Deposits equals the Maximum Deposit Limitation for such Deferral Year.   3.4   Source of Deferrals.   (a)           With respect to Deferral Year 1985, a Participant’s Deposits to be derived from compensation reductions shall be made by reducing the remaining base salary due him/her in 1985 in equal amounts per pay period.   (b)           With respect to each of Deferral Years 1986 through 1989, a Participant’s Deposits to be derived from compensation reductions shall be made:   (i)            Entirely from the bonus due the Participant in such Deferral Year.  If the actual bonus for such Deferral Year is less than the amount to be deposited for such Deferral Year from such bonus, the balance of such Deposit shall be made by reducing the base salary due the Participant in equal amounts for each pay period remaining in such Deferral Year; or   (ii)           By reducing base salary in equal installments for each pay period in such Deferral Year; or   (iii)          By reducing base salary in equal installments from base salary for each pay period in such Deferral Year, up to an aggregate amount of one-half (1/2) of the Deposits to be made for such Deferral Year, with the remainder of the Deposits for such Deferral Year to be made by reducing the bonus due the Participant in such Deferral Year.  In the event that the bonus for such Deferral Year is less than that portion of the Deposit to be made from the bonus for such Deferral Year, the balance of such deposit shall be made by reducing the base salary due the Participant in equal amounts for each pay period remaining in such Deferral Year.   (c)           A Participant who has not made Deposits from compensation reductions may elect to make Deposits by transferring Prior Deferrals to the Plan.  In the event of such an election, the Participant may not make any Deposits derived from compensation reductions until his/her account balances under the Prior Deferred Compensation Plans are exhausted.  The remainder of the Deposits in respect of a Deferral Year (i.e., the Deposits elected for the Deferral Year in excess of the amount of Prior Deferrals transferred to the Plan for such Deferral Year) shall be made by reducing base salary or bonus in respect of such Deferral Year, as the case may be, in accordance with Section 3.4(a) and (b), as applicable.  All transfers of Prior Deferrals shall be made on the later of the Participant’s Eligibility Date or the first day of the Deferral Year with respect to which the Deposit is to be made.   3.5           Timing of Deposit Credits.  The amount of a Participant’s Deposits derived from compensation reductions shall cause an equivalent reduction in his/her base salary and/or bonus, as the case may be, and shall be credited to the Participant’s Account throughout each Deferral Year as the Participant is paid, or would have been paid but for the Deposit, the portion of base salary and/or bonus deferred for such Deferral Year.  The amount a Participant elects to transfer from Prior Deferrals in the Agreement shall cause an equivalent reduction in the balance of his/her account under the Prior Deferred Compensation Plan form which the transfer was made, and shall be credited to the Participant’s Account on the date as of which such transfer is made.   3.6           Eligibility Date.  A Participant’s “Eligibility Date” shall be: (a) the Plan Effective Date in respect of executives who are notified of their eligibility to participate prior to such date provided, however, that the executive files his/her Agreement with the Committee on or prior to the Plan Effective Date or (b) with respect to executives who become eligible to participate in the Plan after the Plan Effective Date, the date specified in a notice to the executive from the Committee, provided, however, that the executive files his/her Agreement with the Committee on or prior to such specified date.   3.7           Reduction of Deposits.  A Participant’s election to make Deposits is irrevocable, except that the Participant may file a written request with the Committee at least seventy-five (75) days prior to the first day of a Deferral Year for permission to reduce the amount of Deposits to be made on his/her behalf for such Deferral Year and all future Deferral Years.  Such request shall state the reason underlying such request.  The Committee shall grant or deny such request and shall inform the Participant of its decision within sixty (60) days after the date the request is filed with the Committee.   3.8           Company Matching Credit.  The Participant in his/her Agreement shall designate the Plan or the 401(k) Plan as the primary plan to which a Company matching contribution is to be credited or made.   (a)           If the Participant designates the Plan as the primary plan, then the Company shall credit a Participant’s Account with the amount (the “Matching Credit”) of “Pre-Tax AI Contributions” (as defined in the 401(k) Plan) that would have been made by the Company on behalf of the Participant to the 401(k) Plan had the Participant made additional “Participant Contributions” to the 401(k) Plan in a Deferral Year in an amount equal to his/her deferrals, as distinct from transfers, made in such Deferral Year.  If a Participant elects to have such amount credited to his/her Account, the Company shall deduct such amount from the Participant Contribution that would otherwise have been made by the Company to the 401(k) Plan on behalf of such Participant with respect to such Deferral Year.   (b)           If the Participant designates the 401(k) Plan as primary, the Company shall credit a Participant’s Account with a Matching Credit equal to the excess, if any of (i) the “Pre-Tax AI Contributions” that the Company would have made to the Plan if the Participant made additional “Pre-Tax Contributions” to the 401(k) Plan in a Deferral Year in an amount equal to his/her deferrals made in such Deferral Year over (ii) the “Pre-Tax Contributions” that the Company actually made to the 401(k) Plan on behalf of the Participant in such Deferral Year.   (c)           The Participant’s Account shall be credited with the Matching Credit at the same time that the deferrals associated therewith are credited to the Participant’s Account.   (d)           Any Matching Credit made pursuant to this Section shall be subject to the Company receiving a determination letter from the Internal Revenue Service to the effect that an amendment to the 401(k) Plan providing for such reduction of the Pre-Tax AI Contribution will not adversely affect the status of the 401(k) Plan as a qualified Plan and as a Plan described in Section 401(k) of the Internal Revenue Code.   3.9           Valuation of Account.  The value of each Participant’s Account as of a Valuation Date shall consist of (i) the balance of such Account as of the immediately preceding Valuation date, plus (ii) the Participant’s Deposits and the Company’s Matching Credits made since the immediately preceding Valuation Date, less (iii) the amount of all distributions, if any, made from such Account since the preceding Valuation Date, plus (iv) interest credited on the balance of such Account on the immediately preceding Valuation Date at the Retirement Interest Yield.  Notwithstanding the preceding sentence, if (a) benefits are payable pursuant to Section 4.3 (Termination Benefit), the Participant’s Account may be revalued from inception with interest credited at a rate equal to the Retirement Interest Yield, applicable from time to time, reduced by three (3) percentage points, if and to the extent provided in Section 4.3, and (b) benefits are payable in installments pursuant to Section 4.8(b) as a result of the death of a Participant before his/her Normal Benefit Date, the Participant’s Account shall be credited with interest on or after the date of the Participant’s death at a rate equal to the Retirement Interest Yield, as applicable from time to time, reduced by three (3) percentage points.   IV.           BENEFITS   4.1           Return of Deposits.  At the time a Participant executes his/her Agreement, he/she may elect that an amount equal to his/her Deposits and the Matching Credit pursuant to Section 3.8 hereof be paid to him/her in a lump sum, at the end of the seventh (7th) calendar year following the calendar year in which the Deposit or Matching Credit was credited to his/her Account.  At least one year prior to the date on which such Deposit and Matching Credit is to be paid pursuant to any such election, the Participant may, with the consent of the Committee, elect to further defer such payment until Termination of Service.   4.2           Retirement Benefit.  Upon a Participant’s Normal Benefit Date, the Participant shall immediately cease to be eligible for any benefit provided under the Plan (other than the Retirement Benefit provided for in this Section and the benefit provided for in Section 8.10 hereof) and the Company shall make payments from the Participant’s Account pursuant to Section 4.8(a).   4.3           Termination Benefit.   (a)                   Within sixty (60) days following a Participant’s Termination of Service before his/her Normal Benefit Date for reasons other than his/her death or Disability, the Company shall pay to the Participant in a lump sum an amount equal to the amount of Deposits and Matching Credits credited to his/her Account, less the amount of such Deposits and Matching Credits previously paid to him/her.   (b)           (i) The Participant shall be entitled to an additional benefit, the amount of which depends upon whether the Participant has engaged in a Competing Activity (as defined in Section 4.3(b)(iii) below) during the one year period following his/her Termination of Service.  If the Participant does engage in a Competing Activity (as defined in Section 4.3(b)(iii) below) during the one year period following his/her Termination of Service, the value of his/her Account shall be determined as though at all times the interest to be credited pursuant to Section 3.9 hereof was and thereafter will be the Retirement Interest Yield reduced by three (3) percentage points.  If the Participant does not engage in a Competing Activity (as defined in Section 4.3(b)(iii) below) during the one year period following his/her Termination of Service, interest shall continue to be credited to his/her Account at the Retirement Interest Yield.  The determination as to whether a Participant has engaged in a Competing Activity shall be made by the Committee.   (ii)           The Committee, in its sole discretion, shall direct the Company to pay the Participant either:   (A)     The Value (using an interest rate equal to the Retirement Interest Yield or the Retirement Interest Yield reduced by three (3) percentage points, as the case may be) of the Participant’s Account in a lump sum determined on the Valuation Date coincident with or next following the first anniversary of the Participant’s Termination of Service; or   (B)     Annual installments, over a period not to exceed ten (10) years, commencing on the Valuation Date coincident with or next following the first anniversary of the Participant’s Termination of Service, with each installment equal to the value of such Account on the date such installment is to be paid multiplied by a fraction whose numerator is one and whose denominator is the number of installments remaining to be paid.   (iii)          A Participant is engaging in a “Competing Activity” if he/she is:   (A)          A director of a corporation, or a member of a partnership, or a trustee of a business trust, or an officer, employee, representative or agent of, or a consultant to, a corporation, partnership, business trust or other entity or organization engaged in a Competing Business (as defined in Subparagraph (C) hereof); or   (B)           A direct or indirect investor in a Competing Business and the investment (whether made by loan, advance, contribution to capital, purchase of stock or otherwise) constitutes more than 10% of (1) the total capital of such business, (2) the equity capital of such business, or (3) the voting power for the election of the Board of Directors or other governing body of such business.   (C)           A business is a “Competing Business” at any time if at such time it is engaging in a business activity which was conducted by the Company, or by a subsidiary of the Company, or a company controlled by the Company or a subsidiary or subsidiaries of the Company, while the Participant was employed by the Company and in or for the conduct of which the Participant was involved or bore responsibility.   (c)           In the event that a Participant dies prior to receiving the benefits due to him/her under this Section, his/her benefits shall be paid to his/her Beneficiary using the same interest rate to determine the value of his/her Account and at the same time and in the same manner that the Account would have been paid had the Participant lived.   (d)           Upon Termination of Service described in this Section, the Participant shall immediately cease to be eligible for any benefit under the Plan (other than the Termination Benefit provided for in this Section and the benefits provided for in Section 8.10 hereof).   4.4           Death Benefit.   (a)           Death Prior to Termination of Service of During Alternate Disability Period.  Upon the Termination of Service of a Participant as a result of his/her death or upon the death of a Participant who is receiving an Alternate Disability Benefit pursuant to Section 4.6 hereof, the Beneficiary of the deceased Participant shall be paid a Death Benefit in an amount equal to the greater of: (i) the value, if any, of the Participant’s Account, determined pursuant to Section 3.9 hereof, as of the Valuation Date coincident with or next following the date of the Participant’s death, or (ii) the Participant’s Total Expected Deferral set forth in Paragraph 4 of the Agreement, or subsequent amendments thereto, and multiplied by a factor based on the Participant’s age at his/her Eligibility Date as indicated below less any amounts paid to him/her pursuant to Section 4.1 hereof:   Age at Eligibility Date   Multiplier   50 and under   5.0   51   4.8   52   4.6   53   4.4   54   4.2   55   4.0   56   3.8   57   3.6   58   3.4   59   3.2   60   3.0   61   2.8   62   2.6   63   2.4   64   2.2   65 and above   2.0     The death benefit shall be paid in accordance with Section 4.8(b) hereof.  The death benefit provided for in this Section 4.4(a) shall be in lieu of all other benefits under the Plan (other than the benefits provided for under Section 8.10 hereof).   (b)           Death During Standard Disability Period. Upon the death of a Participant who is receiving a Disability Benefit under Section 4.5 hereof (the Standard Disability Benefit), the Beneficiary of the deceased Participant shall be paid a Death Benefit in an amount equal to the value, if any, of the Participant’s Account as of the Valuation Date coincident with or next following the date of the Participant’s death.  The Death Benefit shall be paid in accordance with Section 4.8(b) hereof.  The Death Benefit provided for in this Section 4.4(b) shall be in lieu of all other benefits under the Plan (other than the benefits provided for under Section 8.10 hereof). 4.5           Standard Disability Benefit.  In the event of a Disability prior to a Participant’s Termination of Service which first manifests itself after the Participant’s Eligibility  Date and prior to his/her sixty-fifth (65th) birthday, the Company shall pay the Participant a benefit equal to the remaining balance, if any, of the Participant’s Account determined under Section 3.9 hereof.  Such benefit shall be payable as provided in Section 4.8(a)(i) hereof as if he/she had reached his/her Normal Benefit Date at such time.  During the period of Disability the Participant’s Account shall be maintained in accordance with Section 3.9 hereof.  Such benefit shall be paid until the earliest of the following events: (i) there is no longer any balance in the Participant’s Account; (ii) the Participant no longer has a Disability and resumes employment with the Company; (iii) the Participant no longer has a Disability and does not resume employment with the Company (in which case the Participant shall be entitled to the benefits provided in either Section 4.2 hereof if the Participant has attained his/her Normal Benefit Date or Section 4.3 hereof if the Participant has not attained his/her Normal Benefit Date, as the case may be); or (iv) the Participant dies (in which case the Participant’s Beneficiary or Beneficiaries shall be entitled to the Death Benefit provided for under Section 4.4(b) hereof).  Disability Benefits paid pursuant to this Section shall be treated as distributions from the Participant’s Account.  If Disability occurs during the Deferral Period elected in Paragraph 4 of his/her Agreement, further deferrals shall be waived by the Company during the period of Disability.   4.6           Alternate Disability Benefit. In the event a Participant is given notice by the Committee of his/her qualification for an Alternate Disability Benefit, he/she shall be eligible for the Alternate Disability Benefit, he/she shall be eligible for the Alternate Disability Benefit set forth below.  In the event of the Disability of the Participant prior to the Participant’s Termination of Service, which first manifests itself after the Participant’s Eligibility Date and prior to his/her sixty-fifth (65th) birthday, the Participant shall receive the monthly benefit stated in such notice.  The Alternate Disability Benefit shall be in lieu of the Disability Benefit provided for in Section 4.5 hereof.  During the period an Alternative Benefit remains payable, the Participant’s Account shall be maintained in accordance with Section 3.9 hereof.  Such benefit shall be paid until the earliest of the following events: (i) the Participant no longer has a Disability and resumes employment with the Company; (ii) the Participant no longer has a Disability and does not resume employment with the Company (in which case the Participant shall be entitled to the benefit provided for in either Section 4.2 hereof if the Participant has attained his/her Normal Benefit Date or Section 4.3 hereof if the Participant has not attained his/her Normal Benefit Date, as the case may be); (iii) the Participant attains age sixty-five (65) (in which case the Participant shall then be entitled to the Retirement Benefit provided for under Section 4.2 hereof); or (iv) the Participant dies (in which case the Participant’s Beneficiary shall be entitled to the Death Benefit provided for under Section 4.4(a) hereof).   In no event shall the Alternate Disability Benefit in any year exceed the lesser of (i) the maximum stated in the notice referred to in the first sentence of this Section, or (ii) the amount that when added to the Participant’s Group Long-Term Disability Benefits and his/her Primary Social Security Benefits equals eighty (80) percent of the Participant’s Adjusted Compensation.  Alternate Disability Benefits paid pursuant to this Section shall not be treated as distributions from the Participant’s Account.  If Disability occurs during the Deferral Period elected in Paragraph 4 of the Agreement, further deferrals shall be waived by the Company during the period of Disability.   4.7           Failure to Continue Participation.   (a)           In the event a Participant is given approval pursuant to Section 3.7 hereof to cease or decrease participation in the Plan, the Committee may in its discretion treat the Participant as having terminated participation in the Plan at the end of the first calendar year in which the amount stated in his/her Agreement has not been deposited, the effect of which would be to render him/her ineligible for any benefit described in Section 4.4, 4.5 or 4.6 hereof, provided, however, that if the Participant’s failure to continue participation in the Plan is due to the fact that he/she ceased to be a member of the class of employees eligible to participate in the Plan or because the Participant’s compensation has been materially reduced, as determined by the Committee, the Participant shall not be treated as having terminated participation in the Plan pursuant to this Section, provided, however, that the Participant’s Agreement shall be deemed to have been amended as of such date to reflect the reduction in his/her Total Expected Referral.   (b)           At such time that a Participant is transferred outside of the United States and is removed from the United States payroll of the Company, the Participant’s remaining Deposit Commitment, if any, shall be terminated and his/her Agreement shall be deemed to have been amended as of such date to reflect the reduction in his/her Deposit Commitment.  In such event, the Participant shall not be considered as having terminated participation in the Plan and shall remain eligible for the benefits provided for in the Plan.   4.8           Form of Benefit Payment.   (a)           Retirement Benefit.  Upon a Participant’s Normal Benefit Date, the Company shall make payments as the Retirement Benefit provided in Section 4.2 hereof from the Participant’s Account in one of the following forms, as elected by the Participant:   (i)                In annual or monthly installments commencing on the Valuation Date coincident with or next following the Participant’s Normal Benefit Date and payable over a period not to exceed 30 years, as elected by the Participant; the amount of each installment to be calculated by the Company using such reasonable annuity payment calculation methods as the Company shall determine from time to time;   (ii)              In a single lump sum equal to the value of the Participant’s Account on the Valuation Date coincident with or next following the date of payment specified in his/her Agreement (which date shall be before the fifteenth (15th) anniversary of the Participant’s Normal Benefit Date;   (iii)              (A) in a single lump sum equal to a percentage, elected by the Participant, of the value of the Participant’s Account on the Valuation Date coincident with or next following the Participant’s Normal Benefit Date, followed by (B) annual or monthly installments commencing on the next succeeding Valuation Date and payable over a period not to exceed thirty (30) years, as elected by the Participant; the amount of each installment to be calculated by the Company using such reasonable annuity payment calculation methods as the Company shall determine from time to time; or   (iv)              (A) annual or monthly installments commencing on the Valuation Date coincident with or next following the Participant’s Normal Benefit Date and payable over a period not to exceed twenty-eight (28) years, as elected by the Participant, following by (B) a single lump sum equal to a percentage, elected by the Participant, of the value of the Participant’s Account on the Valuation Date coincident with or next following the Participant’s Normal Benefit Date; the amount of each installment to be calculated by the Company using such reasonable annuity payment calculation methods as the Company shall determine from time to time.   In the event that the Participant dies prior to the payment of all amounts credited to his/her Account, the remainder of the Account shall be paid to his/her Beneficiary either (1) at the same time and in the same manner as the Account would have been paid to the Participant had he/she lived, or (2) if elected by the Participant in a written instrument filed with the Committee prior to the Participant’s death or in such Participant’s will, in a lump sum on the Valuation Date coincident with or next following the date of the Participant’s death.  A Participant may at any time elect to change his/her election to any other election permitted under this clause (a).  Such request shall be made in a written instrument filed with the Committee.  Not more than three such changes of election may be made by any Participant.  Unless the Committee, in its sole and absolute discretion, shall determine otherwise, no such change of election shall be effective if the Termination of Service that constitutes the triggering event for distribution to such Participant has already occurred, or occurs within one (1) year of the date of such change of election; unless the Termination of Service is the result of the death or disability of a Participant who, at the time such election was made, did not in good faith expect to die or become disabled within the next year.   (b)                   Death Benefit.  The amount of any Death Benefit determined pursuant to Section 4.4 hereof shall be paid to the Participant’s Beneficiary in the same manner as elected by the Participant pursuant to clause (a) of this Section 4.8 with respect to Account balances.  In such an event, the value of the Participant’s Account as of the Valuation Date coincident with or next following the date of the Participant’s death shall be equal to the amount of the Death Benefit as determined pursuant to Section 4.4.  Until such Account is paid to the Beneficiary, the Account shall be maintained pursuant to Section 3.9 and shall be credited with interest at the Retirement Interest Yield as in effect from time to time; provided that the Account of a Participant who dies before his Normal Benefit Date shall be credited with interest at the Retirement Interest Yield as in effect from time to time, reduced by three (3) percentage points.   4.9           Withholding, Employment Taxes.  To the extent required by the law in effect at the time payments are made, the Company shall withhold any taxes required to be withheld by the federal or any state or local government from payments made hereunder.   4.10         Commencement of Payments.  All benefit payments shall be made as soon as practicable after the Valuation Date as of which the amount thereof is determined.  Neither the Company nor the Committee shall be liable for the payment or crediting of interest with respect to the period between the Valuation Date as of which a benefit is determined and the date such benefit is paid.   4.11         (Intentionally Omitted.)   4.12         Recipients of Payments; Designation of Beneficiary.  All payments to be made by the Company under the Plan shall be made to the Participant during his/her lifetime, provided that if the Participant dies prior to the completion of such payments or a payment is due as a result of his/her death, then all subsequent payments under the Plan shall be made by the Company to the Beneficiary or Beneficiaries determined in accordance with this Section 4.12.  Unless the Participant files a written notice of a different Beneficiary designation with the Committee, the Participant’s Beneficiary shall be the beneficiary or beneficiaries designated in the Company’s Basic Life Insurance Plan.  The Participant may designate a Beneficiary by filing a written notice of such designation with the Committee may include contingent beneficiaries.  The Participant may from time to time change the designated Beneficiary or Beneficiaries without the consent of such Beneficiary or Beneficiaries by filing a new designation in writing with the Committee.  (If a Participant interests hereunder would be subject to community property laws, the spouse of a Participant shall join in any designation of a Beneficiary or Beneficiaries other than the spouse.)  If no designation shall be in effect at the time when any benefits payable under the Plan shall become due, the Beneficiary shall be the legal representatives of the Participant’s estate.   V.            CLAIMS FOR BENEFITS PROCEDURE   5.1           Claim for Benefits.  Any claim for benefits under the Plan shall be made in writing to any member of the Committee.  If such claim for benefits is wholly or partially denied by the Committee, the Committee shall, within a reasonable period of time, but not later than sixty (60) days after receipt of the claim, notify the claimant of the denial of the claim.  Such notice of denial shall be in writing and shall contain:   (a)           The specific reason or reasons for denial of the claim;   (b)           A reference to the relevant Plan provisions upon which the denial is based;   (c)           A description of any additional material or information necessary for the claimant to perfect the claim, together with an explanation of why such material or information is necessary; and   (d)           An explanation of the Plan’s claim review procedure.   If no such notice is provided, the claim shall be deemed granted.   5.2           Request for Review of a Denial of a Claim for Benefits.  Upon the receipt by the claimant of written notice of denial of the claim, the claimant may within ninety (90) days file a written request to the full Committee, requesting a review of the denial of the claim, which review shall include a hearing if deemed necessary by the Committee.  In connection with the claimant’s appeal of the denial of his/her claim, he/she may review relevant documents and may submit issues and comments in writing.   5.3           Decision Upon Review of Denial of Claim for Benefits.  The Committee shall promptly render a decision on the claim review within sixty (60) days after the receipt of the claimant’s request for review, unless special circumstances (such as the need to hold a hearing) require an extension of time, in which case the sixty (60) day period shall be extended to one hundred twenty (120) days.  Such decision shall:   (a)           Include specific reasons for the decision;   (b)           Be written in a manner calculated to be understood by the claimant; and   (c)           Contain specific references to the relevant Plan provisions upon which the decision is based.   VI.           ADMINISTRATION   6.1           Plan Committee.  The Plan shall be administrated by the Committee appointed by the Board of Directors.  Members of the Committee or agents of the Committee may be Participants under the Plan.   6.2           General Rights, Powers, and Duties of the Committee.  The Committee shall be the fiduciary responsible for the management, operation, and administration of the Plan.  In addition to any powers, rights and duties set forth elsewhere in the Plan, it shall have the following powers and duties:   (a)           To adopt such rules and regulations consistent with the provisions of the Plan as it deems necessary for the proper and efficient administration of the Plan;   (b)           To administer the Plan in accordance with its terms and any rules and regulations it establishes;   (c)           To maintain records concerning the Plan sufficient to prepare reports, returns and other information required by the Plan or by law;   (d)           To construe and interpret the Plan and to resolve all questions arising under the Plan;   (e)           To direct the Company to pay benefits under the Plan, and to give such other directions and instructions as may be necessary for the proper administration of the Plan;   (f)            To employ or retain agents, attorneys, actuaries, accountants or other persons, who may also be Participants in the Plan or be employed by or represent the Company; and   (g)           To be responsible for the preparation, filing and disclosure on behalf of the Plan of such documents and reports as are required by any applicable Federal or State law.   6.3           Information to Be Furnished to Committee.  The Company shall furnish the Committee such data and information as it may require.  The records of the Company shall be determinative of each Participant’s period of employment, termination of employment and the reason therefor, leave of absence, reemployment, years of service, personal data, and compensation or bonus reductions.  Participants and their Beneficiaries shall furnish to the Committee such evidence, data, or information, and execute such documents as the Committee requests.   6.4           Responsibility.  No member of the Committee or of the Board of Directors shall be liable to any person for any action taken or omitted in connection with the administration of the Plan unless attributable to his/her own fraud or willful misconduct; nor shall the Company be liable to any person for any such action unless attributable to fraud or willful misconduct on the part of a director, officer or employee of the Company.   VII.          AMENDMENT AND TERMINATION   7.1           Amendment.  The Plan may be amended in whole or in part by the Committee at any time.  Notice of any such amendment shall be given in writing to each Participant and each Beneficiary of a deceased Participant.  No amendment shall decrease the amount of a Participant’s Account.   7.2           Company’s Right to Terminate.  The Company reserves the right to terminate the Plan and/or the Agreement pertaining to any or all Participants at any time.  In the event of any such termination, (i) any Participant who is not then receiving benefits under Section 4.2, 4.3, 4.4, 4.5 or 4.6 hereof shall be entitled to a “Termination Benefit” under Section 4.3 hereof determined as though he/she had incurred a Termination of Service for reasons other than death or Disability on the date of Plan termination and (ii) any Participant (or Beneficiary) who is then receiving benefits under Section 4.2, 4.3, 4.4, 4.5 or 4.6 hereof shall in the sole discretion of the Committee, exercised on a Participant by Participant basis (or a Beneficiary by Beneficiary basis), be entitled to either (A) continue receiving benefits as if the Plan had not terminated or (B) receive a lump sum benefit equal to the value of the Participant’s Account determined as of the First Valuation Date coincident with or next following the date of such termination.  The benefits provided in this Section 7.2 shall be in lieu of all other benefits under the Plan (other than the benefits provided for under Section 8.10 hereof).   7.3           Early Withdrawal.   (a)           Upon the request of any Participant, including a Participant no longer serving as an employee of the Albany Group or as a director of the Company, or any Beneficiary of a deceased Participant designated pursuant to Section 4.8 hereof, a distribution of all or a portion of the value of the Participant’s Account shall be made at any time or times prior to the time at which he/she would have been entitled to receive such amount in accordance with an election pursuant to clause (a) of Section 4.8; provided that there shall be withheld from each such distribution an amount equal to ten percent (10%) of the amount requested to be distributed.  Such Participant or Beneficiary shall forever forfeit, relinquish and waive any right to receive any such withheld amounts, or any interest thereon.   (b)           Upon the request of any Participant who at the time is serving as an employee of the Albany Group or a director of the Company, a distribution of all or a portion of the value of the Participant’s Account shall be made at any time or times prior to the time at which he/she would have been entitled to receive such amount in accordance with an election pursuant to clause (a) of Section 4.8; provided that (i) there shall be withheld from any such distribution an amount equal to five percent (5%) of the amount requested to be distributed, and (ii) such Participant thereafter shall be precluded from deferring any subsequent compensation under any deferred compensation plan of the Company during the period of three years following the date of each such distribution.  In the event that such Participant’s service as an employee of the Albany Group or as a director of the Company is terminated by the Albany Group for cause, as determined by the Committee in its sole discretion, or voluntarily by such Participant, in either case during any such three year period, the Participant shall forever forfeit, relinquish and waive any right to receive the amount withheld from the withdrawal that triggered such period and any earnings thereon.  Any amount so withheld shall otherwise be distributed to such Participant upon termination of his/her service during such period for any other reason, or upon expiration of such three year period.  Interest on any such withheld amount shall continue to accrue in the manner described in Section 3.9 at the Retirement Interest Yield, as applicable from time to time, reduced by three (3) percentage points, until expiration of such three year period or until it is forfeited.   VIII.  MISCELLANEOUS   8.1           No Implied Rights; Rights on Termination of Service.  Neither the establishment of the Plan nor any amendment thereof shall be construed as giving any Participant, Beneficiary, or any other person any legal or equitable right unless such right shall be specifically provided for in the Plan or conferred by specific action of the Company in accordance with the terms and provisions of the Plan.  Except as expressly provided in the Plan, the Company shall not be required or be liable to make any payment under the Plan.   8.2           No Right to Company Assets.  Neither the Participant nor any other person shall acquire by reason of the Plan any right in or title to any assets, funds or property of the Company whatsoever including, without limiting the generality of the foregoing, any specific funds, assets, or other property which the Company, in its sole discretion, may set aside in anticipation of a liability hereunder.  No trust of any kind shall be created in connection with or by the execution or adoption of the Plan, and any benefits which become payable hereunder shall be paid from the general assets of the Company.  The Participant shall have only a contractual right to the amounts, if any, payable hereunder unsecured by any asset of the Company.  Nothing contained in the Plan constitutes a guarantee by the Company that the assets of the Company shall be sufficient to pay any benefit to any person.   8.3           No Employment Rights.  Nothing herein shall constitute a contract of employment or of continuing service or in any manner obligate the Company to continue the services of a Participant, or obligate the Participant to continue in the service of the Company, or as a limitation of the right of the Company to discharge any of its employees, with or without cause.  Nothing herein shall be construed as fixing or regulating the compensation payable to the Participant.   8.4           Offset.  If, at the time payments or installments of payments are to be made hereunder, the Participant or the Beneficiary or both are indebted or obligated to the Company, then the payments remaining to be made to the Participant or the Beneficiary or both may, at the discretion of the Company, be reduced by the amount of such indebtedness or obligation, provided, however, that an election by the Company not to reduce any such payment or payments shall not constitute a waiver of its claim for such indebtedness or obligation.   8.5           Protective Provisions.  In the event of a Participant’s suicide during the first two (2) years of his/her participation or if the Participant makes any material misstatement or fails to make a material disclosure of information, then no benefits will be payable to the Participant under the Plan, or in the Company’s sole discretion, benefits may be payable in a reduced amount.   8.6           Non-assignability.  Neither a Participant nor any other person shall have any voluntary or involuntary right to commute, sell, assign, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are expressly declared to be unassignable and non-transferable.  No part of the amounts payable shall be, prior to actual payment, subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, or be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency.   8.7           Gender and Number.  Wherever appropriate herein, the masculine may mean the feminine and the singular may mean the plural or vice versa.   8.8           Notice.  Any notice required or permitted to be given under the Plan shall be sufficient if in writing and hand delivered, or sent by registered or certified mail, and if given to the Company, delivered to the principal office of the Company, directed to the attention of the Committee.  Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or the receipt for registration or certification.   8.9           Governing Laws.          The Plan shall be construed and administered according to the internal laws of the State of New York.   8.10         Participants Covered by Pension Plan.  If the benefits payable to or in respect of a Participant under the Pension Plan are reduced by reason of Deposits made hereunder derived from compensation reductions, then upon such Participant’s Termination of Service the Committee shall determine the excess of the actuarial present value of the benefit that would have been payable under the Pension Plan but for the fact that the Participant made such Deposits over the actuarial present value of the benefits actually payable under the Pension Plan.  In determining such actuarial present values the Committee shall use the actuarial assumptions set forth in the Pension Plan or, in the absence of any such assumptions specifically applicable to the computations, using such actuarial assumptions as the Committee may deem appropriate.  Upon the Participant’s Termination of Service, an amount equal to such excess shall be credited to the Participant’s Account (in the case of a Participant who dies and whose Beneficiary is entitled to a death benefit pursuant to Section 4.4(a), after the Account is increased to reflect the death benefit payable in Section 4.4(a)) to be maintained pursuant to Section 3.9 hereof and paid as part of his/her Account in the manner provided hereunder.   IN WITNESS WHEREOF, the Company has adopted the ALBANY INTERNATIONAL CORP. EXECUTIVE DEFERRED COMPENSATION PLAN as of September 1, 1985.               ALBANY INTERNATIONAL CORP.                                             By                 (Title: )  

EXHIBIT 10.2 SUMMARY OF TRANSACTION BONUS AGREEMENTS Following is a summary of the transaction bonuses which are payable to the five executives named in the Company’s most recent Proxy Statement (“Named Executives”) upon the completion of certain described transactions:           Transaction bonuses will be paid to qualifying Named Executives if the Company completes the sale of any of its business units (DSS, Color Technologies or DS&IM) or if the entire Company is sold by means of a business combination or a sale of all or substantially all of the Company’s assets pursuant to a definitive agreement entered into prior to December 31, 2002.           The transaction bonuses would qualify Named Executives to receive from 0% to 100% of their maximum transaction bonus amount, depending on the business unit or combination of business units sold in a given transaction or combination of transactions.           The maximum transaction bonus amount for Mr. Monahan is 60% of his base salary as of January 1, 2001.  For each of the other Named Executives, the maximum transaction bonus amount is defined as 40% of their base salary as of January 1, 2001.  No Named Executive is eligible to receive, in the aggregate, more than 100% of the maximum transaction bonus amount for which they are eligible.

  ALLIANCE CAPITAL MANAGEMENT L.P. UNIT OPTION PLAN AGREEMENT             AGREEMENT, dated December 11, 2000 between Alliance Capital Management L.P. (the "Partnership"), Alliance Capital Management Holding L.P. (“Alliance Holding”) and David R. Brewer, Jr. (the "Employee"), an employee of the Partnership or a subsidiary of the Partnership.           The Option Committee (the "Administrator") of the Board of Directors (the “Board”) of Alliance Capital Management Corporation, the general partner of the Partnership and Alliance Holding, pursuant to the Alliance Capital Management L.P. 1993 Unit Option Plan, a copy of which has been delivered to the Employee (the "Plan"), has granted to the Employee an option to purchase units representing assignments of beneficial ownership of limited partnership interests in Alliance Holding (the "Units") as hereinafter set forth, and authorized the execution and delivery of this Agreement.           In accordance with that grant, and as a condition thereto, the Partnership, Alliance Holding and the Employee agree as follows:           1.       Grant of Option.  Subject to and under the terms and conditions set forth in this Agreement and the Plan, the Employee is the owner of an option (the "Option") to purchase the number of Units set forth in Section 1 of Exhibit A attached hereto at the per Unit price set forth in Section 2 of Exhibit A.           2.       Term and Exercise Schedule.  This Option shall not be exercisable to any extent prior to December 11, 2001 or after December 11, 2010 (the "Expiration Date").  Subject to the terms and condi­tions of this Agreement and the Plan, the Employee shall be entitled to exercise the Option prior to the Expiration Date and to purchase Units hereunder in accordance with the schedule set forth in Section 3 of Exhibit A.           The right to exercise this Option shall be cumulative so that to the extent this Option is not exercised when it becomes initially exercisable with respect to any Units, it shall be exercisable with respect to such Units at any time thereafter until the Expiration Date and any Units subject to this Option which have not then been purchased may not, thereafter, be pur­chased hereunder.  A Unit shall be considered to have been purchased on or before the Expiration Date if notice of the purchase has been given and payment therefor has actually been received pursuant to Sections 3 and 13, on or before the Expiration Date.           3.       Notice of Exercise, Payment and Certificate.  Exercise of this Option, in whole or in part, shall be by delivery of a written notice to the Partnership and Alliance Holding pursuant to Section 13 which specifies the number of Units being purchased and is accompanied by payment therefor in cash.  Promptly after receipt of such notice and purchase price, the Partnership and Alliance Holding shall deliver to the person exercising the Option a certificate for the number of Units purchased.  Units to be issued upon the exercise of this Option may be either authorized and unissued Units or Units which have been reacquired by the Partnership, a subsidiary of the Partnership, Alliance Holding or a subsidiary of Alliance Holding.           4.       Termination of Employment.  This Option may be exer­cised only while the Employee is a full-time employee of the Partnership, except as follows:           (a)      Disability.  If the Employee's employment with the Partnership terminates because of Disability, the Employee (or his personal representative) shall have the right to exercise this Option, to the extent that the Employee was entitled to do so on the date of termination of his employ­ment, for a period which ends not later than the earlier of (i) three months after such termination, and (ii) the Expi­ration Date.  "Disability" shall mean a determination by the Administrator that the Employee is physically or mentally incapacitated and has been unable for a period of six con­secutive months to perform the duties for which he was responsible immediately before the onset of his incapacity.  In order to assist the Administrator in making a determina­tion as to the Disability of the Employee for purposes of this paragraph (a), the Employee shall, as reasonably re­quested by the Administrator, (A) make himself available for medical examinations by one or more physicians chosen by the Administrator and approved by the Employee, whose approval shall not unreasonably be withheld, and (B) grant the Admin­istrator and any such physicians access to all relevant medical information concerning him, arrange to furnish copies of medical records to them, and use his best efforts to cause his own physicians to be available to discuss his health with them.           (b)      Death.  If the Employee dies (i) while in the employ of the Partnership, or (ii) within one month after termination of his employment with the Partnership because of Disability (as determined in accordance with paragraph (a) above), or (iii) within one month after the Partnership terminates his employment for any reason other than for Cause (as determined in accordance with paragraph (c) be­low), this Option may be exercised, to the extent that the Employee was entitled to do so on the date of his death, by the person or persons to whom the Option shall have been transferred by will or by the laws of descent and distribu­tion, for a period which ends not later than the earlier of (A) six months from the date of the Employee's death, and (B) the Expiration Date.           (c)      Other Termination.  If the Partnership terminates the Employee's employment for any reason other than death, Disability or for Cause, the Employee shall have the right to exercise this Option, to the extent that he was entitled to do so on the date of the termination of his employment, for a period which ends not later than the earlier of (i) three months after such termination, and (ii) the Expiration Date.  "Cause" shall mean (A) the Employee's continuing willful failure to perform his duties as an employee (other than as a result of his total or partial incapacity due to physical or mental illness), (B) gross negligence or malfeasance in the performance of the Employee's duties, (C) a finding by a court or other governmental body with proper jurisdiction that an act or acts by the Employee constitutes (1) a felony under the laws of the United States or any state thereof (or, if the Employee's place of employment is outside of the United States, a serious crime under the laws of the foreign jurisdiction where he is employed, which crime if committed in the United States would be a felony under the laws of the United States or the laws of New York), or (2) a violation of federal or state securities law (or, if the Employee's place of employment is outside of the United States, of federal, state or foreign securities law) by reason of which finding of violation described in this clause (2) the Board determines in good faith that the continued employment of the Employee by the Partnership would be seriously detrimental to the Partnership and its business, (D) in the absence of such a finding by a court or other governmental body with proper jurisdiction, such a determination in good faith by the Board by reason of such act or acts constituting such a felony, serious crime or violation, or (E) any breach by the Employee of any obliga­tion of confidentiality or non-competition to the Partnership.           For purposes of this Agreement, employment by a subsidiary of the Partnership shall be deemed to be employment by the Partnership.  A "subsidiary" of the Partnership shall be any corporation or other entity of which the Partnership and/or its subsidiaries (a) have sufficient voting power (not depending on the happening of a contingency) to elect at least a majority of its board of directors, or (b) otherwise have the power to direct or cause the direction of its management and policies.           5.       Non-Transferability.  This Option is not transferable other than by will or the laws of descent and distribution and, except as otherwise provided in Section 4, during the lifetime of the Employee this Option is exercisable only by the Employee.           6.       No Right to Continued Employment.  This Option shall not confer upon the Employee any right to continue in the employ of the Partnership or interfere in any way with the right of the Partnership to terminate the employment of the Employee at any time for any reason.           7.       Payment of Withholding Tax.  (a) In the event that the Partnership or Alliance Holding determines that any federal, state or local tax or any other charge is required by law to be withheld with respect to the exercise of this Option, the Employee shall promptly pay to the Partnership or a subsidiary specified by the Partnership or Alliance Holding, on at least seven business days' notice, an amount equal to such withholding tax or charge or (b) if the Employee does not promptly so pay the entire amount of such withholding tax or charge in accordance with such notice, or make arrangements satisfactory to the Partnership and Alliance Holding regarding payment thereof, the Partnership or any subsidiary of the Partnership may withhold the remaining amount thereof from any amount due the Employee from the Partnership or the subsidiary.           8.       Dilution and Other Adjustments.  The existence of this Option shall not impair the right of the Partnership or Alliance Holding or their respective partners to, among other things, conduct, make or effect any change in the Partnership's or Alliance Holding’s business, any issuance of debt obligations or other securities by the Partnership or Alliance Holding, any grant of options with respect to an interest in the Partnership or Alliance Holding or any adjustment, recapitalization or other change in the partnership interests of the Partnership or Alliance Holding (including, without limitation, any distribution, subdivision, or combination of limited partnership interests), or any incorporation of the Partnership or Alliance Holding.  In the event of such a change in the partnership interests of the Partnership or Alliance Holding, the Board shall make such adjustments to this Option, including the purchase price specified in Section 1, as it deems appropriate and equitable. In the event of incorporation of the Partnership or Alliance Holding, the Board shall make such arrangements as it deems appropriate and equitable with respect to this Option for the Employee to purchase stock in the resulting corporation in place of the Units subject to this Option.  Any such adjust­ment or arrangement may provide for the elimination of any fractional Unit or shares of stock which might otherwise become subject to this Option.  Any decision by the Board under this Section shall be final and binding upon the Employee.           9.       Rights as an Owner of a Unit.  The Employee (or a transferee of this Option pursuant to Section 4) shall have no rights as an owner of a Unit with respect to any Unit covered by this Option until he becomes the holder of record of such Unit, which shall be deemed to occur at the time that notice of pur­chase is given and payment in full is received under Section 3 and 13.  By such actions, the Employee (or such transferee) shall be deemed to have consented to, and agreed to be bound by, all other terms, conditions, rights and obligations set forth in the then current Amended and Restated Agreement of Limited Partnership of Alliance Holding and the then current Amended and Restated Agreement of Limited Partnership of the Partnership.  Except as provided in Section 8, no adjustment shall be made with respect to any Unit for any distribution for which the record date is prior to the date on which the Employee becomes the holder of record of the Unit, regardless of whether the distribution is ordinary or extraordinary, in cash, securities or other property, or of any other rights.           10.     Administrator.  If at any time there shall be no Option Committee of the Board, the Board shall be the Administrator.           11.     Governing Law.  This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York.           12.     Interpretation.  The Employee accepts this Option subject to all the terms and provisions of the Plan, which shall control in the event of any conflict between any provision of the Plan and this Agreement, and accepts as binding, conclusive and final all decisions or interpretations of the Board or the Administrator upon any questions arising under the Plan and/or this Agreement.           13.     Notices.  Any notice under this Agreement shall be in writing and shall be deemed to have been duly given when deliv­ered personally or when deposited in the United States mail, registered, postage prepaid, and addressed, in the case of the Partnership, to the Secretary of Alliance Capital Management Corporation at 1345 Avenue of the Americas, New York, New York  10105, or if the Partnership should move its principal office, to such principal office, in the case of Alliance Holding, to the Secretary of Alliance Capital Management Corporation at 1345 Avenue of the Americas, New York, New York 10105, or if Alliance Holding should move its principal office, to such principal office, and, in the case of the Employee, to his last permanent address as shown on the Partnership's records, subject to the right of either party to designate some other address at any time hereafter in a notice satisfying the require­ments of this Section.           14.     Sections and Headings.  All section references in this Agreement are to sections hereof for convenience of reference only and are not to affect the meaning of any provision of this Agreement.     ALLIANCE CAPITAL MANAGEMENT L.P.       By: Alliance Capital Management       Corporation, its General Partner             By: /s/ John D. Carifa --------------------------------------------------------------------------------       John D. Carifa       President         ALLIANCE CAPITAL MANAGEMENT HOLDING L.P.     By: Alliance Capital Management       Corporation, General Partner     By: /s/ John D. Carifa --------------------------------------------------------------------------------       John D. Carifa       President       /s/ David R. Brewer, Jr. --------------------------------------------------------------------------------       David R. Brewer, Jr.     EXHIBIT A To Unit Option Plan Agreement Dated December 11, 2000 between Alliance Capital Management L.P., Alliance Capital Management Holding L.P. and David R. Brewer, Jr.   1. The number of Units that the Employee is entitled to purchase pursuant to the Option granted under this Agreement is 15,000.     2. The per Unit price to purchase Units pursuant to the Option granted under this Agreement is $53.75 per Unit. 3. Percentage of Units With Respect to   Which the Option First Becomes   Exercisable on the Date Indicated --------------------------------------------------------------------------------   1. December 11, 2001 20%     2. December 11, 2002 20%     3. December 11, 2003 20%     4. December 11, 2004 20%     5. December 11, 2005 20%      

EXHIBIT 10 PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS By and Between JENNY CRAIG OPERATIONS, INC., a California corporation as Seller and NATIONAL UNIVERSITY, a California non-profit, public benefit corporation as Buyer Dated as of June 12, 2001   -------------------------------------------------------------------------------- PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS      THIS PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS (“Agreement”) is made as of June 12, 2001 (“Effective Date”), by and between Jenny Craig Operations, Inc., a California corporation (“Seller”) and National University, a California non-profit, public benefit corporation (“Buyer”). RECITALS      A. Seller desires to sell and Buyer desires to buy the Property, subject to satisfaction of the conditions contained herein.      NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which are hereby acknowledged, Buyer and Seller agree as follows: AGREEMENT      1. Certain Basic Definitions.      For purposes of this Agreement, the following terms shall have the following definitions:           1.1 “Brokers” means John Burcher Real Estate and Burnham Real Estate Services.           1.2 “Closing Date” means the day fifteen (15) days after expiration of the Due Diligence Period.           1.3 “Contracts” means all right, title and interest of Seller, if any, in and to any licenses, permits, contracts, and agreements in effect as of the Close of Escrow relating to the Property.           1.4 “Deposit” means the sum of Five Hundred Thousand Dollars ($500,000.00).           1.5 “Due Diligence Period” means the period ending at 5:00 p.m. P.S.T. on the day which is thirty (30) days from the Effective Date.           1.6 “Escrow Holder” means First American Title Insurance Company. 1 --------------------------------------------------------------------------------           1.7 “Lease” means that certain Lease to be effective as of the Closing Date between Seller and Buyer providing for Seller’s leaseback of the Property, as more particularly set forth in the Lease attached hereto as Exhibit “A” and incorporated herein by reference.           1.8 “Permitted Exceptions” means and includes all of the following: (a) applicable zoning and building ordinances and land use regulations; (b) all encumbrances, covenants, conditions, restrictions, easements and other matters of record approved by Buyer (except to the extent that the same are caused or suffered by the acts or omissions of Seller and are placed of record after the date hereof); (c) such exceptions to title as are listed on Schedule B of the Title Report (including the Title Company’s standard printed exceptions) approved by Buyer; (d) such state of facts as disclosed in any survey performed by Buyer at its sole cost and expense and approved by Buyer; (e) such state of facts as would be disclosed by a physical inspection of accessible areas of the Property; (f) the lien of real property taxes and assessments not yet due and payable; (g) any exceptions other than physical encroachments caused by Buyer, its agents, representatives or employees; and (h) such other exceptions as the Title Company shall commit to insure over and to commit to hereafter insure over as to future lenders, buyers and tenants, with endorsements (at Buyer’s sole cost and expense) reasonably satisfactory to Buyer, without any additional cost to Buyer or its future lenders, buyers or tenants, whether such insurance is made available in consideration of payment, bonding, indemnity of Seller or otherwise. Notwithstanding any provision to the contrary contained in this Agreement or any of the documents to be executed in connection herewith or pursuant hereto, any or all of the Permitted Exceptions may be omitted by Seller in the Grant Deed without giving rise to any liability of Seller, irrespective of any covenant or warranty of Seller contained in the Grant Deed (which provisions shall survive the Close of Escrow and not be merged therein).           1.9 “Property” means the real property located at 11355 North Torrey Pines Road, La Jolla, California 92037, and more particularly described in Exhibit “B” attached hereto and incorporated herein by this reference, together with the improvements located thereon and appurtenances thereto, including, without limitation, cafeteria kitchen equipment and appliances, emergency power generator, secretarial bays, the HVAC, mechanical, plumbing, and electrical systems used in the operation of the Property, data and telephone network wiring within and between walls and floors up to patch panel or wall drop, bar refrigerators, audio visual equipment in the two audio visual rooms and the security system. Seller and Buyer agree that the term “Property” shall not include any personal property or trade fixtures owned by Seller located at the Property and used in connection with the ownership, management or operation of the Property. None of such personal property or trade fixtures, including, without limitation, all other movable appliances, tools, machinery, supplies, building materials, artwork, signage, computer equipment, computer equipment racks, cubicles (and cubicle furniture), modular furniture, battery (universal power source), roof antennas for cellular phones, computer and telephone cabling outside of walls (including cabling in false floor in computer room), data network hubs and switches and other tangible personal property shall be transferred to Buyer or included in the Purchase Price.            2 --------------------------------------------------------------------------------           1.10 “Purchase Price” means Twenty-One Million Dollars ($21,000,000.00).           1.11 “Title Company” means First American Title Insurance Company.      2. Sale of Property; Purchase Price.           2.1 Sale of Property. Seller shall sell the Property to Buyer, and Buyer shall purchase the Property from Seller, for the Purchase Price on the terms and conditions of this Agreement.           2.2 Purchase Price. The Purchase Price shall be payable as follows:                 2.2.1 Deposit. Concurrently with the execution of this Agreement by Buyer, Buyer shall deliver to Escrow Holder the Deposit in the form of a wire transfer or cash or cashier’s check drawn on good and sufficient funds on a federally insured bank in the State of California and made payable to the order of Escrow Holder. If Buyer disapproves of the results of its investigation of the Property prior to the expiration of the Due Diligence Period and notifies Seller in writing that it is terminating this Agreement by such date, the Deposit, plus any accrued interest thereon, less one half of any escrow cancellation fees shall be refunded to Buyer. Upon the expiration of the Due Diligence Period forth in Section 3.3.5 below, the Deposit shall be deemed non-refundable and released to Seller without further instruction to Escrow Holder unless Buyer has disapproved the results of its investigation by the expiration of the Due Diligence Period. Except as specifically set forth in this Agreement, the Deposit shall be non-refundable and shall either be applied toward the payment of the Purchase Price on the Close of Escrow or retained by Seller if the Close of Escrow does not occur for any reason other than a default by Seller, the failure of a condition to the Close of Escrow benefitting Buyer set forth in Section 3.3 below, or termination of the Agreement pursuant to Section 8 below.                 2.2.2 Balance. Buyer shall deposit into Escrow an amount (“Cash Balance”), in immediately available federal funds equal to the Purchase Price minus the Deposit and increased or decreased as applicable by the amount of any credits or debits due or any items chargeable or creditable to Buyer under this Agreement. Buyer shall deposit the Cash Balance into Escrow no later than one (1) business day before the Closing Date or such earlier date as may be required by the Escrow Holder under applicable law such that Escrow Holder will be in a position to disburse the cash proceeds to Seller on the Closing Date.                 2.2.3 Early Deposit. Anything in this Section 2.2 to the contrary notwithstanding, if, at the end of the Due Diligence Period, Buyer deposits with Escrow the Cash Balance and all documents and funds required by Escrow Holder of Buyer in order to close the Escrow from Buyer’s standpoint, the Deposit shall not be released to Seller, and Escrow Holder shall proceed to close the Escrow as soon as Seller deposits such funds and documents required by Escrow Holder of Seller herein. 3 --------------------------------------------------------------------------------           2.3 Interest. At the request of Buyer, all funds received from or for the account of Buyer shall be deposited by Escrow Holder in an interest-bearing account for the benefit of Buyer with a federally insured state or national bank located in California.      3. Closing.           3.1 Escrow. Upon the execution of this Agreement by Buyer and Seller, and the acceptance of this Agreement by Escrow Holder in writing, this Agreement shall constitute the joint escrow instructions of Buyer and Seller to Escrow Holder to open an escrow (“Escrow”) for the consummation of the sale of the Property to Buyer pursuant to the terms of this Agreement. Upon Escrow Holder’s receipt of the Deposit and Escrow Holder’s written acceptance of this Agreement, Escrow Holder is authorized to act in accordance with the terms of this Agreement. Buyer and Seller shall execute Escrow Holder’s general escrow instructions upon request; provided, however, that if there is any conflict or inconsistency between such general escrow instructions and this Agreement, this Agreement shall control. Upon the Close of Escrow, Escrow Holder shall pay any sum owed to Seller with immediately available federal funds.           3.2 Closing Date. The Close of Escrow shall be the date upon which the Grant Deed (as defined below) is recorded in the Official Records of San Diego County, California. The Close of Escrow shall occur on or before the Closing Date.           3.3 Buyer’s Conditions to Closing. The Close of Escrow is subject to and contingent on the satisfaction of the following conditions or the waiver of same by Buyer:                 3.3.1 Inspections and Due Diligence Materials. Buyer’s approval of the Contracts, the physical condition of the Property and the “Due Diligence Materials” (as defined in Section 5.6 below) at Buyer’s sole cost and expense prior to the expiration of the Due Diligence Period.                 3.3.2 Title Policy. The Title Company’s commitment to issue or the issuance of the Title Policy (as defined herein in Section 4) complying with the requirements of Section 1.8(h) above regarding endorsements by Escrow Holder without charge as to lenders, buyers and tenants and Section 4 below and the Title Company’s commitment to issue to Buyer’s lender a lender’s policy in form and substance reasonably satisfactory to Buyer’s lender.                 3.3.3 Covenants. Seller having performed and satisfied all agreements and covenants required hereby to be performed by Seller prior to or at the Close of Escrow.                 3.3.4 Representations and Warranties. All representations and warranties of Seller contained in this Agreement shall be true and correct as of the date made and 4 -------------------------------------------------------------------------------- as of the Close of Escrow with the same effect as though such representations and warranties were made at and as of the Close of Escrow.                 3.3.5 Bankruptcy. No action or proceeding shall have been commenced by or against Seller under the federal bankruptcy code or any state law for the relief of debtors or for the enforcement of the rights of creditors and no attachment, execution, lien or levy shall have attached to or been issued with respect to the Property or any portion thereof.                 3.3.6 Payment of Personal Property Taxes. Escrow Holder shall pay, at Close of Escrow, with funds otherwise payable to Seller hereunder, all personal property taxes and assessments with respect to personal property located at the Property. Within ten (10) days after the opening of Escrow, Seller shall provide a copy of the current personal property tax bill to Escrow Holder.           3.4 Buyer’s Approval Procedure. Buyer shall notify Seller of Buyer’s disapproval, if at all, of the matters described in Sections 3, 4 and 5 of this Agreement by written notice delivered to Seller and Escrow Holder by the date set forth for disapproval thereof or if no date is indicated, then the deadline for disapproval shall be the expiration of the Due Diligence Period. Buyer’s failure to disapprove any of the matters described in Sections 3, 4 and 5 by such date in the manner described therein shall be deemed Buyer’s approval and/or waiver of such matter.           3.5 Seller’s Conditions to Closing. The obligations of Seller to consummate the transactions provided for herein are subject to and contingent upon the satisfaction of the following conditions or the waiver of same by Seller in writing:                 3.5.1 Representations and Warranties. All representations and warranties of Buyer contained in this Agreement shall be true and correct as of the date made and as of the Close of Escrow with the same effect as though such representations and warranties were made at and as of the Close of Escrow.                 3.5.2 Covenants. Buyer shall have performed and satisfied all agreements and covenants required hereby to be performed by Buyer prior to or at the Close of Escrow.           3.6 Seller’s Approval Procedure. Seller shall notify Buyer of Seller’s disapproval, if at all, of the matters described in Section 3.5.1 and 3.5.2 of this Agreement by written notice delivered to Buyer and Escrow Holder prior to the Closing Date. Seller’s failure to disapprove any of the matters described in Section 3.5 by such date in the manner described therein shall be deemed Seller’s approval and waiver of such matter.            5 --------------------------------------------------------------------------------           3.7 Possession of Property After Close of Escrow. Seller shall be entitled to remain in possession of the Property immediately after Close of Escrow pursuant to the terms of the Lease.      4. Title Matters.           4.1 Preliminary Report. As soon as possible after the execution of this Agreement by Buyer and Seller, Seller shall endeavor to cause the Title Company to deliver to Buyer a current preliminary report (the “Preliminary Report”) for the Property showing the status of title to the Property as of the date of the Preliminary Report, together with legible and complete copies of the underlying exceptions disclosed on Schedule B of such Preliminary Report (“Title Documents”). The Buyer shall have until fifteen (15) days after receipt of the Preliminary Report and all Title Documents (the “Title Review Period”) within which to give written notice to the Seller and Escrow Holder of any unacceptable exceptions to the Preliminary Report, which disapproval notice shall indicate Buyer’s specific grounds for disapproval. If any supplement or amendment to the Preliminary Report is issued and shows any additional exception to title, including any results from any survey conducted by Buyer (which is other than any Permitted Exception and which materially adversely affects Buyer’s title, in Buyer’s sole discretion), the Buyer shall have until the later of the Title Review Period or five (5) business days from the date such supplement or amendment to the Preliminary Report together with legible and complete copies of underlying documents in connection therewith are provided to Buyer (the “Extended Title Review Period”) within which to give to the Seller written notice of disapproval of such additional exception to title. Any exceptions which are timely disapproved of by Buyer pursuant to this Section 4.1 shall be herein collectively called the “Title Objections.”           If Buyer fails to give notice of disapproval to the Seller within the relevant Title Review Period or Extended Title Review Period, as the case may be, then the Buyer shall conclusively be deemed to have approved the status of title as shown by the Preliminary Report, Title Documents and any supplement or amendment to the Preliminary Report, including any additional or modified Title Documents. If the Buyer gives to the Seller written notice of disapproval within the Title Review Period or Extended Title Review Period, as the case may be, then, at Seller’s sole discretion, Seller may elect (but shall not be obligated) to remove, or cause to be removed at its expense, on or prior to the Close of Escrow, any Title Objections, which removal may be deemed effected by the issuance of title insurance eliminating or insuring against the effect of the Title Objections with assurances reasonably satisfactory to Buyer after issuance, without charge, of such insurance in favor of subsequent lender, buyers, and tenants of the Property.           Seller shall notify Buyer in writing within five (5) business days after receipt of Buyer’s notice of Title Objections whether Seller elects to use its commercially reasonable efforts to attempt to remove any Title Objections (“Seller’s Title Notice”). Seller’s failure to so notify Buyer shall be deemed Seller’s election not to remove any Title Objections. 6 --------------------------------------------------------------------------------           If Seller is unable to remove or endorse over any Title Objections prior to the Close of Escrow, or if Seller elects not to remove one or more Title Objections, then, within five (5) business days after Seller’s notification to Buyer, Buyer may provide Seller with notice that it has elected to terminate this Agreement, in which event the Deposit, less one-half (1/2) of any cancellation fees of Escrow Holder, shall be paid to Buyer by Escrow Holder and, thereafter, the parties shall have no further rights or obligations hereunder except for obligations which expressly survive the termination of this Agreement.           If Buyer does not timely deliver written notice of such election to terminate, then Buyer shall be deemed to waive such Title Objections, in which event such Title Objections shall be deemed Permitted Exceptions and the Close of Escrow shall occur as herein provided without any reduction of or credit against the Purchase Price.           If Seller fails, on or before the Close of Escrow, to cure or delete as exceptions to the Title Policy (as defined below) any Title Objections as to which Seller has agreed to use commercially reasonable efforts to cure or delete in Seller’s Title Notice, Buyer, as its sole right, shall elect either (i) to waive its disapproval of such Title Objections and proceed to the Close of Escrow (whereupon such waived Title Objections shall be deemed Permitted Exceptions), or (ii) to terminate this Agreement by giving Seller and Escrow Agent written notice of such election on or before the Close of Escrow, in which event Escrow Holder shall return the Deposit, less one-half (1/2) of any cancellation fees of Escrow Holder, to Buyer. If Buyer fails to give Seller and Escrow Holder written notice of its election of (i) or (ii) above on or before the Close of Escrow, Buyer shall be deemed to have waived its disapproval of such Disapproved Items and Buyer shall proceed to the Close of Escrow in accordance with the terms of this Agreement. Seller, in any event, shall be required to discharge and remove any and all liens affecting the Property which secure an obligation to pay money and, even though Buyer does not expressly disapprove such matters, such matters shall not be Permitted Exceptions.           4.2 Discharge of Title Objections. Subject to the limitations of Section 1.8(h) above, if on the Closing Date there are any Title Objections which Seller has elected to or is required to pay and discharge, Seller may use any portion of the Cash Balance to satisfy the same, provided Seller shall deliver to Buyer at the Close of Escrow, instruments in recordable form and sufficient to satisfy such Title Objections of record, together with the cost of recording or filing such instruments, or provided that the Title Objections are not liens, Seller shall cause the Title Company to insure over the same, without any additional cost or loss to Buyer, whether such insurance is made available in consideration of payment, bonding, indemnity of Seller or otherwise.           4.3 Title Insurance. At the Close of Escrow, the Title Company shall issue to Buyer, at Seller’s sole cost and expense, a CLTA (or ALTA [1992] with Western Regional Exceptions) Owner’s policy of Standard Coverage Owner’s Form of title insurance (the “Title Policy”), in the amount of the Purchase Price, insuring that title to the Property is vested in Buyer subject only to the Permitted Exceptions. Buyer shall have the right to procure an ALTA Extended Coverage Owner’s Policy of Title Insurance (“ALTA Policy”) as long as the issuance 7 -------------------------------------------------------------------------------- of the ALTA Policy does not delay or extend the Closing Date. Buyer shall pay for the increased cost of such ALTA Policy, the cost of any survey that the Title Company requires for issuance of an ALTA Policy, and for the cost of any other increase in the amount or scope of title insurance if requested by Buyer. Buyer may request that the Title Company provide, at Buyer’s sole cost and expense, such endorsements (or amendments) to the Title Policy as Buyer may reasonably require, provided that (a) such endorsements (or amendments) shall be at no cost or additional liability to Seller, (b) Buyer’s obligations under this Agreement shall not be conditioned upon Buyer’s ability to obtain such endorsements and, if Buyer is unable to obtain such endorsements, Buyer shall nevertheless be obligated to proceed to close the transaction contemplated by this Agreement (the “Transaction”) without reduction of or set off against the Purchase Price, and (c) the Close of Escrow shall not be delayed as a result of Buyer’s request.      5. Inspections.           5.1 Notice. Buyer shall have the right to commence Buyer’s physical inspections of the Property, after Buyer’s delivery of the Deposit, and Seller’s receipt of written evidence that Buyer has procured the insurance required by Section 5.3 of this Agreement, upon twenty-four (24) hours prior written notice to Seller. Buyer’s physical inspection of the Property shall be conducted during normal business hours at times mutually acceptable to Buyer and Seller.           5.2 Testing and Surveys. Buyer acknowledges that prior to the expiration of the Due Diligence Period: (i) Buyer has or will have, at Buyer’s sole cost and expense, conducted such surveys and inspections, and made such boring, percolation, geologic, environmental and soils tests and other studies of the Property; and (ii) Buyer has or will have had adequate opportunity to make such inspection of the Property (including an inspection for zoning, land use, environmental and other laws, regulations and restrictions) as Buyer has, in Buyer’s discretion, deemed necessary or advisable as a condition precedent to Buyer’s purchase of the Property and to determine the physical, environmental and land use characteristics of the Property (including, without limitation, its subsurface) and its suitability for Buyer’s intended use provided that Buyer shall notify Seller before contacting any governmental authorities in accordance with Section 5.6 hereof and provided further that no invasive testing, borings, removal of soil samples or removal of core samples shall be done without the prior written approval of Seller in its sole and absolute discretion; provided, however, Seller hereby consents to the performance of a Phase I environmental report, all physical due diligence inspections excluding boring for a Phase II environmental report, an ALTA survey, research with governmental entities regarding flood zone designation, zoning, seismic matters and other customary due diligence matters and no further notice or consent will be required for such matters.           5.3 Insurance. Buyer shall obtain or cause its consultants to obtain, at Buyer’s sole cost and expense prior to commencement of any investigative activities on the Property, a policy of commercial general liability insurance in a form reasonably acceptable to Seller, covering any and all liability of Buyer and Seller with respect to or arising out of any 8 -------------------------------------------------------------------------------- investigative activities. Such policy of insurance shall be kept and maintained in force during the term of this Agreement and so long thereafter as necessary to cover any claims of damages suffered by persons or property resulting from any acts or omissions of Buyer, Buyer’s employees, agents, contractors, suppliers, consultants or other related parties. Such policy of insurance shall have liability limits of not less than Two Million Dollars ($2,000,000.00) combined single limit per occurrence for bodily injury, personal injury and property damage liability and shall name Seller as an additional insured.           5.4 Indemnity. To the fullest extent permitted by law and in addition to all other indemnities provided for in law or at equity or in the documentation for the transactions described in this Agreement, Buyer shall protect, indemnify, defend and hold the Property, Seller and Seller’s officers, directors, shareholders, trustees, employees, agents, representatives, contractors, and invitees of all of the foregoing, and the heirs, executors, successors and assigns of all of the foregoing (collectively, “Seller Parties”) free and harmless from and against any and all claims, damages, liens, stop notices, liabilities, losses, costs and expenses, including, without limitation, reasonable attorneys’ fees and court costs, resulting from Buyer’s inspection and testing of the Property, including, without limitation, repairing any and all damages to any portion of the Property, arising out of or related (directly or indirectly) to Buyer’s conducting such inspections, surveys, tests, and studies. Buyer shall keep the Property free and clear of any mechanics’ liens or materialmen’s liens related to Buyer’s right of inspection and the activities contemplated by Sections 5.1 and 5.2 of this Agreement; provided, however, Buyer shall bear no responsibility for prior existing conditions (known or unknown) at the Property. The Buyer’s indemnification obligations set forth herein shall survive the Close of Escrow and shall not be merged with the Grant Deed, and shall survive the termination of this Agreement and Escrow.           5.5 Disclosure. It is understood that Seller does not make any representation or warranty, express or implied, as to the accuracy or completeness of any third party reports contained in Seller’s files or in the documents produced by Seller. Buyer acknowledges that Seller and Seller’s affiliates shall have no responsibility for the contents and accuracy of such disclosures, and Buyer agrees that the obligations of Seller in connection with the purchase of the Property shall be governed by this Agreement irrespective of the contents of any such disclosures or the timing or delivery thereof           5.6 Due Diligence. Buyer shall review for approval all Due Diligence Materials (as defined below) within the Due Diligence Period. Seller shall make available to Buyer for Buyer’s review and photocopying (at Buyer’s sole cost and expense) copies of any and all of the documents and information in the possession of Seller related to the Property, provided such documents are not confidential, proprietary or privileged (“Due Diligence Materials”), including, without limitation, all materials in the possession of Seller, its broker and, to the extent not privileged, its attorneys which were provided to Seller when Seller purchased the Property from M&S Balanced Property Fund; provided, however, Seller shall have no liability for the failure to turn over any documents in the possession of Seller’s broker or its attorneys. Seller acknowledges Buyer may desire to discuss or otherwise inquire about plans, documents, agreements and other records of various governmental entities, districts and utilities regarding the 9 -------------------------------------------------------------------------------- Property or otherwise impacting, restricting, or affecting its use or value (“Governmental Records”) with various governmental entities and utilities and the other Due Diligence Materials with third parties. In this regard, Buyer is permitted to contact all necessary third parties and discuss with such third parties the Governmental Records and other Due Diligence Materials; provided, however, Seller is first given a reasonable opportunity to be present at such contact or discussions at a time and location mutually agreed upon by all parties.           5.7 Termination Upon Disapproval. This Agreement shall terminate (i) if Buyer notifies Seller in writing prior to the expiration of the Due Diligence Period that Buyer has decided not to proceed with the purchase of the Property for any reason or (ii) upon Buyer’s disapproval, prior to the expiration of the Due Diligence Period or such earlier date as is specified in this Agreement, of any of the matters described in Section 3.3 (subject to Seller’s right to remove or cure disapproved items, or to obtain a bond or title endorsement). Upon termination of this Agreement pursuant to this subsection: (a) each party shall promptly execute and deliver to Escrow Holder such documents as Escrow Holder may reasonably require to evidence such termination, (b) Escrow Holder shall return all documents to the respective parties who delivered such documents to Escrow, (c) Escrow Holder shall remit all funds deposited into Escrow together with any accrued interest on such funds to the party entitled thereto pursuant to Section 2.2, (d) the parties shall equally share Escrow Holder’s title and escrow cancellation fees, if any, (e) Buyer shall return to Seller all Due Diligence Materials in Buyer’s possession relating to the Property together with copies of any tests or studies prepared by or on behalf of Buyer with respect to the Property, and (f) the respective obligations of Buyer and Seller under this Agreement shall terminate; provided, however, notwithstanding the foregoing, Buyer’s indemnity obligations under Section 5.4 above, shall survive any such termination of the Agreement, and the termination of this Agreement shall not release any other indemnity obligation of Buyer or any other obligations which survive the termination of this Agreement.      6. Escrow Matters.           6.1 Closing Costs and Charges.                 6.1.1 Seller’s Costs. Seller shall pay (a) one-half (1/2) of Escrow Holder’s fees, (b) the premium for the CLTA portion of the Title Policy, (c) all expenses and charges incurred to discharge delinquent taxes, if any, which may be required in order for the Title Company to issue the Buyer’s Title Policy, (d) all documentary transfer taxes payable in connection with the transfer of the Property and all document recording charges related to the transfer of the Property, and (e) Seller’s share of prorations as determined in accordance with Section 6.5.                 6.1.2 Buyer’s Costs. Buyer shall pay (a) one-half (1/2) of the Escrow Holder’s fee, (b) all document recording charges relating to the loan, (c) all costs and premiums to obtain (i) any endorsements to the Title Policy requested by Buyer and/or (ii) ALTA extended coverage if requested by Buyer, (d) cost of any survey or survey update obtained by Buyer, (e) all 10 -------------------------------------------------------------------------------- costs of Buyer’s due diligence, and (f) Buyer“s share of prorations as determined in accordance with Section 6.5.                 6.1.3 Other Costs. All other costs, if any, shall be apportioned in the customary manner for real property transactions in San Diego County, California.           6.2 Deposit of Documents and Funds by Seller. Not later than one (1) business day prior to the Closing Date, Seller shall deposit the following items into Escrow, each of which shall be duly executed and acknowledged by Seller where appropriate:                 6.2.1 A grant deed duly executed and acknowledged by the Seller substantially in the form of Exhibit “C” attached hereto and incorporated herein by this reference (the “Grant Deed”);                 6.2.2 Two (2) counterparts of an assignment and assumption, duly executed by Seller, assigning to Buyer, without warranty, all of Seller’s right, title, and interest in and to all Contracts approved by Buyer at Buyer’s sole discretion, all to the extent transferable by Seller, in the form of Exhibit “D” attached hereto and incorporated herein by this reference (“Assignment and Assumption”);                 6.2.3 An affidavit executed by Seller to the effect that Seller is not a “foreign person” within the meaning of Internal Revenue Code Section 1445 (“Certification”) and an executed California Real Estate Withholding Exemption (Form 597-W) (“Form 597”) and an IRS Form W-9;                 6.2.4 Two (2) counterparts of the Lease, duly executed by Seller; and                 6.2.5 Other documents pertaining to Seller’s authority to record the Grant Deed that may reasonably be required by Escrow Holder to close the Escrow in accordance with this Agreement.      6.3 Deposit of Documents and Funds by Buyer. Not later than one (1) business day prior to the Closing Date, Buyer shall deposit the following items into Escrow:                 6.3.1 The Cash Balance;                 6.3.2 Two (2) counterparts of the Assignment and Assumption, duly executed by Buyer                 6.3.3 Two (2) counterparts of the Lease, duly executed by Buyer; and                 6.3.4 All other funds and documents as may reasonably be required by Escrow Holder to close the Escrow in accordance with this Agreement. 11 --------------------------------------------------------------------------------      6.4 Delivery of Documents and Funds at Closing. Provided that all conditions to closing set forth in this Agreement have been satisfied or, as to any condition not satisfied, waived by the party intended to be benefitted thereby, on the Closing Date, Escrow Holder shall conduct the closing by recording or distributing the following documents and funds in the following manner:                 6.4.1 Recorded Documents. Record the Grant Deed in the Official Records of the county in which the Property is located;                 6.4.2 Buyer’s Documents. Deliver to Buyer: (a) the original Title Policy, (b) an original fully-executed (in counterpart) Assignment and Assumption, (c) the original Certification and Form 597, and (d) an original fully-executed (in counterpart) Lease.                 6.4.3 Seller’s Documents; Purchase Price. Deliver to Seller: (a) the Purchase Price, (b) such other funds, if any, as may be due to Seller by reason of credits under this Agreement, less all items chargeable to Seller under this Agreement, (c) an original fully-executed (in counterpart) Assignment and Assumption, and (d) an original fully-executed (in counterpart) Lease.                 6.4.4 First Month’s Rent and Security Deposit. Deliver to Buyer from Seller’s net proceeds an amount equal to first month’s Rent and security deposit (Three Hundred Eighty Thousand Dollars [$380,000.00]) pursuant to the terms of the Lease.      6.5 Prorations and Adjustments. Real property taxes and operating expenses, if any, affecting the Property shall be prorated as of midnight on the day preceding the Close of Escrow. For purposes of calculating prorations, Buyer shall be deemed to be in title to the Property, and therefore entitled to the income and responsible for the expenses, for the entire day upon which the Close of Escrow occurs.                 6.5.1 Taxes and Assessments. All non-delinquent real estate taxes and current installments of real estate assessments affecting the Property which are payable by Seller shall be prorated as of the Close of Escrow based on the actual current tax bill. All delinquent taxes and assessments, if any, affecting the Property which are payable by Seller shall be paid at the Close of Escrow from funds accruing to Seller. Any refunds of real estate taxes and assessments attributable to the period prior to the Close of Escrow shall be paid to Seller upon receipt, whether such receipt occurs before or after the Close of Escrow. Similarly if following the Close of Escrow any supplemental or escaped assessment is made or levied relating to the period prior to the Close of Escrow, Seller shall be responsible for the same. This provision will survive the Close of Escrow until such taxes and assessments are paid by Seller or are barred by applicable statutes of limitation.                 6.5.2 Operating Expenses. Fees, costs and charges under elevator, HVAC and other service contracts approved and assumed by Buyer herein. Seller shall pay all such expenses that accrue prior to the Close of Escrow and Buyer shall pay all such expenses 12 -------------------------------------------------------------------------------- accruing on the Close of Escrow and thereafter. To the extent possible, Seller and Buyer shall obtain billings and meter readings as of the Close of Escrow to aid in such prorations.                 6.5.3 Method of Proration. Buyer and Seller agree to prepare a schedule of tentative prorations and exchange such schedules not later than three (3) business days prior to the Closing Date with respect to the Property. Such prorations, if and to the extent known and agreed upon as of the Close of Escrow, shall be paid by Buyer to Seller (if the prorations result in a net credit to the Seller) or by Seller to Buyer (if the prorations result in a net credit to the Buyer) by increasing or reducing the cash to be paid by Buyer at the Close of Escrow. Any such prorations not determined or not agreed upon as of the Close of Escrow shall be paid by Buyer to Seller, or by Seller to Buyer, as the case may be, in cash as soon as practicable following the Close of Escrow. Buyer’s and Seller’s obligations with respect to prorations under this Agreement shall survive for a period of two (2) years after the Close of Escrow. A copy of the schedule of prorations as agreed upon by Buyer and Seller shall be delivered to Escrow Holder at least one (1) day prior to the Close of Escrow.                 6.5.4 Assessment Liens. If and to the extent there exists any improvement assessment liens, Mello Roos bond payments or other similar assessments which encumber the Property, the bond payments or assessment liens for the current payable period shall be prorated in accordance with Section 6.5. Seller shall have no obligation to pay off the remaining principal amount of any of such assessments or bonds, and the lien of such assessments shall continue to burden the Property after the Close of Escrow.      7. Property “AS IS.”           7.1 No Side Agreements or Representations. Except as expressly provided in this Agreement, no person acting on behalf of Seller is authorized to make, and by execution hereof, Buyer acknowledges that no person has made, any representation, agreement, statement, warranty, guarantee or promise regarding the Property or the transaction contemplated herein or the zoning, construction, physical condition or other status of the Property except as may be expressly set forth in this Agreement. No representation, warranty, agreement, statement, guarantee or promise, if any, made by any person acting on behalf of Seller which is not contained in this Agreement will be valid or binding on Seller.           7.2 As Is Condition. Buyer acknowledges and agrees that Buyer is purchasing the Property in its existing condition, “AS-IS,” “WHERE IS,” “WITH ALL FAULTS” and that except for those representations and warranties expressly provided for herein, Seller has not made, does not make and specifically negates and disclaims any representations, warranties, promises, covenants, agreements or guaranties of any kind or character whatsoever, whether express or implied, oral or written, past, present or future, of, as to, concerning or with respect to (i) value; (ii) the income to be derived from the Property; (iii) the suitability of the Property for any and all activities and uses which Buyer may conduct thereon, including, without limitation, the possibilities for future development of the Property; (iv) the habitability, merchantability, marketability, profitability or fitness for a particular purpose of the Property; (v) the manner, 13 -------------------------------------------------------------------------------- quality, state of repair or lack of repair of the Property; (vi) the nature, quality or condition of the Property, including, without limitation, the water, soil and geology; (vii) the compliance of or by the Property or its operation with any laws, rules, ordinances or regulations of any applicable governmental authority or body; (viii) the manner or quality of the construction or materials, if any, incorporated into the Property; (ix) compliance with any environmental protection, pollution or land use laws, rules, regulation, orders or requirements, including, without limitation, Title III of the Americans With Disabilities Act of 1990, California Health & Safety Code, the Federal Water Pollution Control Act, the Federal Resource Conservation and Recovery Act, the U.S. Environmental Protection Agency Regulations at 40 C.F.R., Part 261, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Resource Conservation and Recovery Act of 1976, the Clean Water Act, the Safe Drinking Water Act, the Hazardous Materials Transportation Act, the Toxic Substance Control Act, and Regulations promulgated under any of the foregoing; (x) the presence or absence of hazardous materials at, on, under, or adjacent to the Property; (xi) the content, completeness or accuracy of the due diligence materials or preliminary report regarding title; (xii) the conformity of the improvements to any plans or specifications for the Property, including any plans and specifications that may have been or may be provided to Buyer; (xiii) the conformity of the Property to past, current or future applicable zoning or building requirements; (xiv) deficiency of any undershoring; (xv) deficiency of any drainage; (xvi) the fact that all or a portion of the Property may be located on or near an earthquake fault line or on or near a flood plain; (xvii) the existence of vested land use, zoning or building entitlements affecting the Property; or (xviii) with respect to any other matter. Buyer further acknowledges and agrees that having been given the opportunity to inspect the Property and review information and documentation affecting the Property, Buyer is relying solely on its own investigation of the Property and review of such information and documentation, and not on any information provided or to be provided by Seller. Buyer further acknowledges and agrees that any information made available to Buyer or provided or to be provided by or on behalf of Seller with respect to the Property was obtained from a variety of sources and that Seller has not made any independent investigation or verification of such information and makes no representations as to the accuracy or completeness of such information. Buyer agrees to fully and irrevocably release Seller from any and all claims that they may now have or hereafter acquire against Seller for any costs, loss, liability, damage, expense, demand, action or cause of action arising from such information or documentation. Seller is not liable or bound in any manner by any oral or written statements, representations or information pertaining to the Property, or the operation thereof, furnished by any real estate broker, agent, employee, servant or other person. Buyer further acknowledges and agrees that to the maximum extent permitted by law, the sale of the Property as provided for herein is made on an “as is” condition and basis with all faults, and that Seller has no obligations to make repairs, replacements or improvements except as may otherwise be expressly stated herein. Buyer represents, warrants, and covenants to Seller, which representation, warranty, and covenant shall survive the Close of Escrow and not be merged with the grant deed, that, except for Seller’s express representations and warranties specified in this Agreement, Buyer is relying solely upon Buyer’s own investigation of the Property. 14 --------------------------------------------------------------------------------           By initialing below, the Buyer acknowledges that (i) the provisions of this Section 7 have been required by Seller as a material inducement to enter into the contemplated transactions; (ii) this Section 7.2 has been read and fully understood, (iii) the Buyer has had the opportunity to ask questions of its counsel about its meaning and significance, and (iv) the Buyer has accepted and agreed to the terms set forth in this Section 7.2.   BUYER’S INITIALS    /s/ [ILLEGIBLE]           7.3 Seller’s Maintenance of the Property. Between the Effective Date and the Closing Date, Seller shall maintain the Property in substantially the same manner as prior hereto pursuant to Seller’s normal course of business, subject to reasonable wear and tear; provided, however, that Seller’s maintenance obligation under this Section shall not include any obligation to make capital expenditures or other expenditures not incurred in Seller’s normal course of business unless such damage or destruction was due to an insured casualty, in which case Seller shall make such repairs to the extent of available insurance proceeds.           7.4 Release. In recognition of the opportunity afforded to Buyer pursuant to this Agreement to investigate any and all aspects of the Property as Buyer determines to be appropriate, Buyer agrees at the Close of Escrow to release and waive all claims against Seller associated with the Property as follows:           7.4.1 Buyer and its successors and assigns each hereby forever release, discharge and acquit the Seller Parties of and from any and all claims, demands, obligations, liabilities, indebtedness, breaches of contract, breaches of duty or any relationship, acts, omissions, misfeasance, malfeasance, cause or causes of action, debts, sums of money, accounts, compensations, contracts, controversies, promises, damages, costs, losses and expenses, of every type, kind, nature, description or character, relating to or arising from the Property, including, without limitation, any matters which arise out or relate to the presence at, under, on or near the Property of any Hazardous Materials or any hazardous, toxic or radioactive wastes, substances, or materials, and irrespective of how, why or by reason of what facts, whether heretofore, now existing or hereafter arising, or which could, might or may be claimed to exist, of whatever kind or name, whether known or unknown, suspected or unsuspected, liquidated or unliquidated, including, without limitation, any rights of Buyer or its successors or assigns under the State or Federal Comprehensive Environmental Response, Compensation and Liability Act, as amended from time to time, and similar laws, each as though fully set forth herein at length, which in any way arise out of, are connected with or relate to the Property. Notwithstanding anything to the contrary contained herein, nothing contained herein shall be deemed or construed to be a release, discharge or acquittance of the Seller from any of its obligations under the Purchase Agreement or any of the documents executed pursuant to the terms thereof.           7.4.2 Buyer hereby agrees, represents and warrants that it realizes and acknowledges that factual matters now unknown to it may have given or may hereafter give rise 15 -------------------------------------------------------------------------------- to causes of action, claims, demands, debts, controversies, damages, costs, losses and expenses, which are presently unknown, unanticipated and unsuspected, and it further agrees, represents and warrants that this Agreement has been negotiated and agreed upon in light of that realization and that it nevertheless hereby intends to release, discharge and acquit the Seller Parties from any such unknown causes of action, claims, demands, debts, controversies, damages, costs, losses and expenses which are in any way related to the Property except as expressly provided to the contrary in this Agreement. In furtherance of this intention, Buyer expressly waives any and all rights conferred upon it by the provisions of California Civil Code Section 1542, and expressly consents that this Agreement shall be given full force and effect according to each of its express provisions. California Civil Code Section 1542 provides:   “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR .”      8. Damage or Destruction; Condemnation.           8.1 Uniform Act. This Agreement shall be governed by the Uniform Vendor and Purchaser Risk Act as set forth in the California Civil Code (“Act”) as supplemented by this Section 8 and its subsections. For purposes of the Act, (a) a taking by eminent domain of a portion of the Property shall be deemed to affect a “material part” of the Property if the estimated value of the portion of the Property taken exceeds two and one-half percent (2 1/2%) of the Purchase Price, and (b) the destruction of a “material part” of the Property shall be deemed to mean an insured or uninsured casualty to the Property following Buyer’s inspection of the Property and prior to the Close of Escrow having an estimated cost of repair which equals or exceeds two and one-half percent (2 1/2%) of the Purchase Price.           8.2 Definitions. The phrase “estimated value” shall mean an estimate obtained from an M.A.I. appraiser, who has at least five (5) years experience evaluating property located in the County where the Property is located, similar in nature and function to that of the Property, selected by Seller and approved by Buyer, and the phrase “estimated cost of repair” shall mean an estimate obtained from an independent contractor selected by Seller and approved by Buyer. Buyer shall not unreasonably withhold, condition or delay Buyer’s approval under this Section.           8.3 Notice; Credit to Buyer. Buyer shall have the right to terminate this Agreement if all or a material part of the Property is destroyed without fault of Buyer or a material part of the Property is taken by eminent domain during the escrow period. Buyer shall give written notice of Buyer’s election to terminate this Agreement under the Act within five (5) business days after Buyer is given notice by Seller of any damage to or condemnation of the Property which entitles Buyer to terminate this Agreement. If Buyer does not give such notice, 16 -------------------------------------------------------------------------------- then this Agreement shall remain in full force and effect and there shall be no reduction in the Purchase Price, but whether or not the loss or damage is of a material part Seller shall, at Close of Escrow, assign to Buyer (a) any insurance proceeds payable with respect to such damage; or (b) the entire award payable with respect to such condemnation proceeding, whichever is applicable.      9. Representations and Warranties.           9.1 By Seller. Seller represents and warrants to Buyer that as of the date of this Agreement and as of the Closing Date:                 9.1.1 Seller has the full power and authority to execute, deliver and perform its obligations under this Agreement.                 9.1.2 To Seller’s actual knowledge, there is no pending or threatened litigation, proceedings, or special assessments, investigations, or condemnation or eminent domain proceedings including, without limitation, any voluntary or involuntary bankruptcy proceedings affecting Seller or the Property which would affect Buyer’s ownership of the Property in any way, and Seller does not know or have reasonable grounds to know of any basis for any such litigation, proceeding or investigation. Seller shall notify Buyer of the service of any lawsuit or notice of action or proceeding within three (3) business days of Seller’s receipt thereof.                 9.1.3 To Seller’s actual knowledge the Property is free of “Hazardous Materials” and is otherwise in compliance with all applicable “Environmental Requirements” (as hereinafter defined). Except as disclosed to Buyer in writing, Seller has received no written notice of any Hazardous Materials affecting the Property. This warranty does not apply to Hazardous Materials which are legally stored or used on the Property or incorporated in normal building materials in accordance with applicable environmental requirements at either the time of installation or as of Closing. The term “Hazardous Materials” shall mean any waste, industrial by-product, chemical or hazardous substance of any nature, including without limitation, hydrocarbons, radioactive materials, phenylchlorobenzenes (PCBs), friable asbestos, pesticides, herbicides, pesticides or herbicide containers, untreated sewage, industrial process sludge, petroleum or petroleum by-products (including but not limited to crude oil or any fraction thereof, natural gas, natural gas liquids, liquified natural gas or synthetic gas usable for fuel or any mixture thereof), polychlorinated biphenals, urea formaldehyde, radon gas, medical waste, or other regulated materials that may cause cancer of reproductive toxicity, or any “hazardous substance,” “hazardous material,” “hazardous waste,” or “toxic substance,” as such term are defined in the Environmental Requirements. The term “Environmental Requirements” shall mean any applicable environmental requirement of federal, state or local law, statute, ordinance or regulation, or applicable court or administrative order or decree, or applicable private agreement, including but not limited to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. ‘9601, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. ‘6901, et seq., the Clean Water Act, 33 U.S.C. 1251, et seq., the 17 -------------------------------------------------------------------------------- Clean Air Act, 42 U.S.C. ‘7401, et seq., the Occupational Safety and Health Act, 29 U.S.C. ‘651, et seq., the Hazardous Materials Transportation Act, 49 U.S.C. ‘1801, et seq., the Federal Water Pollution Control Act, 33 U.S.C. ‘1321, et seq., the Toxic Substances Control Act, 15 U.S.C. ‘2601, et seq., The Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. ‘136, et seq.), and the Emergency Planning and Community Right-to-Know Act (42 U.S.C. ‘11001, et seq.), the Hazardous Substance Account Act, California Health and Safety Code Section 25300, et seq., the Hazardous Waste Control Law, California Health and Safety Code Section 25100, et seq., the Medical Waste Management Act, California Health and Safety Code Section 25015, et seq. and the Porter-Cologne Water Quality Control Act, California Water Code Section 13000, et seq.                 9.1.4 To the best of Seller’s actual knowledge, neither the execution nor the delivery of this Agreement by Seller nor the performance by Seller of any of its obligations hereunder will, (i) result in breach or violation of any Contract, or (ii) constitute a default under any Contract; furthermore to the best of Seller’s actual knowledge; neither Seller nor any other party to any Contract is currently in default under any Contract affecting the Property.                 9.1.5 There are no tenancies, subtenancies, or licenses to use any portion(s) of the Property, nor will there by any tenancies, subtenancies, or licenses of all or any portions of the Property at Close of Escrow except as may be approved in writing by Buyer prior to Seller entering into same. Furthermore, Seller shall expeditiously forward copies of any correspondence and/or notices received by Seller from any governmental agencies or third parties relating to Seller’s use, occupancy, or ownership of the Property.           As used in this Agreement, “actual knowledge” means the real awareness of Seller’s current senior management (all current officers of the Seller) and does not include imputed or constructive knowledge and does not require Seller to make any independent investigation or inquiry. None of such current senior management shall have any personal liability to Buyer or its successors or assigns for any breach of any representation or warranty in this Agreement.           9.2 By Buyer. Buyer represents and warrants to Seller that as of the date of this Agreement and as of the Closing Date:                 9.2.1 Buyer has the full power and authority to execute, deliver and perform Buyer’s obligations under this Agreement.                 9.2.2 Buyer represents and warrants, which representations and warranties shall survive the Close of Escrow and not be merged with the Grant Deed, that, as specified in Section 5 hereof, Buyer has, or shall have inspected and conducted tests and studies of the Property, and that Buyer is or will be prior to the Close of Escrow familiar with the general condition of the Property. Buyer understands and acknowledges that the Property may be subject to earthquake, fire, floods, erosion, high water table, dangerous underground soil conditions, hazardous materials and similar occurrences that may alter its condition or affect its suitability for any proposed use. Seller shall have no responsibility or liability with respect to any such 18 -------------------------------------------------------------------------------- occurrence or condition. Buyer represents and warrants that Buyer is acting, and will act only, upon information obtained by Buyer directly from Buyer’s own inspection of the Property. Notwithstanding anything to the contrary contained in this Agreement, the suitability or lack of suitability of the Property for any proposed or intended use, or availability or lack of availability of (a) permits or approvals of governmental or regulatory authorities, or (b) easements, licenses or other rights with respect to any such proposed or intended use of the Property, shall not affect the rights or obligations of the Buyer hereunder.      10. Default.           10.10 LIQUIDATED DAMAGES; DEPOSIT. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, IF BUYER HAS NOT TERMINATED THIS AGREEMENT PRIOR TO THE EXPIRATION OF THE DUE DILIGENCE PERIOD AND IF THE SALE OF THE PROPERTY TO BUYER IS NOT CONSUMMATED FOR ANY REASON OTHER THAN SELLER’S DEFAULT UNDER THIS AGREEMENT, THE FAILURE OF A CONDITION TO THE CLOSE OF ESCROW BENEFITTING BUYER SET FORTH IN SECTION 3.3 OF THIS AGREEMENT, OR TERMINATION OF THE AGREEMENT PURSUANT TO SECTION 8 OF THIS AGREEMENT, SELLER SHALL BE ENTITLED TO RETAIN THE DEPOSIT AS SELLER’S LIQUIDATED DAMAGES AND SOLE AND EXCLUSIVE REMEDY. THE PARTIES AGREE THAT IT WOULD BE EXTREMELY IMPRACTICABLE AND DIFFICULT TO ASCERTAIN THE ACTUAL DAMAGES SUFFERED BY SELLER AS A RESULT OF BUYER’S FAILURE TO COMPLETE THE PURCHASE OF THE PROPERTY PURSUANT TO THIS AGREEMENT, AND THAT UNDER THE CIRCUMSTANCES EXISTING AS OF THE DATE OF THIS AGREEMENT, THE LIQUIDATED DAMAGES PROVIDED FOR IN THIS SECTION REPRESENTS A REASONABLE ESTIMATE OF THE DAMAGES WHICH SELLER WILL INCUR AS A RESULT OF SUCH FAILURE, PROVIDED, HOWEVER, THAT THIS PROVISION SHALL NOT LIMIT SELLER’S RIGHTS TO RECEIVE REIMBURSEMENT FOR REASONABLE ATTORNEYS’ FEES, NOR WAIVE OR AFFECT SELLER’S RIGHTS AND BUYER’S INDEMNITY OBLIGATIONS UNDER OTHER SECTIONS OF THIS AGREEMENT. THE PARTIES ACKNOWLEDGE THAT THE PAYMENT OF SUCH LIQUIDATED DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY WITHIN THE MEANING OF CALIFORNIA CIVIL CODE SECTION 3275 OR 3369, BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO SELLER PURSUANT TO CALIFORNIA CIVIL CODE SECTIONS 1671, 1676, AND 1677 THE PARTIES HAVE SET FORTH THEIR INITIALS BELOW TO INDICATE THEIR AGREEMENT WITH THE LIQUIDATED DAMAGES PROVISION CONTAINED IN THIS SECTION. SELLER’S INITIALS   /s/ DW       BUYER’S INITIALS   /s/ [ILLEGIBLE]        19 --------------------------------------------------------------------------------           10.2 No Contesting Liquidated Damages. As material consideration to each party’s agreement to the liquidated damages provisions stated above, each party hereby agrees to waive any and all rights whatsoever to contest the validity of the liquidated damage provisions for any reason whatsoever, including, but not limited to, that such provision was unreasonable under circumstances existing at the time this Agreement was made.           10.3 Buyer’s Remedies for Seller’s Default. If, at the Close of Escrow, (i) Seller is in default of any of its obligations hereunder, or (ii) any of Seller’s material representations or warranties are untrue in any material respect, or (iii) the Close of Escrow otherwise fails to occur by reason of Seller’s failure or refusal to perform its obligations hereunder in a prompt and timely manner, Buyer shall have the right, to elect, as its sole and exclusive remedy, to (a) terminate this Agreement by written notice to Seller, promptly after which the Deposit shall be returned to Buyer or (b) seek specific performance of this Agreement.      11. Waiver of Trial by Jury.           Seller and Buyer, to the extent they may legally do so, hereby expressly waive any right to trial by jury of any claim, demand, action, cause of action, or proceeding arising under or with respect to this Agreement, or in any way connected with, or related to, or incidental to, the dealings of the parties hereto with respect to this Agreement or the transactions related hereto or thereto, in each case whether now existing or hereafter arising, and irrespective of whether sounding in contract, tort, or otherwise. To the extent they may legally do so, Seller and Buyer hereby agree that any such claim, demand, action, cause of action, or proceeding shall be decided by a court trial without a jury and that any party hereto may file an original counterpart or a copy of this Section with any court as written evidence of the consent of the other party or parties hereto to waiver of its or their right to trial by jury.      12. Attorneys’ Fees.           If either party hereto brings an action or proceeding (including any cross-complaint, counterclaim or third-party claim) against the other party by reason of a default by the other party or otherwise arising out of this Agreement, the non-prevailing party shall pay to the prevailing party in such action or proceeding all of the prevailing party“s costs and expenses of suit, including reasonable attorney“s fees, which shall be payable whether or not such action is prosecuted to a judgment.      13. Notices.           All notices, demands, approvals, and other communications provided for in this Agreement shall be in writing and shall be personally delivered, delivered by reputable overnight courier, sent by certified mail, postage prepaid, return receipt requested or sent by facsimile transmission and shall be effective upon the earlier of the following to occur: (a) if personally delivered or delivered by overnight courier, when delivered to the recipient, (b) if mailed, three (3) business days after deposit in a sealed envelope in the United States mail, postage prepaid by 20 -------------------------------------------------------------------------------- registered or certified mail, return receipt requested, addressed to the recipient as set forth below or (c) upon telephonic confirmation if sent by facsimile transmission. All notices to Seller shall be sent to Seller’s Address. All notices to Buyer shall be sent to Buyer’s Address. All notices to Escrow Holder shall be sent to Escrow Holder’s Address. The foregoing addresses may be changed by written notice given in accordance with this Section. If the date on which any notice to be given hereunder falls on a Saturday, Sunday or legal holiday, then such date shall automatically be extended to the next business day immediately following such Saturday, Sunday or legal holiday. Notices shall be directed to the parties at their respective addresses shown below:       If to Buyer:   National University 11255 North Torrey Pines Road La Jolla, California 92037-1011 Attention: Kevin Casey, Vice President Telephone: (858) 642-8110 Facsimile: (858) 642-8711 With a Copy to:   Stephenson Worley Garratt Schwartz Garfield & Prairie, LLP 401 B Street, #2400 San Diego, California 92101-4200 Attention: Michael W. Prairie, Esq. Telephone: (619) 696-3500 Facsimile: (619) 696-3555     Mr. John P. Bucher John Bucher Real Estate Company 1010 Second Avenue, #1830 San Diego, California 92101 Telephone: (619) 235-9940 Facsimile: (619) 235-0701 If to Seller:   Jenny Craig Operations, Inc. Attention: Paul A. Maas, Esq. 11355 North Torrey Pines Road P. O. Box 387910 La Jolla, California 92038-7910 Telephone: (858) 812-2242 Facsimile: (858) 812-2799 21 --------------------------------------------------------------------------------       With a Copy to:   Kolodny & Pressman, A.P.C. A Professional Corporation 11975 El Camino Real, Suite 201 San Diego, California 92130-2542 Attention: Jed L. Weinberg, Esq. Telephone: (858) 453-0309 Facsimile: (858) 453-9347     Mr. John Casey John Burnham & Company 610 West Ash Street, #1900 San Diego, California 92101 Telephone: (619) 236-1557 Facsimile: (619) 238-4118 If to Escrow Holder:   First American Title Insurance Company 411 Ivy Street San Diego, California 92101 Attention: ____________ Telephone: (619) 238-1776 Facsimile: (619) ___ - ____      14. Amendment; Complete Agreement.           All amendments, modifications and supplements to this Agreement must be in writing and executed by Buyer and Seller. This Agreement contains the entire agreement and understanding between Buyer and Seller concerning the subject matter of this Agreement and supersedes all prior agreements, terms, understandings, conditions, representations and warranties, whether written or oral, made by Buyer or Seller concerning the Property or the other matters which are the subject of this Agreement. This Agreement has been drafted through a joint effort of the parties and their counsel and, therefore, shall not be construed in favor of or against either of the parties.      15. Governing Law; Venue.           This Agreement shall be governed by and interpreted in accordance with the laws of the State of California, without regard to principles of conflicts of law. Any action brought by either Seller or Buyer shall be brought in a court of competent jurisdiction located in San Diego County, California.      16. Severability.           If any provision of this Agreement or application thereof to any person or circumstance shall to any extent be invalid or unenforceable, the remainder of this Agreement 22 -------------------------------------------------------------------------------- (including the application of such provision to persons or circumstances other than those to which it is held invalid or unenforceable) shall not be affected thereby, and each provision of this Agreement shall be valid and enforced to the fullest extent permitted by law.      17. Counterparts and Headings.           This Agreement may be executed in counterparts, each of which shall be an original, but all of which together shall constitute one agreement. The headings to sections of this Agreement are for convenient reference only and shall not be used in interpreting this Agreement.      18. Time of the Essence; Days.           Time is of the essence of this Agreement. Unless specified to the contrary, references in this Agreement to “days” shall mean calendar days. In the event an action is required to be taken or obligation to be performed on a day which is not a business day, the action shall be required to be taken or obligation required to be performed on the next business day. For purposes hereof, business day means a day other than Saturday, Sunday, or a day when banks are closed in California.      19. Waiver.           No waiver by Buyer or Seller of any of the terms or conditions of this Agreement or any of their respective rights under this Agreement shall be effective unless such waiver is in writing and signed by the party charged with the waiver.      20. Third Parties.           This Agreement is entered into for the sole benefit of Buyer and Seller and their respective permitted successors and assigns. No party other than Buyer and Seller and such permitted successors and assigns shall have any right of action under or rights or remedies by reason of this Agreement.      21. Additional Documents.           Each party agrees to perform any further acts and to execute and deliver such further documents which may be reasonably necessary to carry out the terms of this Agreement.      22. Independent Counsel.           Buyer and Seller each acknowledge that: (i) they have had the opportunity to be represented by independent counsel in connection with this Agreement, and (ii) this Agreement is the result of negotiations between the parties hereto and the advice and assistance of their respective counsel. The fact that this Agreement was prepared by Seller“s counsel as a matter of 23 -------------------------------------------------------------------------------- convenience shall have no import or significance. Any uncertainty or ambiguity in this Agreement shall not be construed against Seller because Seller’s counsel prepared this Agreement in its final form.      23. Commissions.           Buyer and Seller each represent and warrant to the other that there are no commissions, finder’s fees or brokerage fees arising out of the transactions contemplated by this Agreement other than a commission equal to three percent (3%) of the Purchase Price payable by Seller upon Close of Escrow to Brokers (one and one-half percent [1 1/2%] to each Broker). To the fullest extent permitted by law and in addition to all other indemnities provided for at law or in equity or in the documentation for the transactions described in this Agreement, Buyer shall indemnify and hold the Seller Parties harmless from and against any and all liabilities, claims, demands, damages, costs and expenses, including, without limitation, reasonable attorneys’ fees and court costs, in connection with claims for any such commissions, finders’ fees or brokerage fees arising out of Buyer’s conduct or the inaccuracy of the foregoing representation and/or warranty of Buyer. To the fullest extent permitted by law and in addition to all other indemnities provided for at law or in equity or in the documentation for the transactions described in this Agreement, Seller shall indemnify, defend and hold Buyer and Buyer’s officers, directors, shareholders, trustees, employees, agents, representatives, contractors, and invitees of all of the foregoing, and the heirs, executors, successors and assigns of all of the foregoing (collectively, “Buyer Parties”) harmless from and against any and all liabilities, claims, demands, costs and expenses, including, without limitation, reasonable attorneys’ fees and costs in connection with claims for any such commissions, finders’ fees or brokerage fees arising out of Seller’s conduct or the inaccuracy of the foregoing representation and/or warranty of Seller. The indemnities contained in this Section 23 shall survive the Close of Escrow and shall not be merged with the Grant Deed.      24. Government Approvals.           Nothing contained in this Agreement shall be construed as authorizing Buyer to apply for a zone change, variance, subdivision maps, lot line adjustment or other discretionary governmental act, approval or permit with respect to the Property prior to the Close of Escrow, and Buyer agrees not to do so without Seller’s prior written approval, which approval may be withheld in Seller’s sole and absolute discretion. Correspondingly Seller will not apply for any zone change, variance, subdivision maps, lot line adjustment or other discretionary governmental act, approval or permit with respect to the Property prior to the Close of Escrow without the prior written consent of Buyer which consent may be withheld in Buyer’s sole and absolute discretion. Buyer agrees not to submit any reports, studies or other documents, including, without limitation, plans and specifications, impact statements for water, sewage, drainage or traffic, environmental review forms, or energy conservation checklists to any governmental agency, or any amendment or modification to any such instruments or documents prior to the Close of Escrow unless required to do so by law or first approved by Seller, which approval Seller may withhold in Seller’s sole discretion. Buyer’s obligation to purchase the Property shall not be subject to or 24 -------------------------------------------------------------------------------- conditioned upon Buyer’s obtaining any variances, zoning amendments, subdivision maps, lot line adjustment, or other discretionary governmental act, approval or permit.      25. Assignment.           Buyer shall not assign this Agreement without Seller’s prior written consent, which consent shall not be unreasonably withheld; provided, however, that Buyer may assign this Agreement to an entity controlled by Buyer without Seller’s prior consent, provided that (i) the assignment occurs concurrently with the Close of Escrow, and (ii) the assignee expressly assumes, in writing, all of Buyer’s obligations hereunder. Upon assignment by Buyer, the original Buyer shall remain liable for all obligations of Buyer under this Agreement. Any purported assignment in violation of the terms of this Agreement shall be void.      26. Successors and Assigns.           Subject to Section 25 above, this Agreement shall be binding upon and inure to the benefits of the heirs, successors and assigns of the parties hereto.      27. Exhibits.           Each reference to a Section, subsection or exhibit in this Agreement shall mean the sections or subsections of this Agreement and the exhibits attached to this Agreement, unless the context requires otherwise. Each such exhibit is incorporated herein by this reference.      28. No Reservation of Property.           The preparation and/or delivery of unsigned drafts of this Agreement shall not create any legally binding rights in the Property and/or obligations of the parties, and Buyer and Seller acknowledge that this Agreement shall be of no effect until it is duly executed by both Buyer and Seller.      29. Survival.           The representations, warranties or indemnities set forth herein shall survive the Close of Escrow.      30. Confidentiality.           Neither Seller nor Buyer shall disclose the contents of any proprietary or confidential material or reports furnished by the other (including any material related to internal affairs or composition) or, unless authorized by the other, the terms of the purchase of the Property except to its attorneys, accountants, consultants, agents and prospective lenders as necessary in connection with the consummation of this transaction. 25 --------------------------------------------------------------------------------      31. Publicity.           Neither Seller nor Buyer shall make any public announcement or press release with respect to the execution of this Agreement, or the termination of this Agreement, if such termination occurs without the prior written consent of the other. Neither Buyer nor Seller shall make any public announcement or press release with respect to the occurrence of Close of Escrow without first giving the other party hereto prior written notice thereof and providing such other party a reasonable opportunity to approve the contents of such public announcement or press release; provided, however, with respect to the first public statement regarding the Close of Escrow, Seller and Buyer shall make a joint statement prior to the Close of Escrow with the content of such statement to be mutually agreed to by Seller and Buyer. Buyer acknowledges that Seller does not desire to reflect the documentary transfer tax on the grant deed or publicly announce the Purchase Price. Buyer agrees to undertake reasonable efforts to prevent any of its officers, directors, agents, brokers, or employees from disclosing the Purchase Price or documentary transfer tax.      32. Exchange.           At the option of either party, such party may elect to consummate the transaction hereunder in whole or in part as a like-kind exchange pursuant to Section 1031 of the Internal Revenue Code of 1986, as amended. If either party (the “Exchanging Party”) so elects, the other party (the “Cooperating Party”) shall cooperate with the Exchanging Party, executing such documents and taking such action as may be reasonably necessary in order to effectuate this transaction as a like-kind exchange; provided, however, that (i) the Cooperating Party’s cooperation hereunder shall be without cost, expense or liability to the Cooperating Party, and the Cooperating Party shall have no obligation to take title to any real property; (ii) the Exchanging Party shall assume all risks in connection with the designation, selection and setting of terms of the purchase or sale of any exchange property; (iii) any documents to effectuate such exchange transaction are consistent with the terms and conditions contained in this Agreement; (iv) the Exchanging Party shall indemnify, defend and hold the Cooperating Party harmless from any and all claims, demands, penalties, loss, causes of action, suits, risks, liability, costs or expenses of any kind or nature (including, without limitation, reasonable attorneys’ fees) which the Cooperating Party may incur or sustain, directly or indirectly, related to or in connection with, or arising out of, the consummation of this transaction as a like-kind exchange as contemplated hereunder; and (v) the exchange shall not delay the Closing Date or affect any of the rights of any of the parties to this Agreement. 26 --------------------------------------------------------------------------------      IN WITNESS WHEREOF, Buyer and Seller do hereby execute this Agreement as of the date first written above.       SELLER: JENNY CRAIG OPERATIONS, INC., a California corporation         By:  /s/ DUANE WEINGER   --------------------------------------------------------------------------------   Duayne Weinger ,  its      C.A.O.         --------------------------------------------------------------------------------         By:  /s/ JAMES S. KELLY   --------------------------------------------------------------------------------   James S. Kelly , its        CFO       BUYER: NATIONAL UNIVERSITY, a California non-profit, public benefit corporation         By:  /s/ [ILLEGIBLE]   --------------------------------------------------------------------------------                              , its       President         By:  /s/ PATRICIA POTTER   --------------------------------------------------------------------------------   Patricia Potter ,  its       Secretary Acceptance by Escrow Holder      Escrow Holder acknowledges receipt of the foregoing Agreement and accepts the instructions contained therein.       Dated: June 13, 2001 FIRST AMERICAN TITLE INSURANCE COMPANY         By:  /s/ LYNN GRAHAM   --------------------------------------------------------------------------------   Escrow Officer   Name:   Lynn Graham   -------------------------------------------------------------------------------- 27

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.36      Standard Form Office Lease     Made and entered into at BURLINGAME, California, between HARVARD INVESTMENT CO. ("Lessor") and INTERMUNE, INC. ("Lessee") 1.   Premises. (a) In consideration of the rent herein provided and the terms and conditions hereof, Lessor hereby leases to Lessee those certain premises, more particularly described in Exhibit "A" attached hereto, situated in THE CROWN BUILDING located at 875 MAHLER RD., SUITE 118, BURLINGAME, California.     (b) For all lease purposes, the rentable square footage shall be deemed to be 2992. 2.   Term. Subject to the terms and conditions set forth herein, the term of this lease shall commence on FEBRUARY 14, 2001 and shall end on JULY 31, 2001, unless sooner terminated as hereinafter provided. 3.   Rent. (a) Lessee agrees to pay to Lessor, as a monthly rent for the premises, during the term hereof, the sum of $11,968.00, which rent is subject to adjustment as provided herein. Such monthly rent shall be due and payable in advance each month on the first day of the month and shall be payable to Lessor at the address shown below. The first monthly installment shall be due upon execution of this lease by Lessee. Should this lease commence on a day other than the first of the month, the rent for such partial month shall be prorated.     (b) On the first day of January following the date hereof and on each and every January 1 thereafter during the term hereof, the then current rent shall be increased by the percentage increase, if any, in the CPI's Annual Average or December Index for the immediately preceding year over that which existed for the previous year. If index figures are not available for adjustment purposes when rent payments otherwise become due, said rent payments shall be made at the then current rate and adjusted retroactively when said index figures are available. It is herein understood and agreed that in no event will the rent determined by application of the CPI on any January 1 be less than the monthly rent in effect during the preceding year. As used herein, the term "CPI" shall mean the All Items Consumer Price Index for All Urban Consumers or Urban Wages Earners and Clerical Workers, as determined by Lessor, for the San Francisco-Oakland-San Jose area, 1982-84 - 100, as published by the United States Department of Labor. In the event that said CPI is no longer available, the Index designated by the Bureau of Labor Statistics as replacing said CPI, or the most comparable substitute as determined by the Lessor, shall be used thereafter.     (c) At the end of each calendar year, Lessee shall pay to Lessor, as additional rent, Lessee's pro-rata share of the amount, if any, by which operating expenses for said calendar year exceed $4.00 per square foot of rentable area. As used herein, the term "operating expenses" shall mean all costs of management, operation and maintenance of the land and building of which the premises are a part, including without limitation, management office rental value, the cost of all capital improvements required by any governmental authority or made by Lessor to maintain operations, employee wages, benefits and overhead expenses, equipment and tools, insurance, janitorial services, landscaping, maintenance and repairs, materials and supplies, scavenger, security services, utilities and taxes. 4.   Security Deposit. Upon execution of this lease by Lessee, Lessee, shall deposit with Lessor the sum of $23,936.00. Said sum shall be held by Lessor as security for the faithful performance by Lessee of all the terms and conditions of this lease. If Lessee defaults with respect to any provision of this lease, including without limitation, the provisions relating to the payment of rent, Lessor may, at its option apply or retain as much of said deposit as is necessary to compensate Lessor for the damages caused by Lessee's default. If any portion of said deposit is so used or applied, Lessee shall, upon demand therefore, deposit cash with Lessor in an amount sufficient to restore said deposit to its original amount and Lessee's failure to do so shall be a material breach of this lease. Lessor shall not be required to keep this deposit separate from its general funds and Lessee shall not be entitled to interest on said deposit. If Lessee shall fully and faithfully perform every provision of this lease to be performed by it, the deposit or any balance thereof shall be returned to Lessee at the expiration of the lease term. In the event of termination of Lessor's interest in this --------------------------------------------------------------------------------     lease, Lessor shall transfer said deposit to Lessor's successor in interest. 5.   Use. Lessee shall use the premises for general office purposes only and in strict compliance with the rules and regulations attached hereto. Lessee shall conduct its business, insofar as the same relates to Lessee's use of the premises, in a lawful manner and in strict compliance with all governmental laws, rules, regulations and orders applicable to the use by Lessee of the premises. Lessee shall, at its sole cost and expense, promptly comply with all laws, statutes, ordinances and governmental rules, regulations, orders or requirements now in force or which may hereafter be in force and with the requirements of any board of fire underwriters or other similar body now or hereafter constituted relating to or affecting the condition or use of the premises. Lessee shall not do or permit anything to be done in or about the premises nor bring or keep anything therein which will in any way increase fire or casualty insurance rates or interfere with the rights of other tenants or occupants of the building or injure or annoy them, nor shall Lessee cause, maintain or permit any nuisance in or about the premises. Lessee shall not commit or suffer to be committed any waste in or about the premises. Moreover, Lessee shall pay Lessor, upon demand, for any damages Lessor or other tenants of the building may suffer as a result of any violation of this provision by Lessee, its agents, employees, invitees, contractors, suppliers or customers. 6.   Occupant Load. Lessee shall not permit the premises to be occupied by more than 17 employees. 7.   Equipment. No equipment, other than that described in Exhibit "B" attached hereto, shall be used in the premises without the prior written consent of Lessor. Lessor does not guarantee that the building's air conditioning will be adequate to service Lessee's equipment needs. If auxiliary air conditioning is necessary the cost of purchase, installation, maintenance and operation thereof shall be paid by Lessee upon demand. 8.   Building Services. (a) With the exception of holidays, Lessor shall provide Lessee electricity and HVAC for normal operations 8 a.m. to 6 p.m. Monday through Friday, janitorial service Monday through Friday, building lighting replacement, restroom supplies, window washing with reasonable frequency; provided, however, that Lessee shall not be in default hereunder. Any additional usage or service required by Lessee must be arranged with Lessor and shall be subject to an additional charge. Lessor shall not be liable for, and Lessee shall not be entitled to, any abatement or reduction of rent by reason of Lessor's failure to furnish any of the foregoing when such failure is caused by accidents, breakage, repairs, strikes, lockouts, labor disturbances, or any other cause, similar or dissimilar, beyond the reasonable control of Lessor shall not be liable under any circumstances for loss of or injury to property, however, occurring through or in connection with or incidental to the failure to furnish any of the foregoing.     (b) Whenever heat generating machines, equipment or lighting are used in the premises which affect the temperature otherwise maintained by the air conditioning system, Lessor reserves the right to install supplementary air conditioning for the premises and the cost of purchase, installation, maintenance and operation thereof shall be paid by Lessee upon demand. 9.   Maintenance Repairs. By accepting occupancy, Lessee shall be deemed to have agreed that the premises and building are in (i) a clean and sanitary condition, (ii) good state of repair and (iii) a condition suitable for Lessee's use. Lessee shall maintain the premises and building in said condition. If Lessee, its agents, employees, invitees, contractors, suppliers or customers fail to so maintain the premises and building, Lessor may, at its option, perform such acts and expend such funds as are reasonably required to so maintain or repair the premises and building. Any amount so expended by Lessor shall be paid by Lessee upon demand. Lessor shall have no liability to Lessee for any damage, inconvenience or interference with the use of the premises and building by Lessee as a result of performing any such work. 10.   Alterations and Improvements. Lessee shall not make or allow to be made any alterations or physical additions in or to the premises without the prior written consent of Lessor. Any alterations, additions or improvements to the premises consented to by Lessor shall be made by Lessor for Lessee's account, and Lessee shall reimburse Lessor for the cost thereof, including a reasonable charge for Lessor's overhead, in advance or upon demand as specified by Lessor. Any and all such alterations or improvements shall, at Lessor's option, be removed by Lessee or surrendered to Lessor upon the termination of this lease by lapse of time or otherwise; provided, however, that this clause shall not apply to moveable equipment, trade fixtures or furniture of Lessee which may be removed by Lessee upon the expiration or earlier termination of this lease if Lessee is not then in default. -------------------------------------------------------------------------------- 11.   Liens. Lessee shall keep the land and building of which the premises are a part free from any liens arising out of any work performed, materials furnished or obligations incurred by Lessee. Lessor shall have the right to post and keep posted on the premises any notices that may be provided by law or which Lessor may deem to be proper for the protection of Lessor from such liens and to secure the release of any such liens at Lessee's expense, by payment or by the posting of a bond. 12.   Rules and Regulations. The rules and regulations attached hereto, as well as such rules and regulations as may be hereafter adopted by Lessor for care and cleanliness of the premises and the building and the preservation of good order therein, are hereby expressly made a part hereof, and Lessee agrees to comply with them. Lessor shall not be responsible to Lessee for the non-performance by any other tenant or occupant of the building of any of said rules and regulations. The violation of any such rules and regulation shall be deemed a material breach of the lease by Lessee. Moreover, Lessee shall pay Lessor, upon demand, for any damages Lessor or other tenants of the building may suffer as a result of any violation of said rules and regulations by Lessee, its agents, employees, invitees, contractors, suppliers or customers. 13.   Assignment or Sublease. Lessee shall not assign, transfer, mortgage, pledge, hypothecate or encumber this lease or any interest therein, directly or indirectly, and shall not sublet the premises or any part thereof, or allow any use thereof by license or otherwise. Any attempt to do so shall be void and shall, at Lessor's option, terminate this lease. The acceptance of rent by Lessor from any other person shall not be deemed to be a waiver by Lessor of any provision of this lease or to be a consent to any assignment, subletting or other transfer. In the event Lessee wishes to give up the subject premises, Lessor shall be given the listing assignment to find a replacement tenant. Lessor shall use its best efforts to find a replacement tenant as quickly as possible on terms and conditions acceptable to Lessee and Lessor. 14.   Insurance. Lessee shall obtain and maintain, at all times during the term hereof, at its own cost, commercial general liability insurance with a combined single limit of at least $1,000,000.00. The aforementioned policies shall in no event limit the liability of Lessee hereunder. The aforementioned insurance shall name Lessor as an additional insured and shall contain a cross-liability endorsement. Said insurance shall be with companies having a rating of not less than A in "Best's Insurance Guide" Lessee shall furnish from the insurance companies or cause the insurance companies to furnish certificates of coverage. No policy shall be cancelable or subject to reduction of coverage or other modification or cancellation except after 30 days prior written notice to Lessor by the insurer. All such policies shall be written as primary policies, not contributing with and not in excess of tÈhe coverage which Lessor may carry Lessee shall, at least 20 days prior to the expiration of such policies, furnish Lessor with renewals or binders. Lessee agrees that if Lessee does not take out and maintain such insurance, Lessor may, at its option, procure said insurance on Lessee's behalf and charge Lessee the premiums therefore together with a 25% handling charge payable upon demand. Lessee shall have the right to provide such insurance coverage pursuant to blanket policies obtained by Lessee provided such blanket policies expressly afford coverage to the premises and to Lessee as required hereunder. 15.   Fire and Casualty Damage. If the premises, through no fault or neglect of Lessee, its agents, employees, invitees, contractors, suppliers or customers, shall be partially or totally destroyed by fire or other casualty so as to render them partially or totally untenantable, the rent herein shall be prorated until the premises are made tenantable by Lessor. If Lessor shall decide not to rebuild, then all rent owed to that time shall be paid by Lessee and this lease shall cease and terminate. The provisions of California Civil Code Sections 1932 (2) and 1933 (4), and any successor statutes, are inapplicable with respect to any damage or destruction of the premises. 16.   Condemnation. If the premises shall be taken or condemned in whole or in substantial part for public purposes, this lease shall, at the option of either party, forthwith cease and terminate, and Lessee shall have no claim against Lessor for the value of any unexpired term of this lease or otherwise, except for moving expenses, if any, designated for Lessee. 17.   Loss or Damage. Lessor shall not be liable to Lessee for any injury or damage that may result to any person or property by or from any cause whatsoever in or about the land and building of which the premises are a part, unless caused by Lessor's negligence or intentional conduct. -------------------------------------------------------------------------------- 18.   Bankruptcy by Lessee. If (i) voluntary bankruptcy proceedings are initiated by Lessee, (ii) Lessee is adjudged a bankrupt, (iii) Lessee makes an assignment for the benefit of its creditors, (iv) execution is issued against Lessee or its assets or (v) the interest of Lessee hereunder passes by operation of law to any person other than Lessee, this lease may, at Lessor's option, be terminated. 19.   Default. (a) If Lessee breaches any of the terms and conditions hereof and takes possession of the premises, (ii) remove all persons and property therefrom and (iii) declare this lease terminated. In such event, Lessee shall peacefully and quietly surrender the premises to Lessor and execute such instruments as Lessor may require to evidence termination of Lessee's rights and interest hereunder; and Lessor shall be entitled to recover from Lessee the aggregate of all amounts Lessor is permitted to recover from Lessee pursuant to Section 1951.2 of the California Civil Code, as amended, including without limitation, (i) the worth at the time of award of the unpaid rent which had been earned at the time of termination, (ii) the worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Lessee proves could have been reasonably avoided, (iii) the worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of such rental loss that Lessee proves could have been reasonably avoided and (iv) all costs associated with reletting efforts, including without limitation, Lessor's overhead, legal fees, commissions and improvement costs. The "worth at the time of award" of the amounts referred to in clauses (i) and (ii) above shall be computed by allowing interest at the maximum rate permitted by law. The "worth at the time of award" of the amount referred to in clause (iii) above shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus 1%. Lessee hereby irrevocably appoints Lessor its attorney-in-fact to enter the premises in the event of default and remove any and all persons and property therefrom, and to place said property in storage for the account of, and at the expense of Lessee. If Lessee fails to cure said breach and pay the cost of said storage within 30 days, Lessor may sell any or all of such property, at public or private sale, in such manner and at such times and places as Lessor, in its sole discretion, may deem proper, and shall apply the proceeds of such sale to (i) the cost of such sale, (ii) the payment of storage charges, (iii) the payment of sums due hereunder and (iv) to Lessee if a balance exists.     (b) Lessor may, at any time after Lessee commits a default hereunder, cure the default for the account and at the expense of Lessee, and any expense that Lessor elects or is compelled to pay or incur in connection therewith, including without limitation, reasonable attorney's fees, together with interest thereon at the maximum rate permitted by law, shall be paid by Lessee to Lessor on demand.     (c) The rights and remedies herein conferred upon Lessor are not intended to be exclusive and are in addition to any other rights and remedies it may have now or hereafter by law, equity or statute. 20.   Lessor's Right of Entry. Lessor or its agents may enter the premises at all reasonable hours to inspect, clean, repair, alter or make additions thereto or to adjacent space, or for any other lawful purpose, including without limitation, showing the premises to prospective purchasers, tenants or lenders. For each of the aforesaid purposes, Lessor shall retain a key with which to unlock all of the doors in the premises. Lessor may use any and all means which it deems proper to open said doors in an emergency and any entry to the premises obtained by any of said means shall not, under any circumstances, be construed or deemed to be a forcible or unlawful entry into, or a detainer of, the premises, or an eviction of Lessee from the premises or any portion thereof. 21.   Subordination. This lease, at Lessor's option, shall be subject and subordinate to the lien of any mortgages or deeds of trust in any amount or whatsoever now or hereafter placed on or against the land or building of which the premises are a part without the necessity of the execution and delivery of any further instruments on the part of Lessee to effectuate such subordination; provided, however, that (i) Lessee shall, within 5 days of request from Lessor, execute and deliver such further instruments confirming such subordination as Lessor or its lender may request and (ii) Lessor or any holder of such a mortgage or deed of trust may elect that this lease shall be senior to and have priority over such mortgage or deed of trust whether this lease is dated before or after the mortgage or deed of trust. Lessee shall attorn to the purchaser upon any foreclosure or trust deed sale and recognize such purchaser as the Lessor under this lease. -------------------------------------------------------------------------------- 22.   Estoppel Certificates. Lessee shall execute, acknowledge and deliver to Lessor at any time within 5 days after request by Lessor, a statement in writing certifying, if such be the case, that this lease is unmodified and in full force and effect, or if there have been modifications that the same is in full force and effect as modified, the dates on and to which rent has been paid and such other information as Lessor shall reasonably request. If additional documents are reasonably required by Lessor for this or other purposes, Lessee shall cooperate in the preparation thereof. 23.   Substituted Premises. Lessor may, at any time during the term hereof, upon giving Lessee not less than 30 days prior notice, provide Lessee with space of approximately the same size and configuration elsewhere in the building and relocate Lessee to such space, with Lessor to pay all reasonable costs and expenses incurred as a result of such relocation. If Lessor moves Lessee to such a new space, Lessee shall execute a lease for said new space on the same terms and conditions specified herein. Failure to cooperate fully with this provision shall constitute a material breach of the lease and paragraphs 19 and 29 shall apply. If relocation to space of approxmiately the same size and configuration is not possible, Lessor may, at its option, terminate this lease 30 days from the date notice of said decision to terminate is given to Lessee. Relocation shall be accomplished [ILLEGIBLE] two consecutive pay period to the selected by Lessee. -------------------------------------------------------------------------------- 24.   Waiver. No term or condition hereof or the breach thereof shall be deemed waived, except by written consent of the party against whom the waiver is claimed, and any waiver of the breach of any term or condition shall not be deemed to be a waiver of any preceding or succeeding breach of the same or any other term or condition. Acceptance by Lessor of any performance by Lessee after the time the same shall have become due shall not constitute a waiver by Lessor of the breach or default unless otherwise expressly agreed to by Lessor in writing. 25.   Late Charges. If the payment of any amount due hereunder is not received by Lessor on or before the due date thereof said payment shall be in default and a late charge of 10% of the defaulted payment shall also become due and payable as additional rent. Thereafter, said past due amount together with the late charge described herein shall bear interest at the maximum rate permitted by law. 26.   Attorney's Fees. If either party shall seek the aid of an attorney for relief against the other hereunder, including any suit by Lessor for the recovery of rent or possession of the premises, the losing party shall pay the prevailing party all the costs and expenses thereby incurred, including without limitation, attorney's fees, discovery costs, witness fees and court costs if applicable, whether or not an action is initiated or prosecuted to judgment. The prevailing party shall also be entitled to attorney's fees and other costs for collection of any judgment. Attorney's fees shall be an element of costs under California Code of Civil Procedure Section 685.040 and/or Section 1033.5, or any successor statute. 27.   Hold Harmless. Lessee shall indemnify, defend and hold harmless Lessor, its agents and employees from and against any and all claims, damages, liabilities, losses and expenses, including without limitation, attorney's fees and costs of any kind whatsoever arising out of or resulting from, directly or indirectly, any act or omission of Lessee, its agents, employees, invitees, contractors, suppliers or customers. 28.   Holdover. Any holding over by Lessee after the expiration of this lease, without Lessor's consent, shall be subject to an unlawful detainer action immediately and the rent for such holdover period shall be an amount equal to 2 times the rent due for the last month of the lease term. 29.   Surrender of Premises. Upon the expiration or earlier termination of this lease, Lessee shall surrender the premises and all alterations, additions and improvements thereto in the same condition and configuration as received, ordinary wear and tear alone excepted. Any damage of the type described in the rules and regulations attached hereto shall be deemed excessive. If Lessee fails to so surrender the premises, Lessee shall pay to Lessor, upon demand, the estimated cost of repairs and the rental value of the premises for the time reasonably estimated to make said repairs. The wall repair component of said estimate, if any, shall reflect the charges necessary to replace damaged panels in accordance with manufacturer's specifications and procedures. Lessee shall further indemnify Lessor against any loss or liability resulting from delay by Lessee in so surrendering the premises, including without limitation, any claims made by succeeding tenants founded in such failure. 30.   Notices. All notices which are required to be given by either party to the other hereunder shall be in writing and shall be deemed to have been given when they are (i) personally delivered, (ii) faxed or (iii) mailed as shown below. Lessee hereby appoints, as its agent for the service of 3 day notices and any other process, the person in charge of or occupying the premises at the time of such service. If no such person can be found, service may be made by attaching said notice or process to the entry door of the premises. 31.   Authority. If Lessee signs as a corporation, partnership or joint venture, each of the persons executing this lease on behalf of Lessee does hereby covenant and warrant that (i) Lessee is a duly authorized and existing entity, (ii) Lessee has and is qualified to do business in California, (iii) the entity has full right and authority to enter into this lease and (iv) each person signing on behalf of the entity is authorized to do so. 32.   Joint and Several Liability. Each person or entity signing as Lessee hereunder shall be jointly and severally liable for the obligations of Lessee herein. 33.   Miscellaneous. This lease shall be construed in accordance with the law --------------------------------------------------------------------------------     of the State of California. In the event that one or more of the provisions or paragraphs of this lease is determined to be illegal or unenforceable, the remainder of this lease shall not be affected thereby; and each remaining provision or portion thereof shall continue to be valid and effective and shall be enforceable to the fullest extent permitted by law. Lessee has reviewed this lease, and has had a full opportunity to consult any attorney of its choice in this regard, and accordingly, the normal rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this lease. 34.   Entire Understanding. This agreement, together with the rules and regulations and any and all exhibits, riders or schedules attached hereto, all of which are made a part of this lease, represents the entire understanding of Lessor and Lessee and supersedes all prior written or oral agreements relative to the subject matter hereof. 35.   Binding Effect. Subject to the provisions of Section 13 supra. and any other provisions of this lease to the contrary, all of the provisions of this lease shall be binding upon and inure to the benefit of the parties and their respective heirs, legal representatives, successors and/or assignees. 36.   Assignment or Sublease. Subject to Lessee being a tenant in good standing hereunder, Lessee shall have the right, subject to Lessor's consent, to assign this lease to a franchise, joint venture partner, or any entity controlled by or under common control with Lessee, or to a corporation with which Lessee has merged or consolidated. Upon receipt of written notice from Lessee that it wishes to vacate the premises prior to the lease termination date, Lessor shall have ninety (90) days to recapture the space if it so desires. At the end of said ninety (90) day period, or sooner if agreed to by Lessor, Lessee may assign or sublease with Lessor's written consent but not at a rate greater than Lessee is then paying. Nothing contained herein, however, shall affect Lessee's obligations under this Lease, including without limitations, its obligations to pay rent. Dated February 14, 2001 Lessees   Lessor Intermune -------------------------------------------------------------------------------- (address)   Harvard Investment Company -------------------------------------------------------------------------------- 1710 Gilbreth Road -------------------------------------------------------------------------------- (address)   805 Veterans Blvd., Suite 200 -------------------------------------------------------------------------------- Burlingame, California 94010 -------------------------------------------------------------------------------- (city, state, zip code)   Redwood City, Ca 94063 -------------------------------------------------------------------------------- (city, state, zip code) By /s/ STEPHEN N. ROSENFIELD -------------------------------------------------------------------------------- STEPHEN N. ROSENFIELD (individual)   By /s/ GARY A MARTIN -------------------------------------------------------------------------------- GARY A MARTIN -------------------------------------------------------------------------------- Rules and Regulations 1.   Lessee shall not mark, drive nails, screw or drill into floors, walls, doors, woodwork, plaster or ceilings, or in anyway deface the premises or any part thereof. Premises will be returned in the same condition received. 2.   Lessor will direct workers as to where and how all computer, communication and telephone equipment is to be installed. No boring or cutting for wires or equipment will be allowed without the prior written consent of Lessor. 3.   No unusual furniture, freight, packages, supplies, equipment or merchandise of any kind shall be brought into the building without the prior written consent of Lessor and all moving of the same into or out of the building shall be done in such a time and in such manner as Lessor shall designate. 4.   Lessee shall specify that all deliveries be made at the rear of the building only. Under no circumstances are deliveries to be made or received at or through the front of the building. There shall not be used in the building any hand trucks except those equipped with rubber tires and side guards. In no event shall hand trucks be used on or about the front stairs or lobby of the building. 5.   Lessee shall not overload the floor of the premises. Lessor shall have the right to prescribe the weight size and position of all heavy objects brought into the building and also the times and manner of moving the same in and out of the building. Lessor may require Lessee to pay for any engineering and construction work it deems appropriate to strengthen floors. Lessor will not be responsible for loss of or damage to any such property from any cause and all damage done to the building by moving or maintaining such property shall be repaired at the expense of Lessee. 6.   Before leaving each day, Lessee shall see that (i) all drapes are closed, (ii) all water, gas and electricity in the premises is shut off and (iii) the doors of the premises and building are securely locked. 7.   Cars are to park in properly marked spaces only. Under no circumstances are cars to (i) back in, (ii) park in spaces reserved for other tenants, (iii) park in driveways, (iv) park in front of entrances to the building, (v) park in unmarked areas or (vi) park in loading zones except while loading or unloading. All motorcycles, mopeds and bicycles are to park only in the area designated for them. Lessor shall have the right to cause improperly parked vehicles to be towed at the owners expense. In addition Lessee shall pay to Lessor a charge of $100.00 per day for each parking violation of Lessee, its employees, agents, invitee's, or licensees. 8.   Lessee shall use protective pads at all desks, coffee machines and copy machines and maintain the premises in a clean and orderly manner at all times. 9.   No sign, placard, picture, advertisement, name or notice shall be inscribed, displayed, printed or affixed to any part of the outside or inside of the building or the premises without the prior written consent of Lessor and Lessor shall have the right to remove any such item without notice to and at the expense of Lessee. 10.   The sidewalks, halls, exits, entrances and stairways shall not be obstructed or used for any purpose other than for ingress and egress. The halls, exits, entrances, stairways and roof are not for the use of the general public and Lessor shall in all cases retain the right to control and prevent access thereto by all persons whose presence, in the judgment of Lessor, shall be prejudicial to the safety, character, reputation and interests of the building. Bicycles shall not be brought into any interior space or common area of the premises and shall be parked, stored or locked only at the bicycle racks provided on the north side of the premises. No vehicles of any kind, whether motorized or nonmotorized, shall be parked or stationed on or so as to obstruct any interior or exterior walkway, stairway, path, landscaped area, courtyard, foyer, lobby or any other place in or around the premises except for marked and designated parking spaces or bicycle racks.     At no time shall any common area of the premises, including without limitation, sidewalks, halls, exits, entrances, stairways, lobbies, foyers, courtyards, parking areas, lawns or landscaped areas, be used as waiting or assembly areas for guests, employees, invitees or clients of --------------------------------------------------------------------------------     any tenant (collectively "employees and invitees"). All tenants shall take all steps necessary to insure that all employees and their invitees (including any adults or children accompanying such employees or invitees) wait and assemble only in internal lobbies or waiting rooms not visible from the common areas of the premises and located within the demised space of the tenant in question. At no time shall any tenant permit any employee or invitee to sit, wait, play on or otherwise utilize any common area of the premises except for purposes of ingress and egress to the enclosed and demised tenant space. 11.   Lessor will furnish Lessee 2 keys to Lessee's entry door. Lessor shall make a reasonable charge for any additional keys. Lessee shall not have any such keys copied. Upon the expiration or earlier termination of this lease, Lessee shall deliver to Lessor all keys to doors in the building. Lessee shall not alter any lock or install any new or additional locks or any bolts on any door of the premises without the written consent of Lessor. 12.   The bathrooms, urinals and washbowls shall be used only for the purpose for which they were constructed and no foreign substance of any kind shall be thrown or disposed of therein. 13.   Lessee shall not employ any person other than Lessor's janitor for the purpose of cleaning the premises without the prior written consent of Lessor. Except with the written consent of Lessor, no persons other than those approved by Lessor shall be permitted to Enter the building for the purpose of cleaning the same. Lessee shall not cause any unnecessary labor by reason of Lessee's carelessness or indifference in the preservation of good order and cleanliness. Lessor shall in no way be responsible to Lessee for any loss of property on the premises, however occurring, or for any damage done to the effects of any tenant by the janitor or any other employee or any other person. Janitor service shall include ordinary dusting and cleaning and shall not include cleaning of carpets or rugs, except normal vacuuming, or moving of furniture and other special services, janitor service will not be furnished on nights when rooms are occupied after 9:30 p.m. 14.   Lessee shall not (i) permit or suffer the premises to be occupied or used in a manner offensive or objectionable to Lessor or other occupants of the building, (ii) use the premises for manufacturing, maintenance, repair or for the storage of merchandise except as such storage may be incidental to the use of the premises for general office purposes or (iii) use the premises for cooking, lodging, sleeping, smoking or any illegal purpose. 15.   Lessee shall not use or keep in the premises any hazardous material, toxic, flammable, explosive or noxious material, food, animal or bird. 16.   No vending machine of any kind shall be installed, maintained or operated in the premises without the prior written consent of Lessor. 17.   On Saturdays, Sundays, legal holidays and other days between the hours of 6:00 p.m. and 9:00 a.m. the following day, access to the building or to the premises may be refused unless the person seeking access is known to the person or employee of the building in charge and has a pass or is properly identified. The Lessor shall in no case be liable for damages for any error with regard to the admission to or exclusion from the building of any person. In case of invasion, riot, public excitement or other commotion, Lessor reserves the right to prevent access to the building for the safety of the building and its tenants. 18.   Lessee shall not disturb, solicit or canvass any other tenants of the building and shall cooperate to prevent same. 19.   If Lessee desires a music system, the system available through Lessor shall be used and a separate charge will be assessed for same. 20.   Lessee shall install and maintain, at Lessee's expense, fire extinguishers next to any duplicating machine or similar heat producing equipment. 21.   If Lessee wishes to maintain a coffee machine or like device in the premises, a timer must be connected to the outlet into which said machine is connected to prevent same from being left on. 22.   No air conditioner, heater or similar appliance shall be used without the prior written consent of Lessor. -------------------------------------------------------------------------------- QuickLinks Exhibit 10.36

--------------------------------------------------------------------------------   EXHIBIT 10.4 -------------------------------------------------------------------------------- SEITEL, INC. 2001 INDUCEMENT STOCK OPTION PLAN Adopted January 1, 2001 1.          Purpose. The Plan is established as an inducement plan to attract new employees whose services are considered unusually valuable to the Company. 2.          Definitions. As used herein, unless the context requires otherwise, the following terms shall have the meanings indicated below:           (a)          "Affiliate" means (i) any corporation, partnership or other entity which owns, directly or indirectly, a majority of the voting equity securities of the Company, (ii) any corporation, partnership or other entity of which a majority of the voting equity securities or equity interest is owned, directly or indirectly, by the Company, and (iii) any other entity that is consolidated in the Company's financial statements.           (b)          "Board" means the Board of Directors of the Company.           (c)          "Code" means the Internal Revenue Code of 1986, as amended. Reference in the Plan to any section of the Code shall be deemed to include any amendments or successor provisions to such section and any regulations under such section.           (d)          "Common Stock" means the Common Stock, $.0l par value per share, of the Company or the common stock that the Company may in the future be authorized to issue (as long as the common stock varies from that currently authorized, if at all, only in amount of par value).           (e)          "Company" means Seitel, Inc., a Delaware corporation.           (f)          "Continuous Service" means that the provision of services to the Company or an Affiliate in the capacity of Employee is not interrupted or terminated. Except as otherwise provided in the Option Agreement, service shall not be considered interrupted or terminated for this purpose in the case of (i) any approved leave of absence, (ii) transfers among the Company, any Affiliate, or any successor, in the capacity of Employee, or (iii) any change in status as long as the individual remains in the service of the Company or an Affiliate in any capacity of Employee. An approved leave of absence shall include sick leave, military leave, or any other authorized personal leave.           (g)          "Director" means a voting member of the Board or the board of directors of an Affiliate.           (h)          "Disability" means the permanent and total disability of a person within the meaning of Section 22(e)(3) of the Code.           (i)          "Employee" means any person, including an Officer or Director, who is an employee, whether full-time or part-time, of the Company or an Affiliate. The Company's or an Affiliate's providing compensation to a Director solely with respect to rendering services in the capacity of a Director, however, shall not be sufficient to constitute "employment" by the Company.           (j)          "Exchange Act" means the Securities Exchange Act of 1934, as amended. Reference in the Plan to any section of the Exchange Act shall be deemed to include any amendments or successor provisions to such section and any rules and regulations relating to such section.           (k)          "Fair Market Value" means, as of any date, the value of the Common Stock determined as follows:                     (i)          If the Common Stock is listed on any established stock exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock) on the day of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable.                     (ii)          In the absence of any such established markets for the Common Stock, the Fair Market Value shall be determined in good faith by the Board.           (l)          "Non-Qualified Stock Option" means an Option not intended to meet the requirements of Section 422 of the Code.           (m)          "Officer" means a person who is an "officer" of the Company within the meaning of Section 16 of the Exchange Act (whether or not the Company is subject to the requirements of the Exchange Act).           (n)          "Option" means a Non-Qualified Stock Option granted pursuant to the Plan to purchase a specified number of shares of Common Stock.           (o)          "Option Agreement" means the written agreement evidencing the grant of an Option executed by the Company and the Optionee, including any amendments thereto.           (p)          "Optionee" means an individual to whom an Option has been granted under the Plan.           (q)          "Plan" means this Seitel, Inc. 2001 Inducement Stock Option Plan, as set forth herein and as it may be amended from time to time.           (r)          "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act, as it may be amended from time to time, and any successor to Rule 16b-3.           (s)          "Section" means a Section of the Plan unless otherwise stated or the context otherwise requires.           (t)          "Securities Act" means the Securities Act of 1933, as amended. Reference in the Plan to any section of the Securities Act shall be deemed to include any amendments or successor provisions to such section and any rules and regulations relating to such section. 3.          Types of Options and Shares. Options granted under this Plan shall be Non-Qualified Stock Options. The shares of stock that may be purchased upon exercise of Options granted under this Plan are shares of Common Stock. 4.          Shares Subject to Plan. The aggregate number of shares that may be issued pursuant to Options granted under this Plan is 750,000 shares. If any Option expires or is terminated without being exercised in whole or in part, the unexercised or released shares of Common Stock from such Options will be available for future grant and purchase under this Plan. At all times during the term of this Plan, the Company will reserve and keep available such number of shares of Common Stock as will be required to satisfy the requirements of outstanding Options under this Plan. 5.          Inducement Plan; Eligibility. The Plan will be administered by the Board only in connection with and as an inducement to employment by the Company or one of its Affiliates. As such, no person is eligible to receive a grant of an Option under this Plan if such person has been, at the time such grant is authorized, an Employee for more than 30 days, or was, at any time prior to the authorization of such grant, an Employee in a substantially similar position to the position such person holds as an Employee. Subject to the requirements of the preceding sentence, the Board in its sole discretion will select the recipients of Options. An Optionee may not be granted more than one Option under this Plan. 6.          Terms and Conditions of Options. The Board will determine the provisions, terms and conditions of each Option including, but not limited to, the vesting schedule, the number of shares of Common Stock subject to the Option, the exercise price of the Option, the period during which the Option may be exercised, repurchase provisions, rights of first refusal, forfeiture provisions, methods of payment, and all other terms and conditions of the Option, subject to the following:           (a)          Form of Option Grant. Each Option granted under the Plan will be evidenced by a written Option Agreement in such form (which need not be the same for each Optionee) as the Board from time to time approves.           (b)          Date of Grant. The date of grant of an Option will be the date on which the Board authorizes such Option unless otherwise specified by the Board. The Option Agreement evidencing the Option will be delivered to the Optionee with a copy of the Plan and other relevant Option documents, within a reasonable time after the date of grant.           (c)          Subject to Employment. All Options shall be subject to the Optionee being an Employee on the date the grant is authorized.           (d)          Exercise Price. The exercise price of an Option will be not less than 100% of the Fair Market Value of the shares of Common Stock on the date of grant of the Option.           (e)          Exercise Period. Options will be exercisable within the time or times or upon the event or events determined by the Board and set forth in the Option Agreement; provided, however, that no Option will be exercisable before one year from the date of grant or after the expiration of ten (10) years from the date of grant of the Option.           (f)          Transferability of Options. Options granted under the Plan, and any interest therein, will not be transferable or assignable by the Optionee, and may not be made subject to execution, attachment or similar process, otherwise than by will or by the laws of descent and distribution, and will be exercisable during the lifetime of the Optionee only by the Optionee, or by the Optionee's guardian or legal representative if the Optionee is legally incompetent; provided, that the Optionee may, however, designate persons who or which may exercise the Optionee's Options following the Optionee's death. Notwithstanding the preceding sentence, Options held by an Optionee may be transferred to such family members, family trusts and family partnerships as the Board, in its sole discretion, may approve at the time of the grant of such Option and as provided for in the Optionee's Option Agreement.           (g)          Acquisitions and Other Transactions. The Board may, from time to time, assume outstanding options granted by another company, whether in connection with an acquisition of such other company or otherwise, by either (i) granting an Option under the Plan in replacement of the option assumed by the Company, or (ii) treating the assumed option as if it had been granted under the Plan if the terms of such assumed option could be applied to an Option granted under the Plan. Such assumption will be permissible if the holder of the assumed option would have been eligible to be granted an Option hereunder if the other company had applied the rules of this Plan to such grant. Notwithstanding the foregoing provisions of Section 6(d), in the case of an Option issued or assumed pursuant to this Section 6(g), the exercise price for the Option shall be determined in accordance with the principles of section 424(a) of the Code. 7.          Exercise of Options.           (a)          Notice. Options may be exercised only by delivery to the Company of a written exercise agreement approved by the Board (which need not be the same for each Optionee), stating the number of shares of Common Stock being purchased, the restrictions imposed on the shares of Common Stock, if any, and such representations and agreements regarding the Optionee's investment intent and access to information and other matters, if any, as may be required by the Company to comply with applicable securities laws, or as may be deemed appropriate by the Company in connection with the issuance of shares of Common Stock upon exercise of the Option, together with payment in full of the exercise price for the number of shares of Common Stock being purchased.           (b)          Payment. Payment for the shares of Common Stock to be exercised under an Option may be made in cash (by check) or, where approved by the Board in its sole discretion at the time of grant and where permitted by law: (i) if a public market for the Common Stock exists, through a "same day sale" commitment from the Optionee and a broker-dealer that is a member of the National Association of Securities Dealers, Inc. (an "NASD Dealer") whereby the Optionee irrevocably elects to exercise the Option and to sell a portion of the shares of Common Stock so purchased to pay for the exercise price and whereby the NASD Dealer irrevocably commits upon receipt of such shares of Common Stock to forward the exercise price directly to the Company; (ii) if a public market for the Common Stock exists, through a "margin" commitment from the Optionee and an NASD Dealer whereby the Optionee irrevocably elects to exercise the Option and to pledge the shares of Common Stock so purchased to the NASD Dealer in a margin account as security for a loan from the NASD Dealer in the amount of the exercise price, and whereby the NASD Dealer irrevocably commits upon receipt of such shares of Common Stock to forward the exercise price directly to the Company; or (iii) by any combination of the foregoing.           (c)          Withholding Taxes. Prior to issuance of the shares of Common Stock upon exercise of an Option, the Optionee will pay or make adequate provision acceptable to the Board for the satisfaction of the statutory minimum prescribed amount of any federal or state income or other tax withholding obligations of the Company, if applicable. Upon exercise of an Option, the Company shall withhold or collect from the Optionee an amount sufficient to satisfy such tax withholding obligations.           (d)          Expiration. An Option may not be exercised after the expiration date set forth in the Option Agreement.           (e)          Exercise of Option Following Termination of Continuous Service.                     (i)          An Option may be exercised following the termination of an Optionee's Continuous Service only to the extent provided in the Option Agreement.                     (ii)          Where the Option Agreement permits an Optionee to exercise an Option following the termination of the Optionee's Continuous Service for a specified period, the Option shall terminate to the extent not exercised on the last day of the specified period or the last day of the original term of the Option, whichever occurs first.                     (iii)          The Board will have discretion to determine whether the Continuous Service of an Optionee has terminated and the effective date on which such Continuous Service terminated and whether the Optionee's Continuous Service terminated as a result of the Disability of the Optionee.           (f)          Limitations on Exercise.                     (i)          The Board may specify a reasonable minimum number of shares of Common Stock or a percentage of the shares subject to an Option that may be purchased on any exercise of an Option; provided, that such minimum number will not prevent Optionee from exercising the full number of shares of Common Stock as to which the Option is then exercisable.                     (ii)          The obligation of the Company to issue any shares of Common Stock pursuant to the exercise of any Option will be subject to the condition that such exercise and the issuance and delivery of such shares pursuant thereto comply with the Securities Act, all applicable state securities laws and the requirements of any stock exchange or national market system upon which the shares of Common Stock may then be listed or quoted, as in effect on the date of exercise. The Company will be under no obligation to register any resale of shares of Common Stock with the Securities and Exchange Commission or to effect compliance with the registration, qualification or listing requirements of any state securities laws or stock exchange or national market system with respect to any such resale of the shares of Common Stock, and the Company will have no liability for any inability or failure to do so. 8.          Modification, Extension And Renewal of Options. The Board will have the power to modify, extend or renew outstanding Options and to authorize the grant of new Options in substitution therefor, provided that any such action may not, without the written consent of any Optionee, impair any rights under any Option previously granted to such Optionee. 9.          Privileges of Stock Ownership. No Optionee will have any of the rights of a stockholder with respect to any shares of Common Stock subject to an Option until such Option is properly exercised and the shares are issued and delivered to the Optionee, as evidenced by an appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company. No adjustment will be made for dividends or distributions or other rights for which the record date is prior to such date of issuance and delivery, except as provided in the Plan. 10.          Adjustment Upon Changes in Capitalization and Corporate Events.           (a)          Capital Adjustments. The number of shares of Common Stock covered by each outstanding Option granted under the Plan and the Option price may be adjusted to reflect, as deemed appropriate by the Board, any increase or decrease in the number of shares of Common Stock resulting from a stock dividend, stock split, reverse stock split, combination, reclassification or similar change in the capital structure of the Company without receipt of consideration, subject to any required action by the Board or the stockholders of the Company and compliance with applicable securities laws; provided, however, that a fractional share will not be issued upon exercise of any Option, and either any fraction of a share of Common Stock that would have resulted will be cashed out at Fair Market Value or the number of shares of Common Stock issuable under the Option will be rounded up to the nearest whole number, as determined by the Board.           (b)          Dissolution or Liquidation. The Board shall notify the Optionee at least twenty (20) days prior to any proposed dissolution or liquidation of the Company. Unless provided otherwise in an individual Option Agreement, to the extent that an Option has not been previously exercised, such Option shall terminate immediately prior to consummation of such dissolution or liquidation.           (c)          Merger, Asset Sale and Change in Control. If, during the effectiveness of the Plan (i) the Company consummates a merger, consolidation, share exchange, or reorganization with another corporation or other legal entity and, as a result of such merger, consolidation, share exchange, or reorganization, less than a majority of the combined voting power of the outstanding securities of the surviving entity (whether the Company or another entity) immediately after such transaction is held in the aggregate by the holders of securities of the Company that were entitled to vote generally in the election of directors of the Company (or its successor) ("Voting Stock") immediately before such transaction, or (ii) when pursuant to a tender offer or exchange offer for securities of the Company, or in any other manner, any person or group within the meaning of the Exchange Act, as amended (excluding any employee benefit plan, or related trust, sponsored or maintained by the Company or any of its Affiliates), acquires beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of the Voting Stock (the surviving corporation or purchaser described in this Section 10(c), the "Purchaser", and any such event described in this Section 10(c) a "Change in Control"), the Purchaser shall either assume the obligations of the Company under the outstanding Options or convert the outstanding Options into options of at least equal value as to stock of the Purchaser.           In the event such Purchaser refuses to assume or substitute Options, as provided above, pursuant to a Change in Control event, each Option which is at the time outstanding under the Plan shall, (i) except as provided otherwise in an individual Option Agreement, automatically become fully vested and exercisable immediately prior to the specified effective date of such Change in Control, for all of the shares of Common Stock at the time represented by such Option, and (ii) notwithstanding any contrary terms in the Option Agreement, expire on a date at least twenty (20) days after the Board gives written notice to Optionees specifying the terms and conditions of such termination. 11.          Administration. This Plan shall be administered by the Board. As such, grants of Options hereunder are intended to qualify for exemption from Section 16 of the Securities Act pursuant to Rule 16b-3. The Board shall interpret the Plan and any Options granted pursuant to the Plan and shall prescribe such rules and regulations in connection with the operation of the Plan as it determines to be advisable for the administration of the Plan. The Board may rescind and amend its rules and regulations from time to time. The interpretation by the Board of any of the provisions of this Plan or any Option granted under this Plan will be final and binding upon the Company and all persons having an interest in any Option or any shares of Common Stock purchased pursuant to an Option. 12.          Effect of Plan. Neither the adoption of the Plan nor any action of the Board shall be deemed to give any person any right to be granted an Option to purchase Common Stock or any other rights except as may be evidenced by the Option Agreement, or any amendment thereto, duly authorized by the Board and executed on behalf of the Company, and then only to the extent and on the terms and conditions expressly set forth therein. The existence of the Plan and the Options granted hereunder shall not affect in any way the right of the Board or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company's capital structure or its business, any merger or consolidation of the Company, any issue of bonds, debentures, or shares of preferred stock ahead of or affecting the Common Stock or the rights thereof, the dissolution or liquidation of the Company or any sale or transfer of all or any part of the Company's assets or business, or any other corporate act or proceeding by or for the Company. Nothing contained in the Plan or in any Option Agreement or in other Option-related documents shall confer upon any Employee any right with respect to such person's Continuous Service or interfere or affect in any way with the right of the Company or an Affiliate to terminate such person's Continuous Service at any time, with or without cause. 13.          No Effect on Retirement and Other Benefit Plans. Except as specifically provided in a retirement or other benefit plan of the Company or an Affiliate, Options shall not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Company or an Affiliate, and shall not affect any benefits under any other benefit plan of any kind or any benefit plan subsequently instituted under which the availability or amount of benefits is related to level of compensation. The Plan is not a "Retirement Plan" or "Welfare Plan" under the Employee Retirement Income Security Act of 1974, as amended. 14.          Amendment or Termination of Plan. The Board in its discretion may at any time terminate or amend the Plan in any respect, including amendment of any form of Option Agreement, exercise agreement or instrument to be executed pursuant to the Plan. No Option may be granted after termination of the Plan. Any amendment or termination of the Plan shall not affect Options previously granted, and such Options shall remain in full force and effect as if the Plan had not been amended or terminated, unless mutually agreed otherwise in a writing signed by the Optionee and the Company. 15.          Effective Date and Term of Plan. The Plan shall become effective upon its adoption by the Board. It shall continue in effect for a term of ten (10) years from its adoption date, unless sooner terminated by action of the Board. Subject to the terms and conditions of this Plan and applicable laws, Options may be granted under the Plan upon its becoming effective. 16.          Severability and Reformation. The Company intends all provisions of the Plan to be enforced to the fullest extent permitted by law. Accordingly, should a court of competent jurisdiction determine that the scope of any provision of the Plan is too broad to be enforced as written, the court should reform the provision to such narrower scope as it determines to be enforceable. If, however, any provision of the Plan is held to be wholly illegal, invalid, or unenforceable under present or future law, such provision shall be fully severable and severed, and the Plan shall be construed and enforced as if such illegal, invalid, or unenforceable provision were never a part hereof, and the remaining provisions of the Plan shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance. 17.          Governing Law. The Plan shall be construed and interpreted in accordance with the laws of the State of Delaware. 18.          Interpretive Matters. Whenever required by the context, pronouns and any variation thereof shall be deemed to refer to the masculine, feminine, or neuter, and the singular shall include the plural and visa versa. The term "including" does not denote or imply any limitation. The captions and headings used in the Plan are inserted for convenience and shall not be deemed a part of the Plan for construction or interpretation.   -------------------------------------------------------------------------------- Award Number:   SEITEL, INC. 2001 INDUCEMENT STOCK OPTION PLAN STOCK OPTION AGREEMENT Optionee: Address: Total Shares Subject to Option Exercise Price Per Share: Date of Grant Post-Termination Exercise Period: [90 Days or other applicable period] Expiration Date: 1.          Grant of Option. Seitel, Inc., a Delaware corporation (the "Company"), hereby grants to the Optionee named above an option (the "Option") to purchase the total number of shares of Common Stock set forth above (the "Shares") at the exercise price per share set forth above (the "Exercise Price"), in accordance with this Option Agreement and subject to the terms and conditions of the Seitel, Inc. 2001 Inducement Stock Option Plan, as amended from time to time (the "Plan"), which are incorporated herein by reference. The Option is not intended to qualify as an "incentive stock option" within the meaning of Section 422 of the Code. Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to them in the Plan. 2.          Vesting. Subject to the terms and conditions of the Plan and this Option Agreement, and the Optionee being an Employee on the Date of Grant set forth above, the Option shall vest and become exercisable in the following cumulative installments, as follows:            [(a) One-third (1/3) of the Shares shall become exercisable at any time on or after the first anniversary of the date of grant set forth above (the "Date of Grant");            (b) An additional one-third (1/3) of the Shares shall become exercisable at any time on or after the second anniversary of the Date of Grant; and            (c) The remaining Shares shall become exercisable at any time on or after the third anniversary of the Date of Grant.] If an installment covers a fractional Share, such installment will be rounded to the next highest Share, except the final installment, which will be for the balance of the total Shares; provided, that the Optionee shall in no event be entitled under the Option to purchase a number of shares of the Common Stock greater than the "Total Shares Subject to Option" indicated above. 3.          Exercise of Option.            (a)          Right to Exercise. The Option shall be exercisable in accordance with the vesting provisions contained in Section 2 of this Option Agreement and with the other applicable provisions of the Plan and this Option Agreement. The Option shall be subject to the provisions of Section 10 of the Plan relating to the exercisability or termination of the Option in the event of a Change in Control or in the event of a dissolution or liquidation of the Company.            (b)          Method of Exercise. The Option shall be exercisable only by delivery to the Company of an executed Stock Option Exercise Agreement (the "Exercise Agreement") in the form attached hereto as Exhibit A, or in such other form approved by the Board, which shall state the Optionee's election to exercise the Option, the whole number of Shares in respect of which the Option is being exercised, and such other provisions as may be required by the Board. The Exercise Agreement shall be signed by the Optionee and shall be delivered to the Company in person or by courier, by certified mail, or by such other method as may be permitted by the Board, accompanied (in any case) by payment of the Exercise Price for each Share covered by the Exercise Agreement, as described in Section 4 of this Option Agreement. The Option shall be deemed to be exercised upon receipt by the Company of such written Exercise Agreement accompanied by the Exercise Price.            (c)          Issuance of Shares. If the Exercise Agreement and payment are in form and substance satisfactory to counsel for the Company and Optionee or any other person permitted to exercise the Option has complied with Section 5 of this Option Agreement, the Company shall issue or cause the issuance of, in the name of the Optionee or Optionee's legal representative, the Shares purchased by such exercise of the Option. 4.          Method of Payment. The Optionee's delivery of the signed Exercise Agreement to exercise the Option (in whole or in part) shall be accompanied by full payment of the Exercise Price for the Shares being purchased. Payment for the Shares may be made in cash (by check) or, at the election of the Optionee and where permitted by law: (i) if a public market for the Company's stock exists, through a "same day sale" commitment from the Optionee and a broker-dealer that is a member of the National Association of Securities Dealers (an "NASD Dealer") whereby the Optionee irrevocably elects to exercise the Option and to sell a portion of the Shares so purchased to pay for the exercise price and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the exercise price directly to the Company; (ii) if a public market for the Company's stock exists, through a "margin" commitment from the Optionee and an NASD Dealer whereby the Optionee irrevocably elects to exercise the Option and to pledge the Shares so purchased to the NASD Dealer in a margin account as security for a loan from the NASD Dealer in the amount of the exercise price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the exercise price directly to the Company; or (iii) by any combination of the foregoing. 5.          Tax Withholding Obligations. No Shares will be delivered to the Optionee or any other person permitted to exercise the Option pursuant to the exercise of the Option until the Optionee or such other person has made arrangements acceptable to the Board for the satisfaction of the minimum prescribed applicable income tax, employment tax, and social security tax withholding obligations, including obligations incident to the receipt of Shares. Upon exercise of the Option, the Company or the Optionee's employer may offset or withhold (from any amount owed by the Company or the Optionee's employer to the Optionee) or collect from the Optionee or such other person an amount sufficient to satisfy such tax obligations and/or the employer's withholding obligations. 6.          Expiration. Except as otherwise determined by the Board, the Option may be exercised no later than the Expiration Date set forth above or such earlier date as otherwise provided in this Option Agreement. If no earlier date within which the Option must exercised applies, the Option shall expire on the Expiration date 7.          Termination of Continuous Service. Except as set forth in paragraphs (a), (b), and (c) below, if an Optionee=s Continuous Service terminates, the Optionee may exercise the Option to the extent he or she was otherwise entitled to exercise the Option on the date of termination of Continuous Service (the ATermination Date@) only during the Post-Termination Exercise Period set forth above.            (a)          Termination for Cause. Unless the Board otherwise determines, if the Optionee's Continuous Service is terminated either (i) by the Company or an Affiliate for Cause, or (ii) by the Optionee without compliance with, or without having any right to do so under, the terms of any then effective written employment agreement between the Optionee and the Company or such Affiliate, then the Optionee's right to exercise the Option shall immediately terminate on the Termination Date. For purposes of this Option Agreement, the term "Cause" for termination by the Company or an Affiliate of the Optionee's Continuous Service shall have the meaning set forth in a then-effective written employment agreement between the Optionee and the Company or such Affiliate or, in the absence of such a definition in a then-effective written employment agreement (in the determination of the Board), shall mean the Optionee's (i) willful and continued failure to substantially perform his or her duties (other than as a result of a total or partial incapacity due to physical or mental illness); (ii) proven dishonesty in the performance of his or her duties; (iii) conviction or a plea of guilty or nolo contendere to a felony or crime of moral turpitude; or (iv) alcohol or drug abuse. The Board shall have discretion for the purposes of this Option Agreement to determine whether any termination of Continuous Service by the Optionee is in compliance with, or is in accordance with any right to terminate, under the terms of a then-effective written employment agreement.            (b)          Disability of Optionee. If the Optionee's Continuous Service terminates as a result of his or her Disability, the Optionee may exercise the Option to the extent he or she was otherwise entitled to exercise it on the Termination Date for a period of twenty-four (24) months after the Termination Date (but in no event later than the Expiration Date).            (c)          Death of Optionee. In the event of the termination of the Optionee's Continuous Service as a result of his or her death, or in the event of the Optionee's death during the Post-Termination Exercise Period or during the twenty-four (24)-month period following the Optionee's termination of Continuous Service as a result of his or her Disability, the Optionee's estate, or a person who acquired the right to exercise the Option by bequest or inheritance, may exercise the Option, but only to the extent the Optionee could exercise the Option at the date of his or her death, within twenty-four (24) months from the date of death (but in no event later than the Expiration Date). If the Optionee is terminated for Cause, or if the Optionee does not exercise the Option during the Post-Termination Exercise Period, or if the Optionee does not exercise the option within the times specified in paragraphs (b) and (c) above, the Option shall terminate, respectively, on the Termination Date, or on the last day of the Post-Termination Exercise Period, or on the last day of the periods specified in paragraph (b) and (c) above, even though those dates are before the Expiration Date. The provisions of this Section 7 shall in no event extend the Expiration Date. 8.          Nontransferability of Option. The Option may not be transferred in any manner other than by will or by the law of descent and distribution and may be exercised during the lifetime of the Optionee only by the Optionee, or by the Optionee's guardian or legal representative if the Optionee is legally incompetent; provided, that the Optionee may, however, designate persons who or which may exercise the Option following the Optionee's death. In addition, the Optionee may transfer the Option without consideration to a member or members of the Optionee's immediate family and/or to a trust or partnership established for the benefit of an immediate family member or members. For this purpose, the term "immediate family member" means the Optionee's spouse, parents, children, stepchildren and grandchildren. 9.          Tax Consequences. Set forth below is a brief summary, as of the date of the Option Agreement, of some of the federal tax consequences of exercise of the Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES.            (a)          Exercise of Non-Qualified Stock Option. There may be a regular federal income tax liability upon the exercise of the Option. The Optionee will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the Shares on the date of exercise over the Exercise Price. If the Optionee is an Employee or former Employee, the Company will be required to withhold from the Optionee's compensation or collect from the Optionee and pay to the applicable taxing authorities an amount equal to a percentage of this compensation income at the time of exercise.            (b)          Disposition of Shares. In the case of a Non-Qualified Stock Option, if the Shares are held for at least one year before disposition, any gain in excess of the Fair Market Value of the Shares on the date of exercise will be treated as long-term capital gain for federal income tax purposes. 10.           Entire Agreement, Governing Law. The Plan and the Option Agreement (with the exercise Agreement, if the Option is exercised) constitute the entire agreement of the Company and the Optionee (collectively the "Parties") with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Parties with respect to the subject matter hereof, and may not be modified adversely to the Optionee's interest except by means of a writing signed by the Parties. Nothing in the Plan and the Option Agreement (except as expressly provided therein or herein) is intended to confer any rights or remedies on any person other than the Parties. The Plan and the Option Agreement are to be construed in accordance with and governed by the internal laws of the State of Delaware without giving effect to any choice of law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of Delaware, to the rights and duties of the Parties. Should any provision of the Plan or the Option Agreement be determined by a court of law to be illegal or unenforceable, such provision shall be enforced to the fullest extent allowed by law and the other provisions shall nevertheless remain effective and shall remain enforceable. 11.          Interpretive Matters. Whenever required by the context, pronouns and any variation thereof shall be deemed to refer to the masculine, feminine, or neuter, and the singular shall include the plural, and vice versa. The term "include" or "including" does not denote or imply any limitation. The term "business day" means any Monday through Friday other than such a day on which banks are authorized to be closed in the State of Texas. The captions and headings used in this Option Agreement are inserted for convenience and shall not be deemed a part of the Option or this Option Agreement for construction or interpretation. 12.          Dispute Resolution. The provisions of this Section 12 shall be the exclusive means of resolving disputes of the Parties (including any other persons claiming any rights or having any obligations through the Company or the Optionee) arising out of or relating to the Plan and this Option Agreement (including the Exercise Agreement, if the Option is exercised). The Parties shall attempt in good faith to resolve any disputes arising out of or relating to the Plan and this Option Agreement (including the Exercise Agreement, if the Option is exercised) by negotiation between individuals who have authority to settle the controversy. Negotiations shall be commenced by either Party by a written statement of the Party's position and the name and title of the individual who will represent the Party. Within thirty (30) days of the written notification, the Parties shall meet at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, to resolve the dispute. If the dispute has not been resolved by negotiation, the Parties agree that any suit, action, or proceeding arising out of or relating to the Plan or this Option Agreement shall be brought in the United States District Court for the Southern District of Texas located in Houston, Texas (or should such court lack jurisdiction to hear such action, suit or proceeding, in a Texas state court in Harris County, Texas) and that the Parties shall submit to the jurisdiction of such court. The Parties irrevocably waive, to the fullest extent permitted by law, any objection a Party may have to the laying of venue for any such suit, action or proceeding brought in such court. THE PARTIES ALSO EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING. If any one or more provisions of this Section 12 shall for any reason be held invalid or unenforceable, it is the specific intent of the Parties that such provisions shall be modified to the minimum extent necessary to make it or its application valid and enforceable. 13.          Notice. Any notice or other communication required or permitted hereunder shall be given in writing and shall be deemed given, effective, and received upon prepaid delivery in person or by courier or upon the earliest of delivery or the third business day after deposit in the United States mail if sent by certified mail, with postage and fees prepaid, addressed to the other Party at its address as shown beneath its signature in this Option Agreement, or to such other address as such Party may designate in writing from time to time by notice to the other Party in accordance with this Section 13. SEITEL, INC.         By:   Title:   Address:           THE OPTIONEE ACKNOWLEDGES AND AGREES THAT THE SHARES SUBJECT TO THE OPTION SHALL VEST, IF AT ALL, ONLY DURING THE PERIOD OF THE OPTIONEE'S CONTINUOUS SERVICE (NOT THROUGH THE ACT OF BEING HIRED OR BEING GRANTED THE OPTION OR ACQUIRING SHARES HEREUNDER). THE OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS OPTION AGREEMENT OR THE PLAN SHALL CONFER UPON THE OPTIONEE ANY RIGHT WITH RESPECT TO FUTURE AWARDS OR CONTINUATION OF THE OPTIONEE'S CONTINUOUS SERVICE, NOR SHALL IT INTERFERE IN ANY WAY WITH THE OPTIONEE'S RIGHT OR THE COMPANY=S RIGHT TO TERMINATE OPTIONEE'S CONTINUOUS SERVICE, WITH OR WITHOUT CAUSE, AND WITH OR WITHOUT NOTICE. THE OPTIONEE ACKNOWLEDGES THAT UNLESS THE OPTIONEE HAS A WRITTEN EMPLOYMENT AGREEMENT WITH THE COMPANY TO THE CONTRARY, THE OPTIONEE'S STATUS IS AT WILL. The Optionee acknowledges receipt of a copy of the Plan, and represents that he or she is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions hereof and thereof. The Optionee has reviewed this Option Agreement, the Plan, and the Exercise Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option Agreement, and fully understands all provisions of this Option Agreement, the Plan and the Exercise Agreement. The Optionee hereby agrees that all disputes arising out of or relating to this Option Agreement, the Plan and the Exercise Agreement shall be resolved in accordance with Section 12 of this Option Agreement. The Optionee further agrees to notify the Company upon any change in the residence address indicated in the Option Agreement. If the Optionee is married, the Optionee understands that his or her spouse must execute a consent in the form attached hereto as Exhibit B. Dated:     Signed:           Optionee       Address   -------------------------------------------------------------------------------- EXHIBIT A SEITEL, INC. 2001 INDUCEMENT STOCK OPTION PLAN STOCK OPTION EXERCISE AGREEMENT This Exercise Agreement is made this _____ day of __________, 20_____ between Seitel, Inc. (the "Company"), and the optionee named below ("Optionee") pursuant to the Seitel, Inc. 2001 Inducement Stock Option Plan (the "Plan"). Unless otherwise defined herein, the capitalized terms used in this Exercise Agreement shall have the meanings ascribed to them in the Plan and in the Option Agreement to which this Exercise Agreement relates. Award Number: Optionee: Social Security Number: Address: Number of Shares Purchased: Price Per Share: Aggregate Purchase Price: Date of Grant:           Optionee hereby delivers to the Company the Aggregate Purchase Price set forth above, to the extent permitted in the Option Agreement, as follows (as applicable, check and complete):       in cash in the amount of $__________ receipt of which is acknowledged by the Company;               through a "same-day-sale" commitment, delivered herewith, from Optionee and the NASD       Dealer named therein in the amount of $__________;               through a "margin" commitment, delivered herewith, from Optionee and the NASD Dealer       named therein in the amount of $__________. The Company and Optionee hereby agree as follows: 1.          Purchase of Shares. On this date and subject to the terms and conditions of this Exercise Agreement, Optionee hereby exercises the Option granted in the Option Agreement between the Company and Optionee dated as of the Date of Grant set forth above, with respect to the Number of Shares Purchased set forth above of the Common Stock (the "Shares") at the Aggregate Purchase Price set forth above (the "Aggregate Purchase Price") equal to the Price Per Share set forth above (the "Purchase Price Per Share") multiplied by the Number of Shares Purchased set forth above. The term "Shares" refers to the Shares purchased under this Agreement and includes all securities received (a) in replacement of the Shares, and (b) as a result of stock dividends or stock splits in respect of the Shares. 2.          Representations of the Optionee. Optionee represents and warrants to the Company that Optionee has received, read and understood the Plan, the Option Agreement and this Exercise Agreement and agrees to abide by and be bound by their terms and conditions. 3.          Federal Restrictions on Transfer. Optionee understands that the Company is under no obligation to register any resale of the Shares and that an exemption may not be available or may not permit Optionee to resell or transfer any of the Shares in the amounts or at the times proposed by Optionee. 4.          Rights as Stockholder. Until the stock certificate evidencing the Shares is issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Shares, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued. 5.           Tax Withholding Obligations. The Optionee agrees to satisfy all applicable federal, state and local income, employment and other tax withholding obligations and herewith delivers to the Company the amount necessary, or has made arrangements acceptable to the Company, to satisfy such obligations as provided in the Plan and the Option Agreement. 6.          Tax Consequences. Optionee understands that optionee may suffer adverse tax consequences as a result of Optionee's purchase or disposition of the shares. Optionee represents that Optionee has consulted with any tax consultant(s) he or she deems advisable in connection with the purchase or disposition of the shares and that Optionee is not relying on the Company for any tax advice. 7.          Successors and Assigns. The Company may assign any of its rights under this Exercise Agreement, and this Exercise Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Exercise Agreement shall be binding upon the Optionee and his or her heirs, executors, administrators, successors and permitted assigns. 8.          Interpretive Matters. Whenever required by the context, pronouns and any variation thereof shall be deemed to refer to the masculine, feminine, or neuter, and the singular shall include the plural, and vice versa. The term "include" or "including" does not denote or imply any limitation. The captions and headings used in this Exercise Agreement are inserted for convenience and shall not be deemed a part of this Exercise Agreement for construction or interpretation. 9.          Dispute Resolution. The provisions of Section 12 of the Option Agreement shall be the exclusive means of resolving disputes arising out of or relating to this Exercise Agreement. 10.          Entire Agreement, Governing Law. This Exercise Agreement, with the Plan and the Option Agreement, constitute the entire agreement of the Parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Parties with respect to the subject matter hereof, and may not be modified adversely to the Optionee's interest except by means of a writing signed by the Parties. Nothing in this Exercise Agreement or in the Plan or the Option Agreement (except as expressly provided herein or therein) is intended to confer any rights or remedies on any person other than the Parties. This Exercise Agreement (like the Plan and the Option Agreement) is to be construed in accordance with and governed by the internal laws of the State of Delaware, without giving effect to any choice-of-law rule that would cause the application of the laws of any jurisdiction other than the internal laws of the State of Delaware to the rights and duties of the Parties. Should any provision of the Plan, the Option Agreement, or this Exercise Agreement be determined by a court of law to be illegal or unenforceable, such provision shall be enforced to the fullest extent allowed by law, and the other provisions shall nevertheless remain effective and shall remain enforceable. 11.          Notice. Any notice or other communication required or permitted hereunder shall be given in writing and shall be deemed given, effective, and received upon prepaid delivery in person or by courier or upon the earlier of delivery or the third business day after deposit in the United States mail if sent by certified mail, with postage and fees prepaid, addressed to the other Party at its address as shown beneath its signature in the Option Agreement, or to such other address as such Party may designate in writing from time to time by notice to the other Party in accordance with this Section 11. 12.          Further Instruments. Each Party agrees to execute such further instruments and to take such further action as may be necessary or reasonably appropriate to carry out the purposes and intent of this Exercise Agreement. Submitted by:     Accepted by:             OPTIONEE:     SEITEL, INC.               Signature   By:               Print Name   Title:             Dated:     Dated:               -------------------------------------------------------------------------------- EXHIBIT B SEITEL, INC. 2001 INDUCEMENT STOCK OPTION PLAN CONSENT OF SPOUSE I, ______________________________, spouse of ______________________________, have read and approve the foregoing Stock Option Agreement (the "Agreement"). In consideration of the Company's grant to my spouse of the right to purchase shares of Seitel, Inc. as set forth in the Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to the exercise of any rights under the Agreement and agree to be bound by the provisions of the Agreement insofar as I may have any rights in said Agreement or any shares issued pursuant thereto under the applicable community property laws or similar laws relating to marital property in effect as of the date of the signing of the foregoing Agreement. Dated:             Signature of Spouse               (Please print name)   --------------------------------------------------------------------------------

FOURTEENTH AMENDMENT TO FORBEARANCE AGREEMENT AND TWELFTH AMENDMENT TO POST-CONFIRMATION LOAN AND SECURITY AGREEMENT             THIS FOURTEENTH AMENDMENT TO FORBEARANCE AGREEMENT AND TWELFTH AMENDMENT TO POST-CONFIRMATION LOAN AND SECURITY AGREEMENT (the "Agreement") is effective as of this 6th day of July, 2001, among THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation in its capacity as Agent and Lender ("Agent"), each of the financial institutions party to the Loan Agreement (each is referred to herein as a "Lender" and collectively as the "Lenders"), TRISM, INC., a Delaware corporation ("Trism"), TRISM SECURED TRANSPORTATION, INC., a Delaware corporation ("Trism Secured"), TRI-STATE MOTOR TRANSIT CO., a Delaware corporation ("TSMT"), DIABLO SYSTEMS INCORPORATED D/B/A DIABLO TRANSPORTATION, INC., a California corporation ("Diablo"), TRISM EASTERN, INC. D/B/A C.I. WHITTEN TRANSFER, a Delaware corporation ("CI Whitten"), TRISM HEAVY HAUL, INC., a Delaware corporation ("Heavy Haul"), TRISM SPECIALIZED CARRIERS, INC., a Georgia corporation ("Specialized"), TRISM SPECIAL SERVICES, INC., a Georgia corporation ("Special Services"), TRISM LOGISTICS, INC., a Delaware corporation ("Logistics"), TRISM EQUIPMENT, INC., a Delaware corporation ("TEI") (each of Trism, Trism Secured, TSMT, Diablo, CI Whitten, Heavy Haul, Specialized, Special Services, Logistics and TEI is herein referred to individually as a "Borrower" and collectively as the "Borrowers"), AERO BODY AND TRUCK EQUIPMENT, INC., a Delaware corporation ("Aero Body"), E.L. POWELL & SONS TRUCKING CO., INC., an Oklahoma corporation ("EL Powell"), TRISM TRANSPORT, INC., a Delaware corporation ("Transport"), and TRISM TRANSPORT SERVICES, INC. ("Transport Services") (each of Aero Body, EL Powell, Transport and Transport Services is individually referred to herein as a "Guarantor" and collectively as the "Guarantors"). W I T N E S S E T H:             WHEREAS , Borrowers, Agent and Lenders are party to that certain Post-Confirmation Loan and Security Agreement, dated February 9, 2000 (as the same has been amended from time to time, the "Loan Agreement");             WHEREAS , Borrowers, Agent and Lenders desire to amend the Loan Agreement as set forth herein; and             WHEREAS , Borrowers, Guarantors, Agent and Lenders are party to that certain Forbearance Agreement, dated as of November 8, 2000 (as the same has been amended from time to time, the "Forbearance Agreement;" all capitalized terms used herein and not otherwise expressly defined herein shall have the respective meanings given to such terms in the Forbearance Agreement); and             WHEREAS , Agent, Lenders, Borrowers and Guarantors desire to amend the Forbearance Agreement as set forth herein.     --------------------------------------------------------------------------------               NOW, THEREFORE , in consideration of the foregoing premises, and other good and valuable consideration, the receipt and legal sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:         1.    Amendments to Loan Agreement and Forbearance Agreement. A. Amendments to Loan Agreement. Section 1.1 of Article 1 of the Loan Agreement is hereby amended by deleting therefrom the definition of "Initial Anniversary Date" in its entirety and inserting the following in lieu thereof: "Initial Anniversary Date" shall mean July 13, 2001. B. Amendments to Forbearance Agreement. The Forbearance Agreement is hereby amended as follows:                     (i) Paragraph 2 of the Forbearance Agreement is hereby amended by deleting therefrom the reference to the date "July 6, 2001" and inserting in lieu thereof the date "July 13, 2001."                     (ii) Section (e) of Paragraph 4 of the Forbearance Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:                                     (e) Section 1.1 of Article 1 of the Loan Agreement is hereby further amended by deleting from the definition of "Revolving Credit Facility Cap" the number "$45,000,000" and inserting in lieu thereof the number "$40,000,000."                     (iii) Section (f) of Paragraph 4 of the Forbearance Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:                                     (f) Section 1.1 of Article 1 of the Loan Agreement is hereby further amended by deleting from the definition of "Total Commitment" the number "$45,000,000" and inserting in lieu thereof the number "$40,000,000."         2.    Representations, Warranties, Covenants and Acknowledgments. To induce Agent and Lenders to enter into this Agreement: Each Borrower and Guarantor does hereby represent and warrant that (i) as of the date hereof, all of the representations and warranties made or deemed to be made under the Forbearance Agreement and the other Loan Documents are true and correct, (ii) as of the date hereof, after giving effect to the terms hereof, there exists no (A) default or breach of the Forbearance Agreement or (B) Default or Event of Default under the Loan Agreement or any of the Loan Documents, other than any Default or Event of Default which may arise from the failure of Borrowers to pay, during the Forbearance Period, certain interest payments with respect to the Senior Notes (as defined below), (iii) such Borrower and Guarantor has the power and is duly authorized to enter into, deliver and perform this Agreement, and (iv) this Agreement and each of the Forbearance Agreement and the other Loan Documents is the legal, valid and binding obligation of the such Borrower and Guarantor enforceable against it in accordance with its terms; and --------------------------------------------------------------------------------   Each Borrower and Guarantor does hereby reaffirm each of the agreements, covenants, and undertakings set forth in the Forbearance Agreement and each and every other Loan Document executed in connection therewith or pursuant thereto as if such Borrower or Guarantor were making said agreements, covenants and undertakings on the date hereof; and Each Borrower and Guarantor does hereby acknowledge and agree that no right of offset, defense, counterclaim, claim, causes of action or objection in favor of any Borrower or Guarantor against Agent or any Lender exists arising out of or with respect to (i) the Secured Obligations, this Agreement, the Forbearance Agreement, the Loan Agreement or any of the other Loan Documents, (ii) any other documents now or heretofore evidencing, securing or in any way relating to the foregoing or (iii) the administration or funding of the Revolving Credit Loans; and Each Borrower and Guarantor does hereby acknowledge and agree that any and all references to the Loan Agreement herein or in the Forbearance Agreement shall mean and refer to the Loan Agreement, as amended by (i) that certain First Amendment to Post-Confirmation Loan and Security Agreement, dated August 31, 2000, (ii) that certain Second Amendment to Post-Confirmation Loan and Security Agreement, dated January 26, 2001, (iii) that certain Third Amendment to Post-Confirmation Loan and Security Agreement, dated February 28, 2001, (iv) that certain Fourth Amendment to Post-Confirmation Loan and Security Agreement, dated March 30, 2001, (v) that certain Fifth Amendment to Post-Confirmation Loan and Security Agreement, dated April 13, 2001, (vi) that certain Sixth Amendment to Post-Confirmation Loan and Security Agreement, dated April 27, 2001, (vii) that certain Seventh Amendment to Post-Confirmation Loan and Security Agreement, dated May 18, 2001, (viii) that certain Eighth Amendment to Post-Confirmation Loan and Security Agreement, dated June 4, 2001, (ix) that certain Ninth Amendment to Post-Confirmation Loan and Security Agreement, dated June 8, 2001, (x) that certain Tenth Amendment to Post-Confirmation Loan and Security Agreement, dated June 15, 2001, (xi) that certain Eleventh Amendment to Post-Confirmation Loan and Security Agreement, dated June 27, 2001, and (xii) that certain Twelfth Amendment to Post-Confirmation Loan and Security Agreement, as contained herein.         3.    Releases; Indemnities. In further consideration of Agent's and each Lender's execution of this Agreement, each Borrower and each Guarantor, individually and on behalf of its successors (including, without limitation, any trustees acting on behalf of such Borrower or Guarantor and any debtor-in-possession with respect to such Borrower or Guarantor), assigns, subsidiaries and Affiliates, hereby forever releases Agent and each Lender and their respective successors, assigns, parents, subsidiaries, Affiliates, officers, employees, directors, agents and attorneys (collectively, the "Releasees") from any and all debts, claims, demands, liabilities, responsibilities, disputes, causes, damages, actions and causes of actions (whether at law or in equity) and obligations of every nature whatsoever, whether liquidated or unliquidated, whether known or unknown, matured or unmatured, fixed or contingent (collectively, "Claims") that such Borrower or Guarantor may have against the Releasees which arise from or relate to any actions which the Releasees may have taken or omitted to take in connection with the Forbearance Agreement or other Loan Documents prior to the date this Agreement was executed including without limitation with respect to the Secured Obligations, any Collateral, the Loan Agreement, the Forbearance Agreement, any other Loan Document and any third parties liable in whole or in part for the Secured Obligations. This provision shall survive and continue in full force and effect whether or not such Borrower or Guarantor shall satisfy all other provisions of this Agreement, the Forbearance Agreement, the Loan Documents or the Loan Agreement including payment in full of all Secured Obligations. Each Borrower hereby agrees that its obligation to indemnify and hold the Releasees harmless as set forth in Section 3(a) above shall include an obligation to indemnify and hold the Releasees harmless with respect to any and all liabilities, obligations, losses, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever incurred by the Releasees, or any of them, whether direct, indirect or consequential, as a result of or arising from or relating to any proceeding by, or on behalf of any Person, including, without limitation, officers, directors, agents, trustees, creditors, partners or shareholders of such Borrower or Guarantor any subsidiary or Affiliate of such Borrower, such Guarantor whether threatened or initiated, asserting any claim for legal or equitable remedy under any statutes, regulation or common law principle arising from or in connection with the negotiation, preparation, execution, delivery, performance, administration and enforcement of this Agreement or any other document executed in connection herewith. The foregoing indemnity shall survive the payment in full of the Secured Obligations and the termination of this Agreement, the Forbearance Agreement, the Loan Agreement and the other Loan Documents         4.    Conditions Precedent. The effectiveness of this Agreement is subject to the following conditions precedent: A. Delivery of Documents. Borrowers and Guarantors shall have delivered to Agent, on behalf of Lenders, all in form and substance acceptable to Agent in its sole discretion, (i) executed counterpart originals of this Agreement, and (ii) such other documentation as Agent may reasonably require in connection herewith; and B. Accuracy of Representations and Warranties. All of the representations and warranties made or deemed to be made in this Agreement and under the Forbearance Agreement and the other Loan Documents shall be true and correct as of the date of this Agreement, except such representations and warranties which, by their terms, are applicable to a prior specific date or period; and C. Expenses. Borrowers and Guarantors shall have agreed to jointly and severally pay to Agent the costs and expenses referred to in Section 6 hereof; and   -------------------------------------------------------------------------------- D. Fees. Borrowers and Guarantors shall have paid to Agent, for the ratable benefit of Lenders, an amendment and forbearance fee in an amount equal to $25,000, which fee shall be deemed fully earned as of the date hereof.         5.    Effect of this Agreement; Relationship of Parties. As expressly amended hereby, the Forbearance Agreement and the other Loan Documents shall be and remain in full force and effect as originally written, and shall constitute the legal, valid, binding and enforceable obligations of Borrowers and Guarantors to Agent and Lenders. The relationship of Agent and Lenders, on the one hand, and Borrowers and Guarantors, on the other hand, has been and shall continue to be, at all times, that of creditor and debtor and not as joint venturers or partners. Nothing contained in this Agreement, any instrument, document or agreement delivered in connection herewith or in the Forbearance Agreement, the Loan Agreement or any of the other Loan Documents shall be deemed or construed to create a fiduciary relationship between or among the parties.         6.    Expenses. Borrowers and Guarantors agree to jointly and severally pay on demand all reasonable costs and expenses of Agent and Lenders in connection with the preparation, execution, delivery and enforcement of this Agreement and all other documents and any other transactions contemplated hereby, including, without limitation, the reasonable fees and out-of-pocket expenses of legal counsel to Agent and Lenders. Borrowers authorize Agent to charge the foregoing expenses to the Borrowers' loan account by increasing the principal amount of the Revolving Credit Loans by the amount of such expenses owed by Borrowers in connection herewith.         7.    Miscellaneous. Borrowers and Guarantors agree to take such further action as Agent or any Lender shall reasonably request in connection herewith to evidence the amendments herein contained to the Forbearance Agreement. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same instrument. This Agreement shall be binding upon and inure to the benefit of the successors and permitted assigns of the parties hereto. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Georgia. This Agreement embodies the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior oral or written negotiations, agreements and understandings of the parties with respect to the subject matter hereof, except the agreements embodied in the Forbearance Agreement, the Loan Agreement and the other Loan documents (as modified herein). Time is of the essence of this Agreement and of the Forbearance Agreement and the Loan Agreement. [SIGNATURES APPEAR ON FOLLOWING PAGE]   --------------------------------------------------------------------------------               IN WITNESS WHEREOF , Borrowers, Guarantors, Lenders and Agent have caused this Agreement to be duly executed as of the date first above written.     BORROWERS:       TRISM, INC.                    By:                                                                                 Name:  Ralph Nelson    Title:     Senior Vice President and General Counsel          TRISM SECURED TRANSPORTATION, INC.    By:                                                                                Name: Ralph Nelson Title: Senior Vice President and General Counsel       TRI-STATE MOTOR TRANSIT CO.    By:                                                                                Name: Ralph Nelson Title:  Senior Vice President and General Counsel      --------------------------------------------------------------------------------   DIABLO SYSTEMS INCORPORATED,  D/B/A DIABLO TRANSPORTATION, INC.       By:                                                                                Name:  Ralph Nelson Title:     Senior Vice President and General Counsel       TRISM EASTERN, INC., D/B/A C. I. WHITTEN TRANSFER    By:                                                                                Name:  Ralph Nelson Title:     Senior Vice President and General Counsel       TRISM HEAVY HAUL, INC. By:                                                                                Name: Ralph Nelson Title:  Senior Vice President and General Counsel       TRISM SPECIALIZED CARRIERS, INC.        By:                                                                                Name: Ralph Nelson Title:  Senior Vice President and General Counsel       TRISM SPECIAL SERVICES, INC. By:                                                                                Name: Ralph Nelson Title:  Senior Vice President and General Counsel       TRISM LOGISTICS, INC.       By:                                                                                Name: Ralph Nelson Title:  Senior Vice President and General Counsel               --------------------------------------------------------------------------------   TRISM EQUIPMENT, INC.    By:                                                                                Name: Ralph Nelson Title:  Senior Vice President and General Counsel GUARANTORS: AERO BODY AND TRUCK EQUIPMENT, INC. By:                                                                                Name: Ralph Nelson Title:  Senior Vice President and General Counsel       E.L. POWELL & SONS TRUCKING, INC. By:                                                                                Name: Ralph Nelson Title:  Senior Vice President and General Counsel TRISM TRANSPORT, INC. By:                                                                                Name: Ralph Nelson Title:  Senior Vice President and General Counsel TRISM TRANSPORT SERVICES, INC. By:                                                                                Name:   Ralph Nelson Title:  Senior Vice President and General Counsel   --------------------------------------------------------------------------------   LENDERS:       FLEET CAPITAL CORPORATION                  By:                                                                                  Name:                                                                             Title:                                                                                            THE CIT GROUP/BUSINESS CREDIT,   INC.               By:                                                                                  Name:                                                                             Title:                                                                                            AGENT:      THE CIT GROUP/BUSINESS CREDIT,      INC.                  By:                                                                                  Name:                                                                             Title:                                                                               

Exhibit 10.3 Separation Agreement and General Release       This Separation Agreement and General Release (hereinafter “Agreement”) is entered into by and between Advanced Switching Communications, Inc. (referred to as “the Company”) and Jim Loehndorf (referred to as “Employee”), who are collectively referred to herein as the “Parties.”       WHEREAS, the Parties now desire and agree to forever sever their employment relationship and to fully and finally resolve any and all existing or potential issues, claims, causes of action, grievances and disputes without any admission of liability or finding or admission that any of Employee’s rights, under any statute, claim or otherwise, were in any way violated. In consideration of the mutual promises contained herein, and other good and valuable consideration as hereinafter recited, the receipt and adequacy of which is hereby acknowledged, the Parties, intending to be legally bound, agree as follows:       1. Employee hereby acknowledges that the Company has notified him on July 20, 2001 (the “Notification Date”) that his employment with the Company will cease on August 3, 2001 (the “Termination Date”) due to a reduction in force. From the Notification Date through the Termination Date, Employee shall be placed on paid administrative leave. During this period of paid administrative leave, Employee agrees to provide transitional services as they may be reasonably requested by the Company.       Employee’s employment at the Company will end on the Termination Date. Employee recognizes that for purposes of the continuation coverage requirements of group health plans under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), as amended, and the group health provisions of any applicable state or local law, a “qualifying event” occurs on Employee’s Termination Date.       2. In exchange for the promises made by Employee herein and if Employee executes and does not revoke this Agreement, the Company agrees to pay to Employee, in addition to the one week of paid administrative leave described in Paragraph 1 above, an amount equal to Employee’s base pay (i.e., Employee’s bi-weekly salary) that Employee would have earned for six (6) months, less all lawful deductions, which shall be paid to Employee in accordance with the Company’s normal payroll schedule over the twenty-six (26) week period from August 4, 2001, to February 3, 2002 (the “Guaranteed Severance Period”). The Company agrees to begin making the Guaranteed Severance payments to Employee within fourteen (14) days after the “Effective Date,” as defined in paragraph 16, except that, in the event Employee exercises his revocation rights under paragraph 15, the Company has no obligation to make any of the severance payments described in this paragraph. -1- --------------------------------------------------------------------------------       3. Employee agrees that upon the Termination Date, he will surrender to the Company every item and every document in Employee’s possession or control that is the Company’s property (including but not limited to keys, records, computers, peripherals, computer files and disks, notes, memoranda, models, inventory and equipment) or contains Company information, in whatever form. Employee acknowledges and stipulates that all of the Company’s electronic and telephonic communication systems, computers and other business equipment including, but not limited to, computer systems, data bases, phone mail, modems, e-mail, Internet access, Web sites, fax machines, techniques, processes, formulas, mask works, source codes, programs, semiconductor chips, processors, memories, disc drives, tape heads, computer terminals, keyboards, storage devices, printers and optical character recognition devices, and any and all components, devices, techniques or circuitry incorporated in any of the above and similar business devices (herein collectively referred to as “Electronic Equipment” ), are the sole property of the Company, and that any information transmitted by, received from, or stored in such Electronic Equipment is also the Company’s property. Employee agrees that, after his separation of employment from the Company, he shall not, directly or indirectly, for himself or for any other person or entity, use, access, copy, or retrieve, or attempt to use, access, copy, or retrieve, any of the Company’s Electronic Equipment or any information on the Company’s Electronic Equipment.       4. All reference requests from Employee’s prospective employers shall be made in writing addressed to the attention of Laurie Foglesong, Director of Human Resources. In response to such requests, the Department of Human Resources will provide to prospective employers Employee’s dates of employment and job title. The Department of Human Resources will not provide any additional information to prospective employers regarding Employee’s employment without Employee’s written consent.       5. The parties acknowledge that Employee’s entitlement to stock options of the Company is governed by one or more stock option agreements (the “Option Agreements”). The procedures and time restrictions for the exercise of vested options are set forth in the Option Agreements. All unvested options previously granted to Employee shall expire and terminate on the Termination Date. The Company waives its repurchase rights with respect to 25% of Employees 500,000 shares of Company stock (that is 125,000 shares), which would otherwise be restricted until one year after the closing of the Initial Public Offering per the Amendment to the Key Employee Stock Agreement.       6. Employee agrees that he is not otherwise entitled to the payments from the Company described in Paragraph 2 above. Employee understands that by signing this Agreement, he is electing to receive the payments described in paragraph 1 under the terms set forth in this Agreement.       7. As of the date Employee signs this Agreement, Employee represents that he has been paid for all hours worked through the date of his signature and has not suffered any on-the-job injury as of the date of his signature for which he has not already filed a claim. As a part of this Agreement, the Company agrees that all vacation pay, commissions, or overtime pay (if applicable) that he is owed will be paid on 8/31, 2001. -2- --------------------------------------------------------------------------------       8. Employee agrees that, in consideration of the additional payments described in paragraph 1 herein, he will, and hereby does, forever and irrevocably release and discharge the Company, and its past, present and future, affiliates, parents, subsidiaries, divisions, predecessors, purchasers, assigns, representatives and successors, and its and their officers, directors, employees, independent contractors, agents, (herein collectively referred to as the “Releasees”) from any and all claims, causes of action, damages, defenses, promises, judgments, and liabilities, known or unknown, whatsoever which he now has, has had, or may have, whether the same be at law, in equity, or mixed, in any way arising from or relating to any act, occurrence, or transaction before the date of this Agreement, including without limitation his employment and separation of employment from the Company and any and all tax related liabilities that may result from this Agreement. Employee expressly acknowledges that this General Release includes, but is not limited to, Employee’s intent to release the Company from tort and contract claims, wrongful discharge claims, statutory claims, compensation claims, and claims of discrimination or harassment based on age, race, color, sex, religion, handicap, disability, national origin, ancestry, citizenship, marital status, retaliation or any claim under the Age Discrimination In Employment Act (29 U.S.C. §§ 626 et seq., AADEA”), Title VII of the Civil Rights Acts of 1964 and 1991 as amended (42 U.S.C. §§ 2000e et seq.), Employee Retirement Income Security Act (29 U.S.C. §§ 1001 et seq.), the Consolidated Omnibus Budget Reconciliation Act of 1985 (29 U.S.C. §§ 1161 et seq.), the Americans With Disabilities Act (42 U.S.C. §§ 12101 et seq.), the Rehabilitation Act of 1973 (29 U.S.C. §§ 701 et seq.), the Family and Medical Leave Act (29 U.S.C. §§ 2601 et seq.), the Worker Adjustment and Retraining Notification Act (29 U.S.C. §§ 2101 et seq), and any other federal, state or local law prohibiting employment discrimination or relating to the employment relationship. This release does not include any claims that cannot be waived by law. It is agreed and understood that this release is a GENERAL RELEASE to be construed in the broadest possible manner consistent with applicable law.       9. Employee agrees not to make or file any lawsuits, complaints, or other proceedings of any kind in any federal, state or municipal court against the Company or any of the Releasees concerning any claim that he has released in this Agreement. Provided that, this Agreement and covenant not to sue does not restrict Employee’s right to challenge the enforceability of this Agreement or to file a charge with or participate in an investigation conducted by any government agencies. Employee further agrees that no such lawsuits, complaints, or other proceedings have already been made or filed by or on behalf of Employee regarding any claims that have been released by this Agreement. Employee further agrees and covenants not to assist or encourage others in making or filing any lawsuits in any federal, state or municipal court against the Company or any of the Releasees.       10. Employee agrees that the additional severance payments provided for in this Agreement shall not be construed as an admission of any wrongdoing or liability on the part of the Company and that any such wrongdoing or liability is expressly denied. -3- -------------------------------------------------------------------------------- Employee represents that he has not assigned or transferred to any person or entity any claim against the Company and that any such claim is not assignable or transferable. The Parties agree that this Agreement shall be governed by Virginia law, and that the state and/or federal courts in Virginia shall have sole and exclusive jurisdiction and venue to hear any dispute concerning this Agreement. If any terms of the provisions of this Agreement are found null, void or inoperative, for any reason, the remaining provisions will remain in full force and effect. The language of all parts of this Agreement shall in all cases be construed as a whole, according to its fair meaning, and not strictly for or against either of the Parties.       The Parties agree that this Agreement contains and comprises the entire agreement and understanding of the Parties, that there are no additional promises or terms of the Agreement among the Parties other than those contained herein, and that this Agreement shall not be modified exception a writing signed by each of the Parties hereto. This Agreement cancels and supersedes any prior employment agreements or arrangements that Employee may have entered into with the Company or any of the Releasees, except that the terms of paragraphs 6 and 7 of Employee’s Key Employee Employment Agreement and the Option Agreement(s) (to the extent applicable for vested options) entered into by Employee and Company shall remain and continue in effect in accordance with the terms thereof.       12. Employee agrees that he will not disclose or cause to be disclosed any negative, adverse or derogatory comments or information about the Company, about any product or service provided by the Company, or about the Company’s prospects for the future, except as required by law. Furthermore, Employee hereby represents to the Company that he has made no such communication to any public official, to any person associated with the media, or to any other person or entity. Employee acknowledges that the Company relies upon this representation in agreeing to enter into this Agreement.       13. Employee represents that he has read this Agreement, that he understands all of its terms, that in executing this Agreement he does not rely and has not relied upon any representation or statements made by any of the Company’s agents, representatives, or attorneys with regard to the subject matter, basis, or effect of the Agreement, and that he enters into this Agreement voluntarily, of his own free will, without any duress and with knowledge of its meaning and effect. Employee acknowledges that he has been and is advised by the Company to consult an attorney prior to executing the Agreement.       14. Employee understands that he has forty five (45) days from the date of his receipt of this Agreement, which was July 20, 2001, to sign it, and that he may unilaterally waive this period at his election. Employee’s signature on this Agreement constitutes an express waiver of the forty-five (45) day period if affixed prior to the expiration of that period. By signing this Agreement, Employee expressly acknowledges that his decision to sign this Agreement was knowing and voluntary and of his own free will. The Parties agree that any revisions or modifications to this Agreement, whether material or immaterial, will not and did not restart this time period. -4- --------------------------------------------------------------------------------       15. Employee acknowledges that he may revoke this Agreement for up to and including seven (7) days after his execution of this Agreement, and this Agreement regarding his release of claims shall not become effective until the Effective Date as defined in paragraph 16. Employee agrees that, in order to be effective, his revocation pursuant to this Paragraph must be delivered in writing to Sherry Rhodes before 5:00 p.m. on the seventh day following Employee’s execution of this Agreement.       16. This Agreement shall become effective on the eighth day following the date on which Employee signs it, unless Employee revokes it (“Effective Date”).       17. Employee understands that his termination is the result of a reduction in force, which is occurring on or about July 20, 2001. All individuals who are being terminated in the reduction in force will be eligible for severance payments based upon their execution of a release identical to this one. By signing this Agreement, Employee acknowledges that he has received Exhibit A, which sets forth the job titles and ages of other individuals whose employment will be terminated as a result of the reduction in force and the ages of the individuals in the same job classification or organizational unit who were not selected for termination on that date.       18. Employee also acknowledges that the Company may require him to provide assistance to the Company in the investigation and/or defense of potential or actual claims, charges or legal actions against the Company and agrees to provide the requested assistance, which may include, but is not limited to, interview(s), affidavit(s) and/or in person testimony. Employee acknowledges that such requests may come during and/or after his Guaranteed Severance Period and agrees to provide the assistance as and when required. If Employee no longer resides in the Washington, D.C. metropolitan area when his assistance is required and it is necessary that he be present in the metropolitan area to provide that assistance, the Company will pay his reasonable travel and related expenses for such period as his presence is required but will not pay for his time spent either traveling or rendering such assistance or for any lost income. -5- --------------------------------------------------------------------------------       IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year first written above.       Employee Signature/Printed Name Date   /s/ J.R. Loehndorf 7/27/01   For: Advanced Switching Communications, Inc. Date   /s/ Sherry L. Rhodes   Sherry L. Rhodes VP, General Counsel      & Secretary 7/27/01 -6-

ACKNOWLEDGMENT, WAIVER AND AMENDMENT TO FINANCING AGREEMENT This ACKNOWLEDGMENT, WAIVER AND AMENDMENT ("Amendment") TO THE INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT is made as of May _02, 2001 by and between Datatec Industries, Inc., a Delaware corporation ("Customer") and IBM Credit Corporation, a Delaware corporation ("IBM Credit"). RECITALS: WHEREAS, Customer and IBM Credit have entered into that certain Inventory and Working Capital Financing Agreement dated as of November 10, 2000 (as amended, supplemented or otherwise modified from time to time, the "Agreement"); WHEREAS, Customer is in default of one or more of its financial covenants contained in the Agreement (as more specifically explained in Section 2 hereof); and WHEREAS, IBM Credit is willing to waive such defaults subject to the conditions set forth below. AGREEMENT NOW THEREFORE, in consideration of the premises set forth herein, and for other good and valuable consideration, the value and sufficiency of which is hereby acknowledged, the parties hereto agree that the Agreement is amended as follows: Section 1. Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Agreement. Section 2. Acknowledgment. Customer acknowledges that the financial covenants set forth in Attachment A to the Agreement are applicable to the financial results of Customer for the fiscal quarter ending January 31, 2001, and Customer was required to maintain such financial covenants at all times. Customer further acknowledges its actual attainment was as follows: Covenant Covenant Covenant Requirement Actual -------- ----------- -------- Net Profit after Tax to Revenue Equal to or Greater than Net Loss 0.0 percent Section 3. Waivers to Agreement. IBM Credit hereby waives the Defaults of Customer with the terms of the Agreement to the extent such Defaults are set forth in Section 2 hereof. Section 4. Amendment. The Agreement is hereby amended as follows, notwithstanding any other conditions precedent contained herein: A. Attachment A to the Agreement is hereby amended by deleting such Attachment A in its entirety and substituting, in lieu thereof, the Attachment A attached hereto. Such new Attachment A shall be effective as of the date specified in the new Attachment A. The changes contained in the new Attachment A include, without limitation, the following: (a) Product Financing Charge is increased from Prime Rate plus 0.25% to Prime Rate plus 3.00%; Page 1 of 3 (b) WCO Advance Charge is increased from Prime Rate plus 0.25% to Prime Rate plus 3.00%; (c) PRO Advance Charge is increased from Prime Rate plus 0.25% to Prime Rate plus 3.00%; (d) Credit Line is decreased from Eighteen Million Dollars ($18,000,000.00) to Fourteen Million Dollars ($14,000,000.00); (e) Customer shall be required to maintain the following financial percentage(s) and ratio(s) as of the last day of the fiscal period under review by IBM Credit: Covenant Covenant Requirement, fiscal Covenant Requirement, fiscal quarters ending Requirement, quarters ending October 2001 and fiscal Covenant April/July 2001 thereafter quarters ---------- ------------------- ------------------- ending April 2002 and ---------- thereafter ---------- (i) Revenue on an Annual Basis Greater than Zero and Equal to or Greater than Zero and Equal to Greater than Zero and to Working Capital Less than 25.0 :1.0 or Less than 25.0 :1.0 Equal to or Less than 25.0 :1.0 (ii) Net Profit after Tax to Equal to or Greater than 0.10 Equal to or Greater Revenue percent than 0.10 percent (iii) Tangible Net Worth Equal to or Greater than $2.5 Equal to or Greater Million than $5.0 Million B. Schedule A of the Agreement is hereby amended by increasing the Term Loan Finance Charge from Prime Rate plus 0.75% to Prime Rate plus 3.50%. C. Section 2.4. of the Agreement is hereby amended by deleting 2.4.(E) in its entirety and substituting in lieu thereof the following; " (E) In the event of, and within three (3) days after (i) a public offering or private placement of shares of Customer or any of Customer's subsidiaries or (ii) an offering of public or private debt by Customer or any of Customer's subsidiaries, Customer shall make a mandatory prepayment of $750,000 on the term loan. Section 5. Conditions to Effectiveness of Waiver. The waiver set forth in Section 3 hereof shall become effective upon the receipt by IBM Credit from Customer of: (i) This Amendment executed by Customer; (ii) A waiver fee, in immediately available funds, equal to Ninety Four Thousand and Five Hundred Dollars ($94,500.00). Such waiver fee payable to IBM Credit hereunder shall be nonrefundable and shall be in addition to any other fees IBM Credit may charge Customer; Page 2 of 3 (iii) An executed collateralized guaranty of Customer from its parent company, Datatec Systems, Inc., in form and substance satisfactory to IBM Credit in its sole discretion; (iv) An executed collateralized guaranty of Customer from its affiliate, E-Deploy.com, Inc., in form and substance satisfactory to IBM Credit in its sole discretion; and Section 6. Additional Requirements. (a) Customer hereby restates and affirms the provisions of Section 7.1.(C) of the Agreement that ~as soon as available and in any event within thirty (30) days after the end of each fiscal month of Customer, Customer shall provide; (i) Financial Statements as of the end of such period and for the fiscal year to date, together with a comparison to the Financial Statements for the same periods in the prior year, all in reasonable detail and duly certified (subject to normal year-end audit adjustments and except for the absence of footnotes) by the chief executive officer or chief financial officer of Customer as having been prepared in accordance with GAAP; and (ii) a Compliance Certificate along with a schedule, in substantially the form of Attachment C hereto, of the calculations used in determining, as of the end of such fiscal month, whether Customer is in compliance with the financial covenants set forth in Attachment A; (b) Customer shall provide to IBM Credit on the fifth and twentieth day (or if such day is not a Business Day, on the following Business Day) of each month a Collateral Management Report in form and detail satisfactory to IBM Credit. Such Collateral Management Report shall be as of a date no earlier than the last day of the immediately preceding month or the fifteenth of the current month respectively. Section 7. Rights and Remedies. Except to the extent specifically waived herein IBM Credit reserves any and all rights and remedies that IBM Credit now has or may have in the future with respect to Customer, including any and all rights or remedies which it may have in the future as a result of Customer's failure to comply with its financial covenants to IBM Credit. Except to the extent specifically waived herein neither this Amendment, any of IBM Credit's actions or IBM Credit's failure to act shall be deemed to be a waiver of any such rights or remedies. Section 8. Governing Law. This Amendment shall be governed by and interpreted in accordance with the laws which govern the Agreement. Section 9. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be an original and all of which shall constitute one agreement. IN WITNESS WHEREOF, this Amendment has been executed by duly authorized representatives of the undersigned as of the day and year first above written. IBM Credit Corporation Datatec Industries, Inc. By: /s/ Stanton Clark By: /s/ Issac Gaon --------------------------------------- ------------------------------------- Print Name: Stanton Clark Print Name: Issac Gaon ------------------------------- ------------------------------ Title: Region Credit Manager Title: Chairman of the Board/CEO ------------------------------------ ---------------------------------- ATTACHMENT A, ("IWCF ATTACHMENT A") TO INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT") DATED ___________, ____ Customer Name: Datatec Industries, Inc. Effective Date of this IWCF Attachment A: ______________, 20__ I. Fees, Rates and Repayment Terms: (A) Credit Line: Fourteen Million Dollars ($14,000,000.00); (B) Borrowing Base: (i) 85% of the amount of the Customer's Eligible Accounts other than Concentration Accounts as of the date of determination as reflected in the Customer's most recent Collateral Management Report; (ii) a percentage, determined from time to time by IBM Credit in its sole discretion, of the amount of Customer's Concentration Accounts for a specific Concentration Account Debtor as of the date of determination as reflected in the Customer's most recent Collateral Management Report; unless otherwise notified by IBM Credit, in writing, the percentage for Concentration Accounts for a specific Concentration Account Debtor shall be the same as the percentage set forth in paragraph (i) of the Borrowing Base; provided that the advance on Eligible Accounts from International Business Machines Corporation as Concentration Account Debtor is 95% (iii) 100% of the Customer's inventory in the Customer's possession as of the date of determination as reflected in the Customer's most recent Collateral Management Report constituting Products (other than service parts) financed through a Product Advance by IBM Credit, provided, however, IBM Credit has a first priority security interest in such Products and such Products are new and in un-opened boxes. The value to be assigned to such inventory shall be based upon the Authorized Supplier's invoice price to Customer for Products net of all applicable price reduction credits. (iv) up to 35% of the value of Customer's inventory in the Customer's possession as of the date of determination as reflected and identified in the Customer's most recent Collateral Management Report constituting Products designated by Customer as "Cable" and not financed through a Product Advance by IBM Credit, provided, however, IBM Credit has a first priority security interest in such Products and such Products are new and in un-opened boxes. The value to be assigned to such inventory shall be determined by commercially reasonable methods, in IBM's sole discretion. (v) up to 25% of the value of Customer's inventory in the Customer's possession as of the date of determination as reflected in the Customer's most recent Collateral Management Report constituting Products not financed through a Product Advance by IBM Credit, provided, however, IBM Credit has a first priority security interest in such Products and such Products are new and in un-opened boxes. The value to be assigned to such inventory shall be determined by commercially reasonable methods, in IBM's sole discretion. (C) Product Financing Charge: Prime Rate plus 3.00% (D) Product Financing Period: 70 days Page 1 of 11 (E) Collateral Insurance Amount: Five Million Dollars ($5,000,000.00) (F) A/R Finance Charge: (i) PRO Advance Charge: Prime Rate plus 3.00% (ii) WCO Advance Charge: Prime Rate plus 3.00% (G) Delinquency Fee Rate: Prime Rate plus 6.500% (H) Shortfall Transaction Fee: Shortfall Amount multiplied by 0.30% (I) Free Financing Period Exclusion Fee: Product Advance multiplied by 0.25% (J) Other Charges: (i) Application Processing Fee: $25,000.00 (ii) Annual Renewal Fee: $20,000.00 (iii) Covenant Recasting Fee: $25,000.00 Page 2 of 11 II. Bank Account Customer's Lockbox(es) and Special Account(s) will be maintained at the following Bank(s): Name of Bank: Address: Phone: Lockbox Address: Special Account #: -------------------------------------------------------------------------------- Name of Bank: Address: Phone: Lockbox Address: Special Account #: -------------------------------------------------------------------------------- Name of Bank: Address: Phone: Lockbox Address: Special Account #: -------------------------------------------------------------------------------- Name of Bank: Address: Phone: Lockbox Address: Special Account #: Page 3 of 11 III. Financial Covenants: Definitions: The following terms shall have the following respective meanings in this Attachment. All amounts shall be determined in accordance with generally accepted accounting principles (GAAP). "Consolidated Net Income" shall mean, for any period, the net income (or loss), after taxes, of Customer on a consolidated basis for such period determined in accordance with GAAP. "Current" shall mean within the ongoing twelve month period. "Current Assets" shall mean assets that are cash or expected to become cash within the ongoing twelve months. "Current Liabilities" shall mean payment obligations resulting from past or current transactions that require settlement within the ongoing twelve month period. All indebtedness to IBM Credit shall be considered a Current Liability for purposes of determining compliance with the Financial Covenants. "EBITDA" shall mean, for any period (determined on a consolidated basis in accordance with GAAP), (a) the Consolidated Net Income of Customer for such period, plus (b) each of the following to the extent reflected as an expense in the determination of such Consolidated Net Income: (i) the Customer's provisions for taxes based on income for such period; (ii) Interest Expense for such period; and (iii) depreciation and amortization of tangible and intangible assets of Customer for such period. "Fixed Charges" shall mean, for any period, an amount equal to the sum, without duplication, of the amounts for such as determined for the Customer on a consolidated basis, of (i) scheduled repayments of principal of all Indebtedness (as reduced by repayments thereon previously made), (ii) Interest Expense, (iii) capital expenditures (iv) dividends, (v) leasehold improvement expenditures and (vi) all provisions for U.S. and non U.S. Federal, state and local taxes. "Fixed Charge Coverage Ratio" shall mean the ratio as of the last day of any fiscal period of (i) EBITDA as of the last day of such fiscal period to (ii) Fixed Charges. "Interest Expense" shall mean, for any period, the aggregate consolidated interest expense of Customer during such period in respect of Indebtedness determined on a consolidated basis in accordance with GAAP, including, without limitation, amortization of original issue discount on any Indebtedness and of all fees payable in connection with the incurrence of such Indebtedness (to the extent included in interest expense), the interest portion of any deferred payment obligation and the interest component of any capital lease obligations. "Long Term" shall mean beyond the ongoing twelve month period. "Long Term Assets" shall mean assets that take longer than a year to be converted to cash. They are divided into four categories: tangible assets, investments, intangibles and other. "Long Term Debt" shall mean payment obligations of indebtedness which mature more than twelve months from the date of determination, or mature within twelve months from such date but are renewable or extendible at the option of the debtor to a date more than twelve months from the date of determination. "Net Profit after Tax" shall mean Revenue plus all other income, minus all costs, including applicable taxes. Page 4 of 11 "Revenue" shall mean the monetary expression of the aggregate of products or services transferred by an enterprise to its customers for which said customers have paid or are obligated to pay, plus other income as allowed. "Subordinated Debt" shall mean Customer's indebtedness to third parties as evidenced by an executed Notes Payable Subordination Agreement in favor of IBM Credit. "Tangible Net Worth" shall mean: Total Net Worth minus; (a) goodwill, organizational expenses, pre-paid expenses, deferred charges, research and development expenses, software development costs, leasehold expenses, trademarks, trade names, copyrights, patents, patent applications, privileges, franchises, licenses and rights in any thereof, and other similar intangibles (but not including contract rights) and other current and non-current assets as identified in Customer's financial statements; (b) all accounts receivable from employees, officers, directors, stockholders and affiliates; and (c) all callable/redeemable preferred stock. "Total Assets" shall mean the total of Current Assets and Long Term Assets. "Total Liabilities" shall mean the Current Liabilities and Long Term Debt less Subordinated Debt, resulting from past or current transactions, that require settlement in the future. "Total Net Worth" (the amount of owner's or stockholder's ownership in an enterprise) is equal to Total Assets minus Total Liabilities. "Working Capital" shall mean Current Assets minus Current Liabilities. Customer will be required to maintain the following financial ratios, percentages and amounts as of the last day of the fiscal period under review by IBM Credit: Covenant Covenant Requirement ------------------------------------------ ----------- (i) Revenue on an Annual Basis (i.e. the current Greater than Zero and fiscal year-to-date Revenue annualized) Equal to or Less than 25.0 :1.0 to Working Capital (ii) Net Profit after Tax to Revenue Equal to or Greater than 0.10 percent effective quarter ending 10/31/01 and thereafter (iii) Minimum Tangible Net Worth Equal to or Greater than $2,500 K by quarter ended 10/31/01 and $5,000 K effective fye 4/30/02 and thereafter Page 5 of 11 IV. Additional Conditions Precedent Pursuant to Section 5.1 (J) of the Agreement: o Executed Blocked Account Amendment; o Executed Collateralized Guaranty of Datatec Systems, Inc.; o Executed Collateralized Guaranty of E-Deploy.com, Inc.; o Executed Corporate Guaranty of HH Communications, Inc.; o Fiscal year-end financial statements of Datatec Systems, Inc. as of end of Customer's prior fiscal year audited by an independent certified public accountant; o A Certificate of Location of Collateral whereby the Customer certifies where Customer presently keeps or sells inventory, equipment and other tangible Collateral; o A copy of an all-risk insurance certificate pursuant to Section 7.8 (B) of the Agreement; Page 6 of 11 IWCF ATTACHMENT B TO INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT") Customer: Datatec Industries, Inc. I. Liens: II. Locations of Offices, Records and Inventory: (A) Principal Place of Business and Chief Executive Office: (B) Locations of Assets, Inventory and Equipment (including warehouses): Location Leased (Y/N) -------- ------------ III. Fictitious Names: IV. Organization: (A) Subsidiaries: Name Jurisdiction Owner % Owned ---- ------------ ----- ------- (B) Affiliates: Name Capacity ---- -------- V. Judgments: VI. Environmental Matters: VII. Indebtedness: Page 7 of 11 IWCF ATTACHMENT C INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT") COMPLIANCE CERTIFICATE TO: IBM CREDIT CORPORATION ---------------------- ---------------------- The undersigned authorized officers of ____________________________ ("Customer"), hereby certify on behalf of the Customer, with respect to the Inventory and Working Capital Financing Agreement executed by and between ____________ and IBM Credit Corporation ("IBM Credit") on ______________, 20__, as amended from time to time (the "Agreement"), that (A) ___________ has been in compliance for the period from ______________, 20__ to _________ ____, 20__ with the financial covenants set forth in Attachment A to the Agreement, as demonstrated below, and (B) no Default has occurred and is continuing as of the date hereof, except, in either case, as set forth below. All capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Agreement. I. Financial Covenants: Covenant Covenant Requirement Covenant Actual -------- -------------------- --------------- (i) Annualized Revenue Greater than Zero and to Working Capital Equal to or Less than 25.0 :1.0 effective quarter ending 10/31/01 and thereafter (ii) Net Profit after Tax Equal to or Greater than 0.10 to Revenue percent effective quarter ending 10/31/01and thereafter (iii) MinimumTangible Net Equal to or Greater than Worth $2,500 K effective quarter ending 10/31/01 and equal to or greater than $5,000 K by fiscal year ending 4/30/02 Page 8 of 11 IWCF ATTACHMENT C INVENTORY AND WORKING CAPITAL FINANCING AGREEMENT ("IWCF AGREEMENT") (Continued) II. Calculation of Tangible Net Worth: Total Assets MINUS Total Liabilities LESS: goodwill organizational expenses prepaid expenses deferred charges, etc. leasehold expenses all other callable/redeemable preferred stock officer, employee, director, stockholder and affiliate receivables Total Tangible Net Worth Attached hereto are Financial Statements as of and for the end of the fiscal _____________ ended on the applicable date, as required by Section 7.1 of the Inventory and Working Capital Financing Agreement. Submitted by: ----------------------------------------- (Customer Name) By: ______________________________________ Print Name: _______________________________ Title: _____________________________________ Page 10 of 11

EXHIBIT 10(S) RECEIVABLES PURCHASE AGREEMENT Dated as of December 28, 2000 Among AIRBORNE CREDIT, INC. as the Seller and AIRBORNE EXPRESS, INC. as the Servicer and BLUE RIDGE ASSET FUNDING CORPORATION as the Purchaser and WACHOVIA BANK, N.A. as the Administrative Agent RECEIVABLES PURCHASE AGREEMENT THIS RECEIVABLES PURCHASE AGREEMENT, dated as of December 28, 2000 is entered into by and among: (a) Airborne Credit, Inc., a Virginia corporation ("Seller"), (b) Airborne Express, Inc., (the "Originator") a Delaware corporation, as initial Servicer ("Servicer", the Servicer together with Seller, the "Seller Parties" and each, a "Seller Party"), (c) Blue Ridge Asset Funding Corporation, a Delaware corporation ("Blue Ridge"), and (d) Wachovia Bank, N.A., as administrative agent for Blue Ridge and its assigns under the Transaction Documents and under the Liquidity Agreement (together with its successors and assigns in such capacity, the "Administrative Agent"). Unless defined elsewhere herein, capitalized terms used in this Agreement shall have the meanings assigned to such terms in Exhibit I. PRELIMINARY STATEMENTS Seller desires to transfer and assign Receivable Interests from time to time. Blue Ridge shall purchase Receivable Interests from Seller from time to time either by issuing its Commercial Paper or by availing itself of a Liquidity Funding to the extent available. Wachovia Bank, N.A. has been requested and is willing to act as Administrative Agent on behalf of Blue Ridge and its assigns in accordance with the terms hereof. ARTICLE I PURCHASE ARRANGEMENTS Section 1.1 Purchase Facility. (a) Upon the terms and subject to the conditions of this Agreement (including, without limitation, Article VI), from time to time prior to the Facility Termination Date, Seller may request that Blue Ridge purchase from Seller undivided ownership interests in the Receivables and the associated Related Security and Collections, and Blue Ridge shall make such Purchase; provided that no Purchase shall be made by Blue Ridge if, after giving effect thereto, either (i)the Aggregate Invested Amount would exceed the Purchase Limit, or (ii) the aggregate of the Receivable Interests would exceed 100%. It is the intent of Blue Ridge to fund the Purchases by the issuance of Commercial Paper. If for any reason Blue Ridge is unable, or determines that it is undesirable, to issue Commercial Paper to fund or maintain its investment in the Receivable Interests, or is unable for any reason to repay such Commercial Paper upon the maturity thereof, Blue Ridge will avail itself of a Liquidity Funding to the extent available. If Blue Ridge funds or refinances its investment in a Receivable Interest through one or more Liquidity Fundings, commencing on the date of such Liquidity Funding, in lieu of paying CP Costs on the Invested Amount pursuant to Article III hereof, Seller will pay Yield thereon at the Alternate Base Rate or the Eurodollar Rate (Reserve Adjusted), selected in accordance with Article IV hereof. Nothing herein shall be deemed to constitute a commitment of Blue Ridge to issue Commercial Paper. (b) Seller may, upon at least 30 Business Days' notice to the Administrative Agent, terminate in whole or reduce in part, the unused portion of the Purchase Limit; provided that each partial reduction of the Purchase Limit shall be in an amount equal to $10,000,000 (or a larger integral multiple of $1,000,000 if in excess thereof). Section 1.2 Incremental Purchases. Seller shall provide the Administrative Agent with at least two (2) Business Days' prior written notice in a form set forth as Exhibit II hereto of each Incremental Purchase (each, a "Purchase Notice"). Each Purchase Notice shall be subject to Section 6.2 hereof and, except as set forth below, shall be irrevocable (subject to the proviso below) and shall specify the requested Purchase Price (which shall not be less than $1,000,000 or a larger integral multiple of $100,000) and the Purchase Date (which, in the case of any Incremental Purchase after the initial Purchase hereunder, shall only be on a Settlement Date). Following receipt of a Purchase Notice, the Administrative Agent will determine whether Blue Ridge will fund the requested Incremental Purchase through the issuance of Commercial Paper or through a Liquidity Funding; provided, however that if the Administrative Agent shall determine that Blue Ridge will fund such Incremental Purchase through a Liquidity Funding, it shall notify the Seller of such determination and the Seller may cancel such Purchase Notice. On each Purchase Date, upon satisfaction of the applicable conditions precedent set forth in Article VI, unless otherwise instructed in the applicable Purchase Notice Blue Ridge shall deposit to the Facility Account an amount equal to the requested Purchase Price. Section 1.3 Decreases. Seller shall provide the Administrative Agent with prior written notice in conformity with the Required Notice Period (a "Reduction Notice") of any proposed reduction of Aggregate Invested Amount. Such Reduction Notice shall designate (a) the date (the "Proposed Reduction Date") upon which any such reduction of Aggregate Invested Amount shall occur (which date shall give effect to the applicable Required Notice Period), and (b) the amount of Aggregate Invested Amount to be reduced, which shall be applied to reduce the Invested Amount of Receivable Interests selected by the Administrative Agent (the "Aggregate Reduction"). Only one (1) Reduction Notice shall be outstanding at any time. Section 1.4 Deemed Collections; Purchase Limit. (a) If on any day: (i) the Outstanding Balance of any Receivable is reduced as a result of any defective, rejected or returned goods or services, any cash discount or any other adjustment by the Servicer, the Originator or any Affiliate thereof, or as a result of any tariff or other governmental or regulatory action, or (ii) the Outstanding Balance of any Receivable is reduced or canceled as a result of a setoff in respect of any claim by the Obligor thereof (whether such claim arises out of the same or a related or an unrelated transaction), or (iii) the Outstanding Balance of any Receivable is reduced on account of the obligation of the Seller, the Servicer, the Originator or any Affiliate thereof to pay to the related Obligor any rebate or refund, or (iv) the Outstanding Balance of any Receivable is less than the amount included in calculating the Net Pool Balance for purposes of any Monthly Report (for any reason other than receipt of Collections or such Receivable becoming a Defaulted Receivable), or (v) any of the representations or warranties of Seller set forth in Section 5.1(g), (i), (j), (r), (s), (t) or (u) were not true when made with respect to any Receivable, or (vi) any Receivable is repurchased by the Originator pursuant to the Receivables Sale Agreement, then, on such day, Seller shall (x) be deemed to have received a Collection of such Receivable (A) in the case of clauses (i)-(iv) above, in the amount of such reduction or cancellation or the difference between the actual Outstanding Balance and the amount included in calculating such Net Pool Balance, as applicable; and (B) in the case of clause (v) above, in the amount of the Outstanding Balance of such Receivable as of the date on which such representation or warranty was made and (y) pay to the Administrative Agent's Account the amount of any such Collection deemed to have been received on the date such Collection is so deemed to have been received. (b) Seller shall ensure that the Aggregate Invested Amount at no time exceeds the lesser of (i) the Net Pool Balance and (ii) the Purchase Limit. If at any time the Aggregate Invested Amount exceeds the Purchase Limit, Seller shall pay to the Administrative Agent not later than two (2) Business Days after the first day such excess exists an amount to be applied to reduce the Aggregate Invested Amount (as allocated by the Administrative Agent), such that after giving effect to such payment the Aggregate Invested Amount is less than or equal to the Purchase Limit. (c) Seller shall also ensure that the Receivable Interests shall at no time exceed in the aggregate 100%. If the aggregate of the Receivable Interests exceeds 100%, Seller shall pay to the Administrative Agent not later than two (2) Business Days after the first day such excess exists an amount to be applied to reduce the Aggregate Invested Amount (as allocated by the Administrative Agent), such that after giving effect to such payment the aggregate of the Receivable Interests equals or is less than 100%. Section 1.5 Payment Requirements and Computations. All amounts to be paid or deposited by any Seller Party pursuant to any provision of this Agreement shall be paid or deposited in accordance with the terms hereof no later than 2:00 p.m. (New York time)] on the day when due in immediately available funds, and if not received before 2:00 p.m. (New York time)] shall be deemed to be received on the next succeeding Business Day. If such amounts are payable to the Administrative Agent for the account of Blue Ridge, they shall be paid to the Administrative Agent's Account, for the account of Blue Ridge until otherwise notified by the Administrative Agent. Upon notice to Seller, the Administrative Agent may debit the Facility Account for all amounts due and payable hereunder. All computations of CP Costs, Yield, per annum fees calculated as part of any CP Costs, per annum fees hereunder and per annum fees under the Fee Letter shall be made on the basis of a year of 360 days for the actual number of days elapsed. If any amount hereunder shall be payable on a day which is not a Business Day, such amount shall be payable on the next succeeding Business Day. ARTICLE II PAYMENTS AND COLLECTIONS Section 2.1 Payments of Recourse Obligations. Seller hereby promises to pay the following (collectively, the "Recourse Obligations"): (a) all amounts due and owing under Section 1.3 or 1.4 on the dates specified therein; (b) the fees set forth in the Fee Letter on the dates specified therein; (c) all accrued and unpaid Yield on the Receivable Interests accruing Yield at the Alternate Base Rate or the Default Rate on each Settlement Date applicable thereto; (d) all accrued and unpaid Yield on the Receivable Interests accruing Yield at the Eurodollar Rate (Reserve Adjusted), on the last day of each Tranche Period applicable thereto; (e) all accrued and unpaid CP Costs on the Receivable Interests funded with Commercial Paper on each Settlement Date; and (f) all Broken Funding Costs and Indemnified Amounts upon demand. Section 2.2 Collections Prior to the Facility Termination Date. (a) Prior to the Facility Termination Date, any Deemed Collections received by the Servicer and Blue Ridge's Portion of any Collections received by the Servicer shall be set aside and held in trust by the Servicer for the payment of any accrued and unpaid Aggregate Unpaids or for a Reinvestment as provided in this Section 2.2. If at any time any Collections are received by the Servicer prior to the Facility Termination Date, Seller hereby requests and Blue Ridge hereby agrees to make subject to the terms and conditions set forth in the Agreement, simultaneously with such receipt, a reinvestment (each, a "Reinvestment") with Blue Ridge's Portion of the balance of each and every Collection received by the Servicer such that after giving effect to such Reinvestment, the Invested Amount of such Receivable Interest immediately after such receipt and corresponding Reinvestment shall be equal to the amount of Invested Amount immediately prior to such receipt. (b) On each Settlement Date prior to the Facility Termination Date, the Servicer shall remit to the Administrative Agent's Account the amounts set aside during the preceding Settlement Period that have not been subject to a Reinvestment and apply such amounts (if not previously paid in accordance with Section 2.1) to the Aggregate Unpaids in the order specified: first, ratably to the payment of all accrued and unpaid CP Costs, Yield and Broken Funding Costs (if any) that are then due and owing, second, to the accrued and unpaid Servicing Fee (so long as Servicer is not the Originator or an Affiliate of the Originator) third, ratably to the payment of all accrued and unpaid fees under the Fee Letter (if any) that are then due and owing, fourth, if required under Section 1.3 or 1.4, to the ratable reduction of Aggregate Invested Amount, fifth, for the ratable payment of all other unpaid Recourse Obligations, if any, that are then due and owing, sixth, to the accrued and unpaid Servicing Fee (so long as Servicer is the Originator or an Affiliate of the Originator) seventh, the balance, if any, to Seller or otherwise in accordance with Seller's instructions. Section 2.3 Application of Collections. On the Facility Termination Date and on each day thereafter, the Servicer shall set aside and hold in trust, for the Secured Parties, all Collections received on each such day. On and after the Facility Termination Date, the Servicer shall, on each Settlement Date and on each other Business Day specified by the Administrative Agent (a) remit to the Administrative Agent's Account the amounts set aside pursuant to the immediately preceding sentence, and (b) apply such amounts to reduce the Aggregate Unpaids as follows: first, to the reimbursement of the Administrative Agent's costs of collection and enforcement of this Agreement, second, ratably to the payment of all accrued and unpaid CP Costs, Yield and Broken Funding Costs, third, to the accrued and unpaid Servicing Fee (so long as the Servicer is not the Originator or an Affiliate of the Originator); fourth, ratably to the payment of all accrued and unpaid fees under the Fee Letter, fifth, to the ratable reduction of Aggregate Invested Amount, sixth, for the ratable payment of all other Aggregate Unpaids, seventh, to the accrued and unpaid Servicing Fee (so long as the Servicer is the Originator or an Affiliate of the Originator); and eighth, after the Final Payout Date, to Seller. Section 2.4 Payment Recission. No payment of any of the Aggregate Unpaids shall be considered paid or applied hereunder to the extent that, at any time, all or any portion of such payment or application is rescinded by application of law or judicial authority, or must otherwise be returned or refunded for any reason. Seller shall remain obligated for the amount of any payment or application so rescinded, returned or refunded, and shall promptly pay to the Administrative Agent (for application to the Person or Persons who suffered such recission, return or refund) the full amount thereof, plus interest thereon at the Default Rate from the date of any such recission, return or refunding. Section 2.5 Clean Up Call. In addition to Seller's rights pursuant to Section 1.3, Seller shall have the right (after providing written notice to the Administrative Agent in accordance with the Required Notice Period), at any time following the reduction of the Aggregate Invested Amount to a level that is less than 10.0% of the original Purchase Limit, to repurchase all, but not less than all, of the then outstanding Receivable Interests. The purchase price in respect thereof shall be an amount equal to the Aggregate Unpaids through the date of such repurchase, payable in immediately available funds to the Administrative Agent's Account. Such repurchase shall be without representation, warranty or recourse of any kind by, on the part of, or against Blue Ridge or the Administrative Agent. ARTICLE III COMMERCIAL PAPER FUNDING Section 3.1 CP Costs. Seller shall pay CP Costs with respect to the Invested Amount of all Receivable Interests funded through the issuance of Commercial Paper. Each Receivable Interest that is funded with Pooled Commercial Paper will accrue CP Costs each day on a pro rata basis, based upon the percentage share that the Invested Amount in respect of such Receivable Interest represents in relation to all assets held by Blue Ridge and funded substantially with related Pooled Commercial Paper. Section 3.2 Calculation of CP Costs. Not later than the 3rd Business Day immediately preceding each Monthly Reporting Date, Blue Ridge shall calculate the aggregate amount of CP Costs applicable to its Receivable Interests for the Calculation Period then most recently ended and shall notify Seller of such aggregate amount. Section 3.3 CP Costs Payments. On each Settlement Date, Seller shall pay to the Administrative Agent (for the benefit of Blue Ridge) an aggregate amount equal to all accrued and unpaid CP Costs in respect of the Invested Amount of all Receivable Interests funded with Commercial Paper for the Calculation Period then most recently ended in accordance with Article II. Section 3.4 Default Rate. From and after the occurrence of an Amortization Event, all Receivable Interests shall accrue Yield at the Default Rate. ARTICLE IV LIQUIDITY FUNDINGS Section 4.1 Liquidity Fundings. Prior to the occurrence of an Amortization Event, the outstanding Invested Amount of each Receivable Interest funded with a Liquidity Funding shall accrue Yield for each day during its Tranche Period at either the Eurodollar Rate (Reserve Adjusted) or the Alternate Base Rate in accordance with the terms and conditions hereof. Until Seller gives the required notice to the Administrative Agent of another Yield Rate in accordance with Section 4.4, the initial Yield Rate for any Receivable Interest funded with a Liquidity Funding shall be the Alternate Base Rate (unless the Default Rate is then applicable). If any undivided interest in a Receivable Interest initially funded with Commercial Paper is sold to the Liquidity Banks pursuant to the Liquidity Agreement, such undivided interest in such Receivable Interest shall be deemed to have a Tranche Period commencing on the date of such sale. Section 4.2 Yield Payments. On the Settlement Date for each Receivable Interest that is funded with a Liquidity Funding, Seller shall pay to the Administrative Agent (for the benefit of the Liquidity Banks) an aggregate amount equal to the accrued and unpaid Yield thereon for the entire Tranche Period of each such Liquidity Funding in accordance with Article II. Section 4.3 Selection and Continuation of Tranche Periods. (a) Tranche Periods for the Receivable Interests funded with Liquidity Fundings shall be selected from time to time (i) prior to the occurrence of an Amortization Event, by Seller with consultation from (and approval by) the Administrative Agent provided that if at any time any Liquidity Funding is outstanding, Seller shall always request Tranche Periods such that at least one Tranche Period shall end on the date specified in clause (A) of the definition of Settlement Date and (ii) from and after the occurrence of an Amortization Event, by the Administrative Agent; (b) The Administrative Agent or, prior to the occurrence of an Amortization Event, Seller (with the consent of the Administrative Agent), upon notice to the other received at least three (3) Business Days prior to the end of a Tranche Period (the "Terminating Tranche") for any Liquidity Funding, may, effective on the last day of the Terminating Tranche: (i) divide any such Liquidity Funding into multiple Liquidity Fundings, (ii) combine any such Liquidity Funding with one or more other Liquidity Fundings that have a Terminating Tranche ending on the same day as such Terminating Tranche or (iii) combine any such Liquidity Funding with a new Liquidity Funding to be made by the Liquidity Banks on the day such Terminating Tranche ends. Section 4.4 Liquidity Funding Yield Rates. Subject to Sections 4.5 and 4.6, Seller may select the Eurodollar Rate (Reserve Adjusted) or the Alternate Base Rate for each Liquidity Funding. Seller shall by 12:00 noon (New York time): (a) at least three (3) Business Days prior to the expiration of any Terminating Tranche with respect to which the Eurodollar Rate (Reserve Adjusted) is being requested as a new Yield Rate and (b) at least one (1) Business Day prior to the expiration of any Terminating Tranche with respect to which the Alternate Base Rate is being requested as a new Yield Rate, give the Administrative Agent irrevocable notice of the new Yield Rate for the Liquidity Funding associated with such Terminating Tranche. Until Seller gives notice to the Administrative Agent of another Yield Rate, the initial Yield Rate for any Receivable Interest assigned or participated to the Liquidity Banks pursuant to the Liquidity Agreement shall be the Alternate Base Rate (unless the Default Rate is then applicable). Section 4.5 Suspension of the Eurodollar Rate (Reserve Adjusted). (a) If any Liquidity Bank notifies the Administrative Agent that it has determined that funding its ratable share of the Liquidity Fundings at a Eurodollar Rate (Reserve Adjusted) would violate any applicable law, rule, regulation, or directive of any governmental or regulatory authority, whether or not having the force of law, or that (i) deposits of a type and maturity appropriate to match fund its Liquidity Funding at such Eurodollar Rate (Reserve Adjusted) are not available or (ii) such Eurodollar Rate (Reserve Adjusted) does not accurately reflect the cost of acquiring or maintaining a Liquidity Funding at such Eurodollar Rate (Reserve Adjusted), then the Eurodollar Rate (Reserve Adjusted) shall be suspended and the Alternate Base Rate shall apply to any Liquidity Funding accruing Yield at such Eurodollar Rate (Reserve Adjusted). (b) If less than all of the Liquidity Banks give a notice to the Administrative Agent pursuant to Section 4.5(a), each Liquidity Bank which gave such a notice shall be obliged, at the request of Seller, Blue Ridge or the Administrative Agent, to assign all of its rights and obligations hereunder to (i) another Liquidity Bank or (ii) another funding entity nominated by Seller or the Administrative Agent that is an Eligible Assignee willing to participate in the Liquidity Agreement through the Liquidity Termination Date in the place of such notifying Liquidity Bank; provided that (i) the notifying Liquidity Bank receives payment in full of all Aggregate Unpaids owing to it (whether due or accrued), and (ii) the replacement Liquidity Bank otherwise satisfies the requirements of the Liquidity Agreement. Section 4.6 Default Rate. From and after the occurrence of an Amortization Event, all Liquidity Fundings shall accrue Yield at the Default Rate. ARTICLE V REPRESENTATIONS AND WARRANTIES Section 5.1 Representations and Warranties of the Seller Parties. Each Seller Party hereby represents and warrants to the Administrative Agent and Blue Ridge, as to itself, as of the date hereof and as of the date of each Incremental Purchase and the date of each Reinvestment that: (a) Existence and Power. Such Seller Party's jurisdiction of organization is correctly set forth in the preamble to this Agreement. Such Seller Party is duly organized under the laws of that jurisdiction and no other state or jurisdiction, and such jurisdiction must maintain a public record showing the organization to have been organized. Such Seller Party is validly existing and in good standing under the laws of its state of organization. Such Seller Party is duly qualified to do business and is in good standing as a foreign entity, and has and holds all organizational power and all governmental licenses, authorizations, consents and approvals required to carry on its business in each jurisdiction in which its business is conducted except where the failure to so qualify or so hold could not reasonably be expected to have a Material Adverse Effect. (b) Power and Authority; Due Authorization, Execution and Delivery. The execution and delivery by such Seller Party of this Agreement and each other Transaction Document to which it is a party, and the performance of its obligations hereunder and thereunder and, in the case of Seller, Seller's use of the proceeds of Purchases made hereunder, are within its corporate powers and authority and have been duly authorized by all necessary corporate action on its part. This Agreement and each other Transaction Document to which such Seller Party is a party has been duly executed and delivered by such Seller Party. (c) No Conflict. The execution and delivery by such Seller Party of this Agreement and each other Transaction Document to which it is a party, and the performance of its obligations hereunder and thereunder do not contravene or violate (i) its certificate or articles of incorporation or by-laws, (ii) any law, rule or regulation applicable to it, (iii) any restrictions under any agreement, contract or instrument to which it is a party or by which it or any of its property is bound, or (iv) any order, writ, judgment, award, injunction or decree binding on or affecting it or its property, and do not result in the creation or imposition of any Adverse Claim on assets of such Seller Party or its Subsidiaries (except as created hereunder) except, in any case, where such contravention or violation could not reasonably be expected to have a Material Adverse Effect; and no transaction contemplated hereby requires compliance with any bulk sales act or similar law. (d) Governmental Authorization. Other than the filing of the financing statements required hereunder, no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution and delivery by such Seller Party of this Agreement and each other Transaction Document to which it is a party and the performance of its obligations hereunder and thereunder. (e) Actions, Suits. There are no actions, suits or proceedings pending, or to the best of such Seller Party's knowledge, threatened, against or affecting such Seller Party, or any of its properties, in or before any court, arbitrator or other body, that could reasonably be expected to have a Material Adverse Effect. Such Seller Party is not in default with respect to any order of any court, arbitrator or governmental body. (f) Binding Effect. This Agreement and each other Transaction Document to which such Seller Party is a party constitute the legal, valid and binding obligations of such Seller Party enforceable against such Seller Party in accordance with their respective terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). (g) Accuracy of Information. All information heretofore furnished by such Seller Party or any of its Affiliates to the Administrative Agent or Blue Ridge for purposes of or in connection with this Agreement, any of the other Transaction Documents or any transaction contemplated hereby or thereby is, and all such information hereafter furnished by such Seller Party or any of its Affiliates to the Administrative Agent or Blue Ridge will be, true and accurate in every material respect on the date such information is stated or certified and does not and will not contain any material misstatement of fact or omit to state a material fact or any fact necessary to make the statements contained therein not misleading. (h) Use of Proceeds. No proceeds of any Purchase hereunder will be used (i) for a purpose that violates, or would be inconsistent with, (A) Section 7.2(e) of this Agreement or (B) Regulation T, U or X promulgated by the Board of Governors of the Federal Reserve System from time to time or (ii) to acquire any security in any transaction which is subject to Section 12, 13 or 14 of the Securities Exchange Act of 1934, as amended. (i) Good Title. Seller is the legal and beneficial owner of the Receivables and Related Security with respect thereto, free and clear of any Adverse Claim, except as created by the Transaction Documents. There have been duly filed all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect Seller's ownership interest in each Receivable, its Collections and the Related Security. (j) Perfection. This Agreement is effective to create a valid security interest in favor of the Administrative Agent for the benefit of the Secured Parties in the Purchased Assets to secure payment of the Aggregate Unpaids, free and clear of any Adverse Claim except as created by the Transactions Documents. There have been duly filed all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect the Administrative Agent's, for the benefit of the Secured Parties, security interest in the Purchased Assets. Such Seller Party's jurisdiction of organization is a jurisdiction whose law generally requires information concerning the existence of a nonpossessory security interest to be made generally available in a filing, record or registration system as a condition or result of such a security interest's obtaining priority over the rights of a lien creditor which respect to collateral. (k) Places of Business and Locations of Records. The principal places of business and chief executive office of such Seller Party and the offices where it keeps all of its Records are located at the address(es) listed on Exhibit III or such other locations of which the Administrative Agent has been notified in accordance with Section 7.2(a) in jurisdictions where all action required by Section 13.3(a) has been taken and completed. Seller's Federal Employer Identification Number is correctly set forth on Exhibit III. (l) Collections. The conditions and requirements set forth in Section 7.1(j) and Section 8.2 have at all times been satisfied and duly performed. The names, addresses and jurisdictions of organization of all Collection Banks, together with the account numbers of the Blocked Accounts of Seller at each Collection Bank and the post office box number of each Lock- Box, are listed on Exhibit IV. Seller has not granted any Person, other than the Administrative Agent as contemplated by this Agreement, dominion and control of any Lock-Box or Blocked Account, or the right to take dominion and control of any such Lock-Box or Blocked Account at a future time or upon the occurrence of a future event. (m) Material Adverse Effect. (i) The initial Servicer represents and warrants that since September 30, 2000, no event has occurred that would have a material adverse effect on the financial condition or operations of the initial Servicer and its Subsidiaries or the ability of the initial Servicer to perform its obligations under this Agreement, and (ii) Seller represents and warrants that since the date of this Agreement, no event has occurred that would have a material adverse effect on (A) the financial condition or operations of Seller, (B) the ability of Seller to perform its obligations under the Transaction Documents, or (C) the collectibility of the Receivables generally or any material portion of the Receivables. (n) Names. The name in which Seller has executed this Agreement is identical to the name of Seller as indicated on the public record of its state of organization which shows Seller to have been organized. In the past five (5) years, Seller has not used any corporate names, trade names or assumed names other than the name in which it has executed this Agreement. (o) Ownership of Seller. The Performance Guarantor owns, directly or indirectly, 100% of the issued and outstanding capital stock of Seller, free and clear of any Adverse Claim. Such capital stock is validly issued, fully paid and nonassessable, and there are no options, warrants or other rights to acquire securities of Seller. (p) Not a Holding Company or an Investment Company. Such Seller Party is not a "holding company" or a "subsidiary holding company" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended, or any successor statute. Such Seller Party is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or any successor statute. (q) Compliance with Law. Such Seller Party has complied in all respects with all applicable laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject, except where the failure to so comply could not reasonably be expected to have a Material Adverse Effect. Each Receivable, together with the Contract related thereto, does not contravene any laws, rules or regulations applicable thereto (including, without limitation, laws, rules and regulations relating to truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy), and no part of such Contract is in violation of any such law, rule or regulation, except where such contravention or violation could not reasonably be expected to have a Material Adverse Effect. (r) Compliance with Credit and Collection Policy. Such Seller Party has complied in all material respects with the Credit and Collection Policy with regard to each Receivable and the related Contract, and has not made any change to such Credit and Collection Policy, except for such changes made in accordance with Section 7.1(a)(vii). (s) Payments to Originator. With respect to each Receivable transferred to Seller under the Receivables Sale Agreement, Seller has given reasonably equivalent value to the Originator in consideration therefor and such transfer was not made for or on account of an antecedent debt. No transfer by the Originator of any Receivable under the Receivables Sale Agreement is or may be voidable under any section of the Bankruptcy Reform Act of 1978 (11 U.S.C. 101 et seq.), as amended. (t) Enforceability of Contracts. Each Contract with respect to each Receivable is effective to create, and has created, a legal, valid and binding obligation of the related Obligor to pay the Outstanding Balance of the Receivable created thereunder and any accrued interest thereon, enforceable against the Obligor in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). (u) Eligible Receivables. Each Receivable included in the Net Pool Balance as an Eligible Receivable on the date of any Monthly Report was an Eligible Receivable on such date. (v) Purchase Limit and Maximum Receivable Interests. Immediately after giving effect to each Incremental Purchase hereunder, the Aggregate Invested Amount is less than or equal to the Purchase Limit and the aggregate of the Receivable Interests does not exceed 100%. (w) Accounting. The manner in which such Seller Party accounts for the transactions contemplated by this Agreement and the Receivables Sale Agreement does not jeopardize the true sale analysis. (x) Taxes. Such Seller Party has filed all tax returns and reports required by law to be filed by it and has paid all taxes and governmental charges due and owing, except any such taxes which are not yet owing or are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP have been set aside on its books. ARTICLE VI CONDITIONS OF PURCHASES Section 6.1 Conditions Precedent to Initial Incremental Purchase. The initial Incremental Purchase of a Receivable Interest under this Agreement is subject to the conditions precedent that (a) the Administrative Agent shall have received on or before the date of such Purchase those documents listed on Schedule A and (b) the Administrative Agent shall have received all fees and expenses required to be paid on such date pursuant to the terms of this Agreement and the Fee Letter. Section 6.2 Conditions Precedent to All Purchases and Reinvestments. Each Incremental Purchase and each Reinvestment shall be subject to the further conditions precedent that (a) in the case of each such Purchase: (i) the Servicer shall have delivered to the Administrative Agent on or prior to the date of such Purchase, in form and substance satisfactory to the Administrative Agent, all Monthly Reports as and when due under Section 8.5 and (ii) upon the Administrative Agent's request, the Servicer shall have delivered to the Administrative Agent at least three (3) days prior to such Purchase an interim Monthly Report showing the amount of Eligible Receivables; (b) the Administrative Agent shall have received no later than 30 days after the date hereof executed Blocked Account Agreements with each Blocked Account Bank and such other approvals, opinions or documents as it may reasonably request and (c) on each Purchase Date, the following statements shall be true (and acceptance of the proceeds of such Incremental Purchase or Reinvestment shall be deemed a representation and warranty by Seller that such statements are then true): (i) the representations and warranties set forth in Section 5.1 are true and correct on and as of the date of such Incremental Purchase or Reinvestment as though made on and as of such Purchase Date; (ii) no event has occurred and is continuing, or would result from such Incremental Purchase or Reinvestment, that will constitute an Amortization Event, and no event has occurred and is continuing, or would result from such Incremental Purchase or Reinvestment, that would constitute an Unmatured Amortization Event; and (iii) the Aggregate Invested Amount does not exceed the Purchase Limit and the aggregate Receivable Interests do not exceed 100%. It is expressly understood that each Reinvestment shall, unless otherwise directed by the Administrative Agent or Blue Ridge, occur automatically on each day that the Servicer shall receive any Collections without the requirement that any further action be taken on the part of any Person and notwithstanding the failure of Seller to satisfy any of the foregoing conditions precedent in respect of such Reinvestment. The failure of Seller to satisfy any of the foregoing conditions precedent in respect of any Reinvestment shall give rise to a right of the Administrative Agent, which right may be exercised at any time on demand of the Administrative Agent, to rescind the related purchase and direct Seller to pay to the Administrative Agent's Account, for the benefit of Blue Ridge, an amount equal to the Collections prior to the Facility Termination Date that shall have been applied to the affected Reinvestment. ARTICLE VII COVENANTS Section 7.1 Affirmative Covenants of the Seller Parties. Until the date on which the Aggregate Unpaids have been indefeasibly paid in full and this Agreement terminates in accordance with its terms, each Seller Party hereby covenants, as to itself, as set forth below: (a) Financial Reporting. The Performance Guarantor will maintain, for itself and each of its Subsidiaries, a system of accounting established and administered in accordance with GAAP, and furnish or cause to be furnished to the Administrative Agent: (i) Annual Reporting. Within 90 days after the close of its fiscal year, audited, financial statements (which shall include balance sheets, statements of income and retained earnings and statements of cash flows) for the Performance Guarantor and its Subsidiaries for such fiscal year certified by Deloitte & Touche LLP or by any other nationally recognized independent public accountants, which certifications shall be free of exceptions and qualifications not acceptable to the Administrative Agent. (ii) Quarterly Reporting. Within 45 days after the close of the first three (3) quarterly periods of its fiscal year, balance sheets of the Performance Guarantor and its Subsidiaries as at the close of each such period and statements of income and retained earnings and a statement of cash flows for each such Person for the period from the beginning of such fiscal year to the end of such quarter, all certified by its chief financial officer. (iii) Compliance Certificate. Together with the financial statements required hereunder, a compliance certificate in substantially the form of Exhibit V signed by the Performance Guarantor's Authorized Officer and dated the date of such annual financial statement or such quarterly financial statement, as the case may be. (iv) Shareholders Statements and Reports. Promptly upon the furnishing thereof to the shareholders of the Performance Guarantor or its Subsidiaries copies of all financial statements, reports and proxy statements so furnished. (v) S.E.C. Filings. Promptly upon the filing thereof, copies of all registration statements and annual, quarterly, monthly or other regular reports which the Performance Guarantor or its Subsidiaries or any of its Affiliates files with the Securities and Exchange Commission. (vi) Copies of Notices. Promptly upon its receipt of any notice, request for consent, financial statements, certification, report or other communication under or in connection with any Transaction Document from any Person other than the Administrative Agent or Blue Ridge, copies of the same. (vii) Change in Credit and Collection Policy. At least thirty (30) days prior to the effectiveness of any material change in the Credit and Collection Policy, a notice (A) indicating such change and (B) if such proposed change would be reasonably likely to adversely affect the collectibility of the Receivables or decrease the credit quality of any newly created Receivables, requesting the Administrative Agent's consent thereto. (viii) Other Information. Promptly, from time to time, such other information, documents, records or reports relating to the Receivables or the condition or operations, financial or otherwise, of such Seller Party as the Administrative Agent may from time to time reasonably request in order to protect the interests of the Administrative Agent, for the benefit of Blue Ridge, under or as contemplated by this Agreement. (b) Notices. Such Seller Party will notify the Administrative Agent in writing of any of the following promptly upon learning of the occurrence thereof, describing the same and, if applicable, the steps being taken with respect thereto: (i) Amortization Events or Unmatured Amortization Events. The occurrence of each Amortization Event and each Unmatured Amortization Event, by a statement of an Authorized Officer of such Seller Party. (ii) Judgments and Proceedings. (A) (1) The entry of any judgment or decree against the Performance Guarantor, the Servicer or any of their respective Subsidiaries if the aggregate amount of all judgments and decrees then outstanding against the Performance Guarantor, the Servicer and their respective Subsidiaries exceeds $10,000,000 after deducting (I) the amount with respect to which the Performance Guarantor, the Servicer or any such Subsidiary, as the case may be, is insured and with respect to which the insurer has assumed responsibility in writing, and (II) the amount for which the Performance Guarantor, the Servicer or any such Subsidiary is otherwise indemnified if the terms of such indemnification are satisfactory to the Administrative Agent, and (2) the institution of any litigation, arbitration proceeding or governmental proceeding against the Performance Guarantor or the Servicer which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect; and (B) the entry of any judgment or decree or the institution of any litigation, arbitration proceeding or governmental proceeding against Seller. (iii) Material Adverse Effect. The occurrence of any event or condition that has had, or could reasonably be expected to have, a Material Adverse Effect. (iv) Termination Date. The occurrence of the "Termination Date" under and as defined in the Receivables Sale Agreement. (v) Defaults Under Other Agreements. The occurrence of a default or an event of default under any other material financing arrangement pursuant to which such Seller Party is a debtor or an obligor. (vi) Notices under Receivables Sale Agreement. Copies of all notices delivered under the Receivables Sale Agreement. (vii) Downgrade of Performance Guarantor or Originator. Any downgrade in the rating of any Indebtedness of the Performance Guarantor or Originator by S&P or Moody's, setting forth the Indebtedness affected and the nature of such change. (c) Compliance with Laws and Preservation of Corporate Existence. Such Seller Party will comply in all respects with all applicable laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject, except where the failure to so comply could not reasonably be expected to have a Material Adverse Effect. Such Seller Party will preserve and maintain its corporate existence, rights, franchises and privileges in the jurisdiction of its incorporation, and qualify and remain qualified in good standing as a foreign corporation in each jurisdiction where its business is conducted, except where the failure to so preserve and maintain or qualify or remain qualified could not reasonably be expected to have a Material Adverse Effect. (d) Audits. Such Seller Party will furnish to the Administrative Agent from time to time such information with respect to it and the Receivables as the Administrative Agent may reasonably request. Such Seller Party will, from time to time during regular business hours as requested by the Administrative Agent upon reasonable notice and at the sole cost of such Seller Party, permit the Administrative Agent, or its agents or representatives (and shall cause the Originator to permit the Administrative Agent or its agents or representatives): (i) to examine and make copies of and abstracts from all Records in the possession or under the control of such Person relating to the Purchased Assets, including, without limitation, the related Contracts, and (ii) to visit the offices and properties of such Person for the purpose of examining such materials described in clause (i) above, and to discuss matters relating to such Person's financial condition or the Purchased Assets or any Person's performance under any of the Transaction Documents or any Person's performance under the Contracts and, in each case, with any of the officers or employees of Seller or the Servicer having knowledge of such matters (each of the foregoing examinations and visits, a "Review"); provided, however, that, so long as no Amortization Event has occurred and is continuing, (A) the Seller Parties shall only be responsible for the costs and expenses of one (1) Review in any one calendar year, and (B) the Administrative Agent will not request more than two (2) Reviews in any one calendar year. (e) Keeping and Marking of Records and Books. (i) The Servicer will (and will cause the Originator to) maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Receivables in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records and other information reasonably necessary or advisable for the collection of all Receivables (including, without limitation, records adequate to permit the immediate identification of each new Receivable and all Collections of and adjustments to each existing Receivable). The Servicer will (and will cause the Originator to) give the Administrative Agent notice of any material change in the administrative and operating procedures referred to in the previous sentence. (ii) Such Seller Party will (and will cause the Originator to): (A) on or prior to the date hereof, mark its master data processing records and other books and records relating to the Receivables with a legend, acceptable to the Administrative Agent, describing the Administrative Agent's security interest, for the benefit of the Secured Parties, in the Purchased Assets and (B) upon the request of the Administrative Agent following the occurrence of an Amortization Event: (x) mark each Contract with a legend describing the Administrative Agent's security interest and (y) deliver to the Administrative Agent all Contracts (including, without limitation, all multiple originals of any such Contract constituting an instrument, a certificated security or chattel paper) relating to the Receivables. (f) Compliance with Contracts and Credit and Collection Policy. Such Seller Party will (and will cause the Originator to) timely and fully (i) perform and comply with all provisions, covenants and other promises required to be observed by it under the Contracts related to the Receivables, and (ii) comply in all respects with the Credit and Collection Policy in regard to each Receivable and the related Contract. (g) Performance and Enforcement of Receivables Sale Agreement. Seller will, and will require the Originator to, perform each of their respective obligations and undertakings under and pursuant to the Receivables Sale Agreement, will purchase Receivables thereunder in strict compliance with the terms thereof and will vigorously enforce the rights and remedies accorded to Seller under the Receivables Sale Agreement. Seller will take all actions to perfect and enforce its rights and interests (and the rights and interests of the Administrative Agent, as Seller's assignee) under the Receivables Sale Agreement as the Administrative Agent may from time to time reasonably request, including, without limitation, making claims to which it may be entitled under any indemnity, reimbursement or similar provision contained in the Receivables Sale Agreement. (h) Ownership. Seller will (or will cause the Originator to) take all necessary action to (i) vest legal and equitable title to the Purchased Assets purchased under the Receivables Sale Agreement irrevocably in Seller, free and clear of any Adverse Claims (other than Adverse Claims in favor of the Administrative Agent, for the benefit of the Secured Parties) including, without limitation, the filing of all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect Seller's interest in such Purchased Assets and such other action to perfect, protect or more fully evidence the interest of Seller therein as the Administrative Agent may reasonably request), and (ii) establish and maintain, in favor of the Administrative Agent, for the benefit of the Secured Parties, a valid and perfected first priority security interest in all Purchased Assets, free and clear of any Adverse Claims, including, without limitation, the filing of all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect the Administrative Agent's (for the benefit of the Secured Parties) security interest in the Purchased Assets and such other action to perfect, protect or more fully evidence the interest of the Administrative Agent for the benefit of the Secured Parties as the Administrative Agent may reasonably request. (i) Reliance. Seller acknowledges that the Administrative Agent and Blue Ridge are entering into the transactions contemplated by this Agreement in reliance upon Seller's identity as a legal entity that is separate from the Originator. Therefore, from and after the date of execution and delivery of this Agreement, Seller shall take all reasonable steps, including, without limitation, all steps that the Administrative Agent or Blue Ridge may from time to time reasonably request, to maintain Seller's identity as a separate legal entity and to make it manifest to third parties that Seller is an entity with assets and liabilities distinct from those of the Originator and any Affiliates thereof (other than Seller) and not just a division of the Originator or any such Affiliate. Without limiting the generality of the foregoing and in addition to the other covenants set forth herein, Seller will: (i) conduct its own business in its own name and require that all full-time employees of Seller, if any, identify themselves as such and not as employees of the Originator (including, without limitation, by means of providing appropriate employees with business or identification cards identifying such employees as Seller's employees); (ii) compensate all employees, consultants and agents directly, from Seller's own funds, for services provided to Seller by such employees, consultants and agents and, to the extent any employee, consultant or agent of Seller is also an employee, consultant or agent of the Originator or any Affiliate thereof, allocate the compensation of such employee, consultant or agent between Seller and the Originator or such Affiliate, as applicable, on a basis that reflects the services rendered to Seller and the Originator or such Affiliate, as applicable; (iii) clearly identify its offices (by signage or otherwise) as its offices and, if such office is located in the offices of the Originator, Seller shall lease such office at a fair market rent; (iv) have a separate telephone number, which will be answered only in its name and separate stationery and checks, if it uses any, in its own name; (v) conduct all transactions with the Originator and the Servicer (including, without limitation, any delegation of its obligations hereunder as Servicer) strictly on an arm's-length basis, allocate all overhead expenses (including, without limitation, telephone and other utility charges) for items shared between Seller and the Originator on the basis of actual use to the extent practicable and, to the extent such allocation is not practicable, on a basis reasonably related to actual use; (vi) at all times have a Board of Directors consisting of three members, at least one member of which is an Independent Director; (vii) observe all corporate formalities as a distinct entity, and ensure that all corporate actions relating to (A) the selection, maintenance or replacement of the Independent Director, (B) the dissolution or liquidation of Seller or (C) the initiation of, participation in, acquiescence in or consent to any bankruptcy, insolvency, reorganization or similar proceeding involving Seller, are duly authorized by unanimous vote of its Board of Directors (including the Independent Director); (viii) maintain Seller's books and records separate from those of the Originator and any Affiliate thereof and otherwise readily identifiable as its own assets rather than assets of the Originator or any Affiliate thereof; (ix) prepare its financial statements separately from those of the Originator and insure that any consolidated financial statements of the Originator or any Affiliate thereof that include Seller and that are filed with the Securities and Exchange Commission or any other governmental agency have notes clearly stating that Seller is a separate corporate entity and that its assets will be available first and foremost to satisfy the claims of the creditors of Seller; (x) except as herein specifically otherwise provided, maintain the funds or other assets of Seller separate from, and not commingled with, those of the Originator or any Affiliate thereof and only maintain bank accounts or other depository accounts to which Seller alone is the account party, into which Seller and Servicer, for the account of Seller, make deposits and from which Seller alone (or the Administrative Agent hereunder) has the power to make withdrawals; (xi) pay all of Seller's operating expenses from Seller's own assets (except for certain payments by the Originator or other Persons pursuant to allocation arrangements that comply with the requirements of this Section 7.1(i)); (xii) operate its business and activities such that: it does not engage in any business or activity of any kind, or enter into any transaction or indenture, mortgage, instrument, agreement, contract, lease or other undertaking, other than the transactions contemplated and authorized by this Agreement and the Receivables Sale Agreement; and does not create, incur, guarantee, assume or suffer to exist any indebtedness or other liabilities, whether direct or contingent, other than (1) as a result of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, (2) the incurrence of obligations under this Agreement, (3) the incurrence of obligations, as expressly contemplated in the Receivables Sale Agreement, to make payment to the Originator thereunder for the purchase of Receivables from the Originator under the Receivables Sale Agreement, and (4) the incurrence of operating expenses in the ordinary course of business of the type otherwise contemplated by this Agreement; (xiii) maintain its corporate charter in conformity with this Agreement, such that it does not amend, restate, supplement or otherwise modify its Certificate of Incorporation or By-Laws in any respect that would impair its ability to comply with the terms or provisions of any of the Transaction Documents, including, without limitation, Section 7.1(i) of this Agreement; (xiv) maintain the effectiveness of, and continue to perform under the Receivables Sale Agreement and the Performance Undertaking, such that it does not amend, restate, supplement, cancel, terminate or otherwise modify the Receivables Sale Agreement or the Performance Undertaking, or give any consent, waiver, directive or approval thereunder or waive any default, action, omission or breach under the Receivables Sale Agreement or the Performance Undertaking or otherwise grant any indulgence thereunder, without (in each case) the prior written consent of the Administrative Agent; (xv) maintain its corporate separateness such that it does not merge or consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions, and except as otherwise contemplated herein) all or substantially all of its assets (whether now owned or hereafter acquired) to, or acquire all or substantially all of the assets of, any Person, nor at any time create, have, acquire, maintain or hold any interest in any Subsidiary. (xvi) maintain at all times the Required Capital Amount (as defined in the Receivables Sale Agreement) and refrain from making any dividend, distribution, redemption of capital stock or payment of any subordinated indebtedness which would cause the Required Capital Amount to cease to be so maintained; and (xvii) take such other actions as are necessary on its part to ensure that the facts and assumptions set forth in the opinion issued by Riddell Williams P.S. counsel for Seller, in connection with the closing or initial Purchase under this Agreement and relating to substantive consolidation issues, and in the certificates accompanying such opinion, remain true and correct in all material respects at all times. (j) Collections. Such Seller Party will cause (i) all Collections to be sent to a Blocked Account or a Lock-Box and cause all such Collections to be deposited in one of the Blocked Accounts, (ii) from no later than 30 days after the date hereof, each Blocked Account shall be subject at all times to a Blocked Account Agreement that is in full force and effect, and (iii) a Delivery Order to be executed and delivered with respect to each Lock-Box. In the event any payments relating to the Purchased Assets are remitted directly to Seller or any Affiliate of Seller, Seller will deposit (or will cause all such payments to be deposited) directly to a Blocked Account within two (2) Business Days following receipt thereof, and, at all times prior to such remittance, Seller will itself hold or, if applicable, will cause such payments to be held in trust for the exclusive benefit of the Administrative Agent and Blue Ridge. Seller will maintain exclusive ownership, dominion and control (subject to the terms of this Agreement) of each Lock-Box and Blocked Account and shall not grant the right to take dominion and control of any Lock-Box or Blocked Account at a future time or upon the occurrence of a future event to any Person, except to the Administrative Agent as contemplated by this Agreement. (k) Taxes. Such Seller Party will file all tax returns and reports required by law to be filed by it and will promptly pay all taxes and governmental charges at any time owing, except any such taxes which are not yet delinquent or are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books. Seller will pay when due any taxes payable in connection with the Receivables, exclusive of taxes on or measured by income or gross receipts of the Administrative Agent or Blue Ridge. (l) Payment to the Originator. With respect to any Receivable purchased by Seller from the Originator, such sale shall be effected under, and in strict compliance with the terms of, the Receivables Sale Agreement, including, without limitation, the terms relating to the amount and timing of payments to be made to the Originator in respect of the purchase price for such Receivable. Section 7.2 Negative Covenants of the Seller Parties. Until the date on which the Aggregate Unpaids have been indefeasibly paid in full and this Agreement terminates in accordance with its terms, each Seller Party hereby covenants, as to itself, that: (a) Name Change, Offices and Records. Such Seller Party will not change its name, identity or structure (within the meaning of any applicable enactment of the UCC), relocate its chief executive office at any time while the location of its chief executive office is relevant to perfection of the Administrative Agent's security interest, for the benefit of the Secured Parties, in the Receivables, Related Security and Collections, or change any office where Records are kept unless it shall have: (i) given the Administrative Agent at least forty- five (45) days' prior written notice thereof and (ii) delivered to the Administrative Agent all financing statements, instruments and other documents requested by the Administrative Agent in connection with such change or relocation. (b) Change in Payment Instructions to Obligors. Except as may be required by the Administrative Agent pursuant to Section 8.2(b), such Seller Party will not add or terminate any bank as a Blocked Account Bank, or make any change in the instructions to Obligors regarding payments to be made to any Lock-Box or Blocked Account, unless the Administrative Agent shall have received, at least ten (10) days before the proposed effective date therefor, (i) written notice of such addition, termination or change and (ii) with respect to the addition of a Blocked Account Bank or a Blocked Account or Lock-Box, an executed Blocked Account Agreement with respect to the new Blocked Account and an executed Delivery Order with respect to the new Lock-Box; provided, however, that the Servicer may make changes in instructions to Obligors regarding payments if such new instructions require such Obligor to make payments to another existing Blocked Account. (c) Modifications to Contracts and Credit and Collection Policy. Such Seller Party will not, and will not permit the Originator to, change the character of its business or make any change to the Credit and Collection Policy except in compliance with the provisions of Section 7.1(a)(vii). Except as provided in Section 8.2(d), the Servicer will not, and will not permit the Originator to, extend, amend or otherwise modify the terms of any Receivable or any Contract related thereto other than in accordance with the Credit and Collection Policy. (d) Sales, Liens. Seller will not sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, or create or suffer to exist any Adverse Claim upon (including, without limitation, the filing of any financing statement) or with respect to, any of the Purchased Assets, or assign any right to receive income with respect thereto (other than, in each case, the creation of a security interest therein in favor of the Administrative Agent, for the benefit of the Secured Parties, as provided for herein), and Seller will defend the right, title and interest of the Secured Parties in, to and under any of the foregoing property, against all claims of third parties claiming through or under Seller or the Originator. Seller will not create or suffer to exist any mortgage, pledge, security interest, encumbrance, lien, charge or other similar arrangement on any of its inventory. (e) Use of Proceeds. Seller will not use the proceeds of the Purchases for any purpose other than (i) paying for Receivables and Related Security under and in accordance with the Receivables Sale Agreement, including without limitation, making payments on the Subordinated Notes to the extent permitted thereunder and under the Receivables Sale Agreement, (ii) paying its ordinary and necessary operating expenses when and as due, and (iii) making Restricted Junior Payments to the extent permitted under this Agreement. (f) Termination Date Determination. Seller will not designate the Termination Date, or send any written notice to the Originator in respect thereof, without the prior written consent of the Administrative Agent, except with respect to the occurrence of such Termination Date arising pursuant to Section 5.1(d) of the Receivables Sale Agreement. (g) Restricted Junior Payments. Seller will not make any Restricted Junior Payment if after giving effect thereto, Seller's Net Worth (as defined in the Receivables Sale Agreement) would be less than the Required Capital Amount (as defined in the Receivables Sale Agreement). From and after the occurrence of an Unmatured Amortization Event, Seller will not make any Restricted Junior Payment. (h) Seller Indebtedness. Seller will not incur or permit to exist any Indebtedness or liability on account of deposits except: (i) the Aggregate Unpaids, (ii) the Subordinated Loans (as defined in the Receivables Sale Agreement, and (iii) other current accounts payable arising in the ordinary course of business and not overdue. (i) Prohibition on Additional Negative Pledges. No Seller Party will enter into or assume any agreement (other than this Agreement and the other Transaction Documents) prohibiting the creation or assumption of any Adverse Claim upon the Purchased Assets except as contemplated by the Transaction Documents, or otherwise prohibiting or restricting any transaction contemplated hereby or by the other Transaction Documents, and no Seller Party will enter into or assume any agreement creating any Adverse Claim upon the Subordinated Notes (as defined in the Receivables Sale Agreement). (j) Net Pool Balance. At no time prior to the Facility Termination Date shall Seller permit the Net Pool Balance to be less than an amount equal to the sum of (i) the Aggregate Invested Amount and (ii) the Required Reserve. (k) Prohibition on Additional Activities. The Seller shall not engage in any activities other than those contemplated by this Agreement and the Transaction Documents as such other activities are reasonably incidental hereto and thereto. ARTICLE VIII ADMINISTRATION AND COLLECTION Section 8.1 Designation of Servicer. (a) The servicing, administration and collection of the Receivables shall be conducted by such Person (the "Servicer") so designated from time to time in accordance with this Section 8.1. Originator. is hereby designated as, and hereby agrees to perform the duties and obligations of, the Servicer pursuant to the terms of this Agreement. The Administrative Agent may at any time after the occurrence of an Amortization Event designate as Servicer any Person to succeed Originator or any successor Servicer, provided that the Rating Agency Condition is satisfied. (b) Without the prior written consent of the Administrative Agent and the Required Liquidity Banks, Originator shall not be permitted to delegate any of its duties or responsibilities as Servicer to any Person other than (i) Seller and (ii) with respect to certain Defaulted Receivables, outside collection agencies in accordance with its customary practices. Seller shall not be permitted to further delegate to any other Person any of the duties or responsibilities of the Servicer delegated to it by Originator. If at any time the Administrative Agent shall designate as Servicer any Person other than Originator, all duties and responsibilities theretofore delegated by Originator to Seller may, at the discretion of the Administrative Agent, be terminated forthwith on notice given by the Administrative Agent to Originator and to Seller. (c) Notwithstanding the foregoing subsection (b): (i) Originator shall be and remain primarily liable to the Administrative Agent and Blue Ridge for the full and prompt performance of all duties and responsibilities of the Servicer hereunder and (ii) the Administrative Agent and Blue Ridge shall be entitled to deal exclusively with Originator in matters relating to the discharge by the Servicer of its duties and responsibilities hereunder. The Administrative Agent and Blue Ridge shall not be required to give notice, demand or other communication to any Person other than Originator in order for communication to the Servicer and its sub-servicer or other delegate with respect thereto to be accomplished. Originator, at all times that it is the Servicer, shall be responsible for providing any sub-servicer or other delegate of the Servicer with any notice given to the Servicer under this Agreement. Section 8.2 Duties of Servicer. (a) The Servicer shall take or cause to be taken all such actions as may be necessary or advisable to collect each Receivable from time to time, all in accordance with applicable laws, rules and regulations, with reasonable care and diligence, and in accordance with the Credit and Collection Policy. (b) The Servicer will instruct all Obligors to pay all Collections directly to a Lock-Box or a Blocked Account. The Servicer shall cause to be established and maintained one or more Lock-Boxes and Blocked Accounts in the name of the Seller and shall effect a Blocked Account Agreement substantially in the form of Exhibit VI with each bank party to a Blocked Account at any time and shall cause a Delivery Order to be executed and delivered with respect to each Lock-Box at any time. In the case of any remittances received in any Lock-Box or Blocked Account that shall have been identified, to the satisfaction of the Servicer, to not constitute Collections or other proceeds of the Receivables or the Related Security, the Servicer shall promptly remit such items to the Person identified to it as being the owner of such remittances. From and after the date the Administrative Agent delivers to any Blocked Account Bank a Collection Notice pursuant to Section 8.3, or delivers to the US Postal Service a Delivery Order relating to a Lock-Box, the Administrative Agent may request that the Servicer, and the Servicer thereupon promptly shall instruct all Obligors with respect to the Receivables, to remit all payments thereon to a new depositary account or Lock-Box specified by the Administrative Agent and, at all times thereafter, Seller and the Servicer shall not deposit or otherwise credit, and shall not permit any other Person to deposit or otherwise credit to such new depositary account any cash or payment item other than Collections or, if a Delivery Order has been presented with respect to a Lock-Box, Seller and Servicer shall not remove any receipts from such Lock-Box, but the Administrative Agent or its designee shall remove all such receipts from such Lock-Box. (c) The Servicer shall administer the Collections in accordance with the procedures described herein and in Article II. The Servicer shall set aside and hold in trust for the account of Seller and Blue Ridge their respective shares of the Collections in accordance with Article II. The Servicer shall, upon the request of the Administrative Agent, segregate, in a manner acceptable to the Administrative Agent, all cash, checks and other instruments received by it from time to time constituting Collections from the general funds of the Servicer or Seller prior to the remittance thereof in accordance with Article II. If the Servicer shall be required to segregate Collections pursuant to the preceding sentence, the Servicer shall segregate and deposit with a bank designated by the Administrative Agent such allocable share of Collections of Receivables set aside for Blue Ridge on the first Business Day following receipt by the Servicer of such Collections, duly endorsed or with duly executed instruments of transfer. (d) The Servicer may, in accordance with the Credit and Collection Policy, extend the maturity of any Receivable or adjust the Outstanding Balance of any Receivable as the Servicer determines to be appropriate to maximize Collections thereof; provided, however, that such extension or adjustment shall not alter the status of such Receivable as a Delinquent Receivable or Defaulted Receivable or limit the rights of the Administrative Agent or Blue Ridge under this Agreement. Notwithstanding anything to the contrary contained herein, the Administrative Agent shall have the absolute and unlimited right after the earlier to occur of an Unmatured Amortization Event and an Amortization Event to direct the Servicer to commence or settle any legal action with respect to any Receivable or to foreclose upon or repossess any Related Security. (e) The Servicer shall hold in trust for Seller and the Administrative Agent and Blue Ridge all Records that (i) evidence or relate to the Receivables, the related Contracts and Related Security or (ii) are otherwise necessary or desirable to collect the Receivables and shall, as soon as practicable upon demand of the Administrative Agent, deliver or make available to the Administrative Agent all such Records, at a place selected by the Administrative Agent. The Servicer shall, as soon as practicable following receipt thereof turn over to Seller any cash collections or other cash proceeds received with respect to Indebtedness not constituting Receivables. The Servicer shall, from time to time at the request of the Administrative Agent or Blue Ridge, furnish to Blue Ridge (promptly after any such request) a calculation of the amounts set aside for Blue Ridge pursuant to Article II. (f) Any payment by an Obligor in respect of any indebtedness owed by it to Originator or Seller shall, except as otherwise specified by such Obligor or otherwise required by contract or law and unless otherwise instructed by the Administrative Agent, be applied as a Collection of any Receivable of such Obligor (starting with the oldest such Receivable) to the extent of any amounts then due and payable thereunder before being applied to any other receivable or other obligation of such Obligor. Section 8.3 Collection Notices and Delivery Orders. The Administrative Agent is authorized at any time after the occurrence of an Amortization Event to date and to deliver to the Blocked Account Banks the Collection Notices and deliver to the US Postal Service the Delivery Orders. Seller hereby transfers to the Administrative Agent for the benefit of Blue Ridge, effective when the Administrative Agent delivers such notice, the exclusive ownership and control of each Lock-Box and the Blocked Accounts. In case any authorized signatory of Seller whose signature appears on a Blocked Account Agreement or a Delivery Order shall cease to have such authority before the delivery of such notice, such Collection Notice or Delivery Order, as the case may be, shall nevertheless be valid as if such authority had remained in force. Seller hereby authorizes the Administrative Agent, and agrees that the Administrative Agent shall be entitled (a) at any time after delivery of the Collection Notices and/or the Delivery Orders, to endorse Seller's name on checks and other instruments representing Collections, (b) at any time after the occurrence of an Amortization Event, to enforce the Receivables, the related Contracts and the Related Security, and (c) at any time after the occurrence of an Amortization Event, to take such action as shall be necessary or desirable to cause all cash, checks and other instruments constituting Collections of Receivables to come into the possession of the Administrative Agent rather than Seller. Section 8.4 Responsibilities of Seller. Anything herein to the contrary notwithstanding, the exercise by the Administrative Agent, on behalf of Blue Ridge, of the Administrative Agent's rights hereunder shall not release the Servicer, the Originator or Seller from any of their duties or obligations with respect to any Receivables or under the related Contracts. The Administrative Agent and Blue Ridge shall have no obligation or liability with respect to any Receivables or related Contracts, nor shall any of them be obligated to perform the obligations of Seller or the Originator thereunder. Section 8.5 Monthly Reports. The Servicer shall prepare and forward to the Administrative Agent (a) on each Monthly Reporting Date, a Monthly Report and an electronic file of the data contained therein and (b) at such times as the Administrative Agent shall request, a listing by Obligor of all Receivables together with an aging of such Receivables. Section 8.6 Servicing Fee. As compensation for the Servicer's servicing activities on their behalf, the Servicer shall be paid the Servicing Fee in arrears on each Settlement Date out of Collections. ARTICLE IX AMORTIZATION EVENTS Section 9.1 Amortization Events. The occurrence of any one or more of the following events shall constitute an Amortization Event: (a) Any Seller Party or the Performance Guarantor shall fail to make any payment or deposit required to be made by it under the Transaction Documents when due and, for any such payment or deposit which is not in respect of principal, such failure continues for five (5) consecutive Business Days. (b) Any representation, warranty, certification or statement made by the Performance Guarantor or any Seller Party in any Transaction Document to which it is a party or in any other document delivered pursuant thereto shall prove to have been materially incorrect when made or deemed made. (c) Any Seller Party shall fail to perform or observe any covenant contained in Section 7.2 or 8.5 when due. (d) Any Seller Party or the Performance Guarantor shall fail to perform or observe any other term, covenant or agreement under any Transaction Documents and such failure shall continue for ten (10) days. (e) Failure of Seller to pay any Indebtedness (other than the Aggregate Unpaids) when due or the default by Seller in the performance of any term, provision or condition contained in any agreement under which any such Indebtedness was created or is governed, the effect of which is to cause, or to permit the holder or holders of such Indebtedness to cause, such Indebtedness to become due prior to its stated maturity; or any such Indebtedness of Seller shall be declared to be due and payable or required to be prepaid (other than by a regularly scheduled payment) prior to the date of maturity thereof. (f) Failure of the Performance Guarantor or any of its Subsidiaries to pay Indebtedness in excess of $5,000,000 (or $10,750 in the case of Seller) in aggregate principal amount (hereinafter, "Material Indebtedness") when due, the effect of which is to cause, or to permit the holder or holders of such Material Indebtedness to cause, such Material Indebtedness to become due prior to its stated maturity; or any Material Indebtedness of the Performance Guarantor or any of its Subsidiaries shall be declared to be due and payable or required to be prepaid (other than by a regularly scheduled payment) prior to the date of maturity thereof. (g) An Event of Bankruptcy shall occur with respect to the Performance Guarantor, any Seller Party or any of their respective Subsidiaries. (h) As at the end of any Calculation Period: (i) the three-month rolling average Delinquency Ratio shall exceed 2.75%, (ii) the three-month rolling average Default Ratio shall exceed 2.50%, or (iii) the three-month rolling average Dilution Ratio shall exceed 3.00%. (i) A Change of Control. (j) (i) One or more final judgments for the payment of money in an aggregate amount of $10,750 or more shall be entered against Seller or (ii) one or more final judgments for the payment of money in an amount in excess of $10,000,000, individually or in the aggregate, shall be entered against the Performance Guarantor, the Originator or any of their Subsidiaries (other than Seller) on claims not covered by insurance or as to which the insurance carrier has denied its responsibility, and such judgment shall continue unsatisfied and in effect for thirty (30) consecutive days without a stay of execution. (k) The Termination Date under the Receivables Sale Agreement shall occur or the Originator shall for any reason cease to transfer, or cease to have the legal capacity to transfer, or otherwise be incapable of transferring Receivables to Seller under the Receivables Sale Agreement. (l) This Agreement shall terminate in whole or in part (except in accordance with its terms), or shall cease to be effective or to be the legally valid, binding and enforceable obligation of Seller, or any Obligor shall directly or indirectly contest in any manner such effectiveness, validity, binding nature or enforceability, or the Administrative Agent, for the benefit of the Secured Parties, shall cease to have a valid and perfected first priority security interest in the Purchased Assets. (m) On any Settlement Date, after giving effect to the turnover of Collections by the Servicer on such date and the application thereof to the Aggregate Unpaids in accordance with this Agreement, (i) the Receivables Interest shall exceed 100% or (ii) the Aggregate Invested Amount shall exceed the Purchase Limit. (n) The Performance Undertaking shall cease to be effective or to be the legally valid, binding and enforceable obligation of Performance Guarantor, or Performance Guarantor shall directly or indirectly contest in any manner such effectiveness, validity, binding nature or enforceability of its obligations thereunder. (o) The Internal Revenue Service shall file notice of a lien pursuant to Section 6323 of the Tax Code with regard to any of the Purchased Assets and such lien shall not have been released within seven (7) days, or the PBGC shall, or shall indicate its intention to, file notice of a lien pursuant to Section 4068 of ERISA with regard to any of the Purchased Assets. (p) Any Plan of the Performance Guarantor or any of its ERISA Affiliates: (i) shall fail to be funded in accordance with the minimum funding standard required by applicable law, the terms of such Plan, Section 412 of the Tax Code or Section 302 of ERISA for any plan year or a waiver of such standard is sought or granted with respect to such Plan under applicable law, the terms of such Plan or Section 412 of the Tax Code or Section 303 of ERISA; or (ii) is being, or has been, terminated or the subject of termination proceedings under applicable law or the terms of such Plan; or (iii) shall require the Performance Guarantor or any of its ERISA Affiliates to provide security under applicable law, the terms of such Plan, Section 401 or 412 of the Tax Code or Section 306 or 307 of ERISA; or (iv) results in a liability to the Performance Guarantor or any of its ERISA Affiliates under applicable law, the terms of such Plan, or Title IV ERISA, and there shall result from any such failure, waiver, termination or other event a liability to the PBGC or a Plan that would have a Material Adverse Effect. (q) Any event shall occur which (i) materially and adversely impairs the ability of the Originator to originate Receivables of a credit quality that is at least equal to the credit quality of the Receivables sold or contributed to Seller on the date of this Agreement or (ii) has, or could be reasonably expected to have a Material Adverse Effect. (r) The Seller or the Originator shall become an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or any successor statute. Section 9.2 Remedies. Upon the occurrence and during the continuation of an Amortization Event, the Administrative Agent may, or upon the direction of the Required Liquidity Banks shall, take any of the following actions: (a) replace the Person then acting as Servicer if the Administrative Agent has not already done so, (b) declare the Facility Termination Date to have occurred, whereupon Reinvestments shall immediately terminate and the Facility Termination Date shall forthwith occur, all without demand, protest or further notice of any kind, all of which are hereby expressly waived by each Seller Party; provided, however, that upon the occurrence of an Event of Bankruptcy with respect to any Seller Party, the Facility Termination Date shall automatically occur, without demand, protest or any notice of any kind, all of which are hereby expressly waived by each Seller Party, (c) deliver the Collection Notices to the Blocked Account Banks, (d) exercise all rights and remedies of a secured party upon default under the UCC and other applicable laws, (e) deliver the Delivery Orders to the US Postal Service, and (f) notify Obligors of the Administrative Agent's security interest, for the benefit of the Secured Parties, in the Receivables and other Purchased Assets. The aforementioned rights and remedies shall be without limitation, and shall be in addition to all other rights and remedies of the Administrative Agent and Blue Ridge otherwise available under any other provision of this Agreement, by operation of law, at equity or otherwise, all of which are hereby expressly preserved, including, without limitation, all rights and remedies provided under the UCC, all of which rights shall be cumulative. ARTICLE X INDEMNIFICATION Section 10.1 Indemnities by the Seller Parties. Without limiting any other rights that the Administrative Agent or Blue Ridge may have hereunder or under applicable law, (a) Seller hereby agrees to indemnify (and pay upon demand to) the Administrative Agent, Blue Ridge, each of the Liquidity Banks and each of the respective assigns, officers, directors, agents and employees of the foregoing (each, an "Indemnified Party") from and against any and all damages, losses, claims, taxes, liabilities, costs, expenses and for all other amounts payable, including reasonable attorneys' fees (which attorneys may be employees of the Administrative Agent or another Indemnified Party) and disbursements (all of the foregoing being collectively referred to as "Indemnified Amounts") awarded against or incurred by any of them arising out of or as a result of this Agreement or the acquisition, either directly or indirectly, by Blue Ridge or any of its Liquidity Banks of an interest in the Receivables, and (b) the Servicer hereby agrees to indemnify (and pay upon demand to) each Indemnified Party for Indemnified Amounts awarded against or incurred by any of them arising out of the Servicer's activities as Servicer hereunder excluding, however, in all of the foregoing instances under the preceding clauses (a) and (b): (i) Indemnified Amounts to the extent a final judgment of a court of competent jurisdiction holds that such Indemnified Amounts resulted from gross negligence or willful misconduct on the part of the Indemnified Party seeking indemnification; (ii) Indemnified Amounts to the extent the same includes losses in respect of Receivables that are uncollectible on account of the insolvency, bankruptcy or lack of creditworthiness of the related Obligor; or (iii) taxes imposed by the jurisdiction in which such Indemnified Party's principal executive office is located, on or measured by the overall net income of such Indemnified Party to the extent that the computation of such taxes is consistent with the characterization for income tax purposes of the acquisition by Blue Ridge of Receivables as a loan or loans by Blue Ridge to Seller secured by the Receivables, the Related Security, the Blocked Accounts and the Collections; provided, however, that nothing contained in this sentence shall limit the liability of any Seller Party or limit the recourse of Blue Ridge to any Seller Party for amounts otherwise specifically provided to be paid by such Seller Party under the terms of this Agreement. Without limiting the generality of the foregoing indemnification, Seller shall indemnify the Administrative Agent and Blue Ridge for Indemnified Amounts (including, without limitation, losses in respect of uncollectible receivables, regardless of whether reimbursement therefor would constitute recourse to Seller or the Servicer) relating to or resulting from: (i) any representation or warranty made by any Seller Party or the Originator (or any officers of any such Person) under or in connection with this Agreement, any other Transaction Document or any other information or report delivered by any such Person pursuant hereto or thereto, which shall have been false or incorrect when made or deemed made; (ii) the failure by Seller, the Servicer or the Originator to comply with any applicable law, rule or regulation with respect to any Receivable or Contract related thereto, or the nonconformity of any Receivable or Contract included therein with any such applicable law, rule or regulation or any failure of the Originator to keep or perform any of its obligations, express or implied, with respect to any Contract; (iii) any failure of Seller, the Servicer or the Originator to perform its duties, covenants or other obligations in accordance with the provisions of this Agreement or any other Transaction Document; (iv) any products liability, personal injury or damage suit, or other similar claim arising out of or in connection with merchandise, insurance or services that are the subject of any Contract or any Receivable; (v) any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Receivable (including, without limitation, a defense based on such Receivable or the related Contract not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from the sale of the merchandise or service related to such Receivable or the furnishing or failure to furnish such merchandise or services; (vi) the commingling of Collections of Receivables at any time with other funds; (vii) any investigation, litigation or proceeding related to or arising from this Agreement or any other Transaction Document, the transactions contemplated hereby, the use of the proceeds of any Purchase, the Purchased Assets or any other investigation, litigation or proceeding relating to Seller, the Servicer or the Originator in which any Indemnified Party becomes involved as a result of any of the transactions contemplated hereby; (viii) any inability to litigate any claim against any Obligor in respect of any Receivable as a result of such Obligor being immune from civil and commercial law and suit on the grounds of sovereignty or otherwise from any legal action, suit or proceeding; (ix) any Amortization Event of the type described in Section 9.1(g); (x) any failure of Seller to acquire and maintain legal and equitable title to, and ownership of any of the Purchased Assets from the Originator, free and clear of any Adverse Claim (other than as created hereunder); or any failure of Seller to give reasonably equivalent value to the Originator under the Receivables Sale Agreement in consideration of the transfer by the Originator of any Receivable, or any attempt by any Person to void such transfer under statutory provisions or common law or equitable action; (xi) any failure to vest and maintain vested in the Administrative Agent for the benefit of Blue Ridge, or to transfer to the Administrative Agent for the benefit of the Secured Parties, a valid first priority perfected security interest in the Purchased Assets, free and clear of any Adverse Claim (except as created by the Transaction Documents); (xii) the failure to have filed, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Purchased Assets, and the proceeds thereof, whether at the time of any Purchase or at any subsequent time; (xiii) any action or omission by any Seller Party which reduces or impairs the rights of the Administrative Agent or Blue Ridge with respect to any Purchased Assets or the value of any Purchased Assets; (xiv) any attempt by any Person to void any Purchase or the Administrative Agent's security interest, for the benefit of the Secured Parties, in the Purchased Assets under statutory provisions or common law or equitable action; and (xv) the failure of any Receivable included in the calculation of the Net Pool Balance as an Eligible Receivable to be an Eligible Receivable at the time so included. Section 10.2 Increased Cost and Reduced Return. If after the date hereof, any Funding Source shall be charged any fee, expense or increased cost on account of the adoption of any applicable law, rule or regulation (including any applicable law, rule or regulation regarding capital adequacy) or any change therein, 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 with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency (a "Regulatory Change"): (a) that subjects any Funding Source to any charge or withholding on or with respect to any Funding Agreement or a Funding Source's obligations under a Funding Agreement, or on or with respect to the Receivables, or changes the basis of taxation of payments to any Funding Source of any amounts payable under any Funding Agreement (except for changes in the rate of tax on the overall net income of a Funding Source or taxes excluded by Section 10.1) or (b) that imposes, modifies or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of a Funding Source, or credit extended by a Funding Source pursuant to a Funding Agreement or (c) that imposes any other condition the result of which is to increase the cost to a Funding Source of performing its obligations under a Funding Agreement, or to reduce the rate of return on a Funding Source's capital as a consequence of its obligations under a Funding Agreement, or to reduce the amount of any sum received or receivable by a Funding Source under a Funding Agreement or to require any payment calculated by reference to the amount of interests or loans held or interest received by it, then, upon demand by the Administrative Agent, Seller shall pay to the Administrative Agent, for the benefit of the relevant Funding Source, such amounts charged to such Funding Source or such amounts to otherwise compensate such Funding Source for such increased cost or such reduction. Within 30 days after receipt by the Administrative Agent of written notice from any Funding Source that it has determined that a Regulatory Change has occurred which will result in the imposition of any additional costs or expenses under this Section 10.2, the Administrative Agent shall provide written notice to Seller of such Regulatory Change. Section 10.3 Other Costs and Expenses. Seller shall pay to the Administrative Agent and Blue Ridge on demand all costs and out-of-pocket expenses in connection with the preparation, execution, delivery and administration of this Agreement, the transactions contemplated hereby and the other documents to be delivered hereunder, including without limitation, the cost of Blue Ridge's auditors auditing the books, records and procedures of Seller, reasonable fees and out-of- pocket expenses of legal counsel for Blue Ridge and the Administrative Agent (which such counsel may be employees of Blue Ridge or the Administrative Agent) with respect thereto and with respect to advising Blue Ridge and the Administrative Agent as to their respective rights and remedies under this Agreement. Seller shall pay to the Administrative Agent on demand any and all costs and expenses of the Administrative Agent and Blue Ridge, if any, including reasonable counsel fees and expenses in connection with the enforcement of this Agreement and the other documents delivered hereunder and in connection with any restructuring or workout of this Agreement or such documents, or the administration of this Agreement following an Amortization Event. Seller shall reimburse Blue Ridge on demand for all other costs and expenses incurred by Blue Ridge ("Other Costs"), including, without limitation, the cost of auditing Blue Ridge's books by certified public accountants, the cost of rating the Commercial Paper by independent financial rating agencies, and the reasonable fees and out-of-pocket expenses of counsel for Blue Ridge or any counsel for any shareholder of Blue Ridge with respect to advising Blue Ridge or such shareholder as to matters relating to Blue Ridge's operations. Section 10.4 Allocations. Blue Ridge shall allocate the liability for Other Costs among Seller and other Persons with whom Blue Ridge has entered into agreements to purchase interests in or finance receivables and other financial assets ("Other Customers"). If any Other Costs are attributable to Seller and not attributable to any Other Customer, Seller shall be solely liable for such Other Costs. However, if Other Costs are attributable to Other Customers and not attributable to Seller, such Other Customer shall be solely liable for such Other Costs. All allocations to be made pursuant to the foregoing provisions of this Article X shall be made by Blue Ridge in its sole discretion and shall be binding on Seller and the Servicer. ARTICLE XI THE ADMINISTRATIVE AGENT Section 11.1 Authorization and Action. Blue Ridge, on behalf of itself and its assigns, hereby designates and appoints Wachovia to act as its agent under the Liquidity Agreement, this Agreement and under each other Transaction Document, and authorizes the Administrative Agent to take such actions as agent on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms of the Liquidity Agreement, this Agreement and the other Transaction Documents together with such powers as are reasonably incidental thereto, including, without limitation, the power to perfect all security interests granted under the Transaction Documents. The provisions of Section 6 of the Liquidity Agreement are hereby incorporated by this reference with the same force and effect as if fully set forth herein, and shall govern the relationship between the Administrative Agent, on the one hand, and Blue Ridge, on the other. ARTICLE XII ASSIGNMENTS AND PARTICIPATIONS Section 12.1 Assignments and Participations by Blue Ridge. Each of the parties hereto, on behalf of its successors and assigns, hereby agrees and consents to the complete or partial sale by Blue Ridge of all or any portion of its rights under, interest in, title to and obligations under this Agreement to the Liquidity Banks pursuant to the Liquidity Agreement, regardless of whether such sale constitutes an assignment or the sale of a participation in such rights and obligations. Section 12.2 Prohibition on Assignments by Seller Parties. No Seller Party may assign any of its rights or obligations under this Agreement without (a)the prior written consent of the Administrative Agent and Blue Ridge and (b) satisfying the Rating Agency Condition. ARTICLE XIII MISCELLANEOUS Section 13.1 Waivers and Amendments. (a) No failure or delay on the part of the Administrative Agent or Blue Ridge in exercising any power, right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or remedy preclude any other further exercise thereof or the exercise of any other power, right or remedy. The rights and remedies herein provided shall be cumulative and nonexclusive of any rights or remedies provided by law. Any waiver of this Agreement shall be effective only in the specific instance and for the specific purpose for which given. (b) No provision of this Agreement may be amended, supplemented, modified or waived except in writing in accordance with the provisions of this Section 13.1(b). Blue Ridge, Seller and the Administrative Agent, at the direction of the Required Liquidity Banks, may enter into written modifications or waivers of any provisions of this Agreement, provided, however, that no such modification or waiver shall: (i) without the consent of Blue Ridge and each affected Liquidity Bank, (A) extend the Liquidity Termination Date or the date of any payment or deposit of Collections by Seller or the Servicer, (B) reduce the rate or extend the time of payment of Yield or any CP Costs (or any component of Yield or CP Costs), (C) reduce any fee payable to the Administrative Agent for the benefit of Blue Ridge, (D) change the Invested Amount of any Receivable Interest, (E) amend, modify or waive any provision of the definition of Required Liquidity Banks or this Section 13.1(b), (F) consent to or permit the assignment or transfer by Seller of any of its rights and obligations under this Agreement, (G) change the definition of "Eligible Receivable," "Loss Reserve," "Dilution Reserve," "Yield Reserve," "Servicing Reserve," "Servicing Fee Rate," "Required Reserve" or "Required Reserve Factor Floor" or (H) amend or modify any defined term (or any defined term used directly or indirectly in such defined term) used in clauses (A) through (G) above in a manner that would circumvent the intention of the restrictions set forth in such clauses; or (ii) without the written consent of the then Administrative Agent, amend, modify or waive any provision of this Agreement if the effect thereof is to affect the rights or duties of such Administrative Agent, and any material amendment, waiver or other modification of this Agreement shall require satisfaction of the Rating Agency Condition. Section 13.2 Notices. Except as provided in this Section 13.2, all communications and notices provided for hereunder shall be in writing (including bank wire, telecopy or electronic facsimile transmission or similar writing) and shall be given to the other parties hereto at their respective addresses or telecopy numbers set forth on the signature pages hereof or at such other address or telecopy number as such Person may hereafter specify for the purpose of notice to each of the other parties hereto. Each such notice or other communication shall be effective (a) if given by telecopy, upon the receipt thereof, (b) if given by mail, three (3) Business Days after the time such communication is deposited in the mail with first class postage prepaid or (c) if given by any other means, when received at the address specified in this Section 13.2. Seller hereby authorizes the Administrative Agent to effect Purchases and Tranche Period and Yield Rate selections based on telephonic notices made by any Person whom the Administrative Agent in good faith believes to be acting on behalf of Seller. Seller agrees to deliver promptly to the Administrative Agent a written confirmation of each telephonic notice signed by an authorized officer of Seller; provided, however, the absence of such confirmation shall not affect the validity of such notice. If the written confirmation differs from the action taken by the Administrative Agent, the records of the Administrative Agent shall govern absent manifest error. Section 13.3 Protection of Administrative Agent's Security Interest. (a) Seller agrees that from time to time, at its expense, it will promptly execute and deliver all instruments and documents, and take all actions, that may be necessary or desirable, or that the Administrative Agent may request, to perfect, protect or more fully evidence the Administrative Agent's security interest, for the benefit of the Secured Parties, in the Purchased Assets, or to enable the Administrative Agent or Blue Ridge to exercise and enforce their rights and remedies hereunder. At any time, the Administrative Agent may, or the Administrative Agent may direct Seller or the Servicer to, notify the Obligors of Receivables, at Seller's expense, of the ownership or security interests of the Administrative Agent, for the benefit of the Secured Parties, under this Agreement and may also direct that payments of all amounts due or that become due under any or all Receivables be made directly to the Administrative Agent or its designee. Seller or the Servicer (as applicable) shall, at the Administrative Agent's request, withhold the identities of the Administrative Agent and Blue Ridge in any such notification. (b) If any Seller Party fails to perform any of its obligations hereunder, the Administrative Agent or Blue Ridge may (but shall not be required to) perform, or cause performance of, such obligations, and the Administrative Agent's or Blue Ridge's costs and expenses incurred in connection therewith shall be payable by Seller as provided in Section 10.3. Each Seller Party irrevocably authorizes the Administrative Agent at any time and from time to time in the sole discretion of the Administrative Agent, and appoints the Administrative Agent as its attorney-in- fact, to act on behalf of such Seller Party (i) to execute on behalf of Seller as debtor and to file financing statements necessary or desirable in the Administrative Agent's sole discretion to perfect and to maintain the perfection and priority of the interest of Blue Ridge in the Receivables and (ii) to file a carbon, photographic or other reproduction of this Agreement or any financing statement with respect to the Receivables as a financing statement in such offices as the Administrative Agent in its sole discretion deems necessary or desirable to perfect and to maintain the perfection and priority of the Administrative Agent's security interest in the Purchased Assets, for the benefit of the Secured Parties. This appointment is coupled with an interest and is irrevocable. From and after July 1, 2001: (A) each of the Seller Parties hereby authorizes the Administrative Agent to file financing statements and other filing or recording documents with respect to the Receivables and Related Security (including any amendments thereto, or continuation or termination statements thereof), without the signature or other authorization of such Seller Party, in such form and in such offices as the Administrative Agent reasonably determines appropriate to perfect or maintain the perfection of the security interest of the Administrative Agent, for the benefit of the Secured Parties, hereunder, (B) each of the Seller Parties acknowledges and agrees that it is not authorized to, and will not, file financing statements or other filing or recording documents with respect to the Receivables or Related Security (including any amendments thereto, or continuation or termination statements thereof), without the express prior written approval by the Administrative Agent, consenting to the form and substance of such filing or recording document, and (C) each of the Seller Parties approves, authorizes and ratifies any filings or recordings made by or on behalf of the Administrative Agent in connection with the perfection of the security interests in favor of Seller or the Administrative Agent. Section 13.4 Confidentiality. (a) Each of the Seller Parties shall maintain and shall cause each of its employees and officers to maintain the confidentiality of this Agreement and the other confidential or proprietary information with respect to the Administrative Agent and Blue Ridge and their respective businesses obtained by it or them in connection with the structuring, negotiating and execution of the transactions contemplated herein, except that such Seller Party and its officers and employees may disclose such information to such Seller Party's external accountants and attorneys and as required by any applicable law or order of any judicial or administrative proceeding. (b) Anything herein to the contrary notwithstanding, each Seller Party hereby consents to the disclosure of any nonpublic information with respect to it (i) to the Administrative Agent, the Liquidity Banks or Blue Ridge by each other, (ii) by the Administrative Agent or Blue Ridge to any prospective or actual assignee or participant of any of them and (iii) by the Administrative Agent to any rating agency, Commercial Paper dealer or provider of a surety, guaranty or credit or liquidity enhancement to Blue Ridge or any entity organized for the purpose of purchasing, or making loans secured by, financial assets for which Wachovia acts as the agent and to any officers, directors, employees, outside accountants and attorneys of any of the foregoing, provided that each such Person is informed of the confidential nature of such information. In addition, Blue Ridge and the Administrative Agent may disclose any such nonpublic information pursuant to any law, rule, regulation, direction, request or order of any judicial, administrative or regulatory authority or proceedings (whether or not having the force or effect of law). Section 13.5 Bankruptcy Petition. Seller, the Servicer, the Administrative Agent and each Liquidity Bank hereby covenants and agrees that, prior to the date that is one year and one day after the payment in full of all outstanding senior indebtedness of Blue Ridge, it will not institute against, or join any other Person in instituting against, Blue Ridge any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States. Section 13.6 Limitation of Liability. Except with respect to any claim arising out of the willful misconduct or gross negligence of Blue Ridge, the Administrative Agent or any Liquidity Bank, no claim may be made by any Seller Party or any other Person against Blue Ridge, the Administrative Agent or any Liquidity Bank or their respective Affiliates, directors, officers, employees, attorneys or agents for any special, indirect, consequential or punitive damages in respect of any claim for breach of contract or any other theory of liability arising out of or related to the transactions contemplated by this Agreement, or any act, omission or event occurring in connection therewith; and each Seller Party hereby waives, releases, and agrees not to sue upon any claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. Section 13.7 CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW (EXCEPT IN THE CASE OF THE OTHER TRANSACTION DOCUMENTS, TO THE EXTENT OTHERWISE EXPRESSLY STATED THEREIN) AND EXCEPT TO THE EXTENT THAT THE PERFECTION OF THE OWNERSHIP INTEREST OF SELLER OR THE SECURITY INTEREST OF THE ADMINISTRATIVE AGENT, FOR THE BENEFIT OF THE SECURED PARTIES, IN ANY OF THE COLLATERAL IS GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. Section 13.8 CONSENT TO JURISDICTION. EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK, NEW YORK, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY SUCH PERSON PURSUANT TO THIS AGREEMENT, AND EACH SUCH PARTY HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY PURCHASER TO BRING PROCEEDINGS AGAINST ANY SELLER PARTY IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY SELLER PARTY AGAINST THE ADMINISTRATIVE AGENT OR ANY PURCHASER OR ANY AFFILIATE OF THE ADMINISTRATIVE AGENT OR ANY PURCHASER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY SUCH SELLER PARTY PURSUANT TO THIS AGREEMENT SHALL BE BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK. Section 13.9 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, ANY DOCUMENT EXECUTED BY ANY SELLER PARTY PURSUANT TO THIS AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER. Section 13.10 Integration; Binding Effect; Survival of Terms. (a) This Agreement and each other Transaction Document contain the final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof superseding all prior oral or written understandings. (b) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns (including any trustee in bankruptcy). This Agreement shall create and constitute the continuing obligations of the parties hereto in accordance with its terms and shall remain in full force and effect until terminated in accordance with its terms; provided, however, that the rights and remedies with respect to (i) any breach of any representation and warranty made by any Seller Party pursuant to Article V, (ii) the indemnification and payment provisions of Article X, and Sections 13.4 and 13.5 shall be continuing and shall survive any termination of this Agreement. (c) Each of the Seller Parties, Blue Ridge and the Administrative Agent hereby acknowledges and agrees that the Liquidity Banks are hereby made express third party beneficiaries of this Agreement and each of the other Transaction Documents. Section 13.11 Counterparts; Severability; Section References. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile shall be effective as delivery of a manually executed counterpart to this Agreement. Any provisions of this Agreement which are 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. Unless otherwise expressly indicated, all references herein to "Article," "Section," "Schedule" or "Exhibit" shall mean articles and sections of, and schedules and exhibits to, this Agreement. Section 13.12 Characterization. (a) It is the intention of the parties hereto that each Purchase hereunder shall constitute and be treated as an absolute and irrevocable sale, which Purchase shall provide the Blue Ridge with the full benefits of ownership of the applicable Receivable Interest. Except as specifically provided in this Agreement, each sale of a Receivable Interest hereunder is made without recourse to Seller; provided, however, that (i) Seller shall be liable to Blue Ridge and the Administrative Agent for all representations, warranties, covenants and indemnities made by Seller pursuant to the terms of this Agreement, and (ii) such sale does not constitute and is not intended to result in an assumption by Blue Ridge or the Administrative Agent or any assignee thereof of any obligation of Seller or the Originator or any other person arising in connection with the Receivables, the Related Security, or the related Contracts, or any other obligations of Seller or the Originator. (b) In addition to any ownership interest which the Administrative Agent or Blue Ridge may from time to time acquire pursuant hereto, Seller hereby grants to the Administrative Agent, for the benefit of the Secured Parties, a valid and perfected security interest in all of Seller's right, title and interest in, to and under all Receivables now existing or hereafter arising, the Collections, each Lock-Box, each Blocked Account, all Related Security, all other rights and payments relating to such Receivables, and all proceeds of any thereof prior to all other liens on and security interests therein to secure the prompt and complete payment of the Aggregate Unpaids. The Administrative Agent, on behalf of Blue Ridge, shall have, in addition to the rights and remedies that it may have under this Agreement, all other rights and remedies provided to a secured creditor under the UCC and other applicable law, which rights and remedies shall be cumulative. [signature pages follow] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers or attorneys-in-fact as of the date hereof. AIRBORNE CREDIT, INC., as Seller By: /s/Diane M. Hackler Name: Diane M. Hackler Title: Vice President Address: 3101 Western Avenue P.O. Box 662 Seattle, WA 98111-0662 Attention: President Telephone: (206) 281-1003 Telecopy: (206) 281-1444 AIRBORNE EXPRESS, INC., as Servicer By: /s/Diane M. Hackler Name: Diane M. Hackler Title: Treasurer Address: 3101 Western Avenue P.O. Box 662 Seattle, WA 98111-0662 Attention: Chief Financial Officer Telephone: (206) 281-1003 Telecopy: (206) 281-1444 BLUE RIDGE ASSET FUNDING CORPORATION BY: WACHOVIA BANK, N.A., AS ATTORNEY-IN-FACT By: /s/Brian M. Mellone Name: Brian M. Mellone Title: Vice President Address: c/o Wachovia Bank, N.A., as Administrative Agent 191 Peachtree Street Mail Stop GA-423 Atlanta, GA 30303 Attention: Asset-Backed Finance Telephone: Telecopy: WACHOVIA BANK, N.A., as Administrative Agent By: /s/Kenny Karpowicz Name: Kenny Karpowicz Title: Vice President Address: 191 Peachtree Street Mail Stop GA-423 Atlanta, GA 30303 Attention: Asset-Backed Finance Telephone: Telecopy: EXHIBIT I DEFINITIONS As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Adjusted Dilution Ratio" means, at any time, the rolling average of the Dilution Ratio for the twelve (12) Calculation Periods then most recently ended. "Administrative Agent" has the meaning set forth in the preamble to this Agreement. "Administrative Agent's Account" means account #8735-098787 at Wachovia Bank, N.A., ABA #053100494. "Adverse Claim" means a lien, security interest, charge or encumbrance, or other right or claim in, of or on any Person's assets or properties in favor of any other Person. "Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person or any Subsidiary of such Person. A Person shall be deemed to control another Person if the controlling Person owns 10% or more of any class of voting securities of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, by contract or otherwise. "Aggregate Invested Amount" means, on any date of determination, the aggregate Invested Amount of all Receivable Interests outstanding on such date. "Aggregate Reduction" has the meaning specified in Section 1.3. "Aggregate Unpaids" means, at any time, an amount equal to the sum of (i) the Aggregate Invested Amount, plus (ii) all Recourse Obligations (whether due or accrued) at such time. "Agreement" means this Receivables Purchase Agreement, as it may be amended or modified and in effect from time to time. "Alternate Base Rate" means for any day, the rate per annum equal to the higher as of such day of (i) the Prime Rate, or (ii) one- half of one percent (0.50%) above the Federal Funds Rate. For purposes of determining the Alternate Base Rate for any day, changes in the Prime Rate or the Federal Funds Rate shall be effective on the date of each such change. "Amortization Event" has the meaning specified in Article IX. "Authorized Officer" means, with respect to any Person, its president, corporate controller, treasurer, chief executive officer or chief financial officer. "Bank of America Blocked Account" means that depositary account number 1233386558 maintained in the name of the Seller with Bank of America and in which any Collections are collected or deposited. "Bank of Boston Blocked Account" means that depositary account number 580-35308 maintained in the name of the Seller with Bank of Boston and in which any Collections are collected or deposited. "Blocked Account Agreement" means an agreement substantially in the form of Exhibit VI among the Originator, Servicer, Seller, the Administrative Agent and a Blocked Account Bank. "Blocked Account Bank" means, at any time, any of the banks holding one or more Blocked Accounts. "Blocked Accounts" mean the Bank of America Blocked Account, the Bank of Boston Blocked Account and the Wachovia Blocked Account. "Blue Ridge" has the meaning set forth in the preamble to this Agreement. "Blue Ridge's Portion" means, on any date of determination, the sum of the percentages represented by the Receivable Interests. "Broken Funding Costs" means for any Receivable Interest which: (i) has its Invested Amount reduced without compliance by Seller with the notice requirements hereunder or (ii) does not become subject to an Aggregate Reduction following the delivery of any Reduction Notice or (iii) is assigned by Blue Ridge to the Liquidity Banks under the Liquidity Agreement or terminated prior to the date on which it was originally scheduled to end; an amount equal to the excess, if any, of (A) the CP Costs or Yield (as applicable) that would have accrued during the remainder of the Tranche Periods or the tranche periods for Commercial Paper determined by the Administrative Agent to relate to such Receivable Interest (as applicable) subsequent to the date of such reduction, assignment or termination (or in respect of clause (ii) above, the date such Aggregate Reduction was designated to occur pursuant to the Reduction Notice) of the Invested Amount of such Receivable Interest if such reduction, assignment or termination had not occurred or such Reduction Notice had not been delivered, over (B) the sum of (x) to the extent all or a portion of such Invested Amount is allocated to another Receivable Interest, the amount of CP Costs or Yield actually accrued during the remainder of such period on such Invested Amount for the new Receivable Interest, and (y) to the extent such Invested Amount is not allocated to another Receivable Interest, the income, if any, actually received during the remainder of such period by the holder of such Receivable Interest from investing the portion of such Invested Amount not so allocated. All Broken Funding Costs shall be due and payable hereunder upon demand. "Business Day" means any day on which banks are not authorized or required to close in New York, New York, Atlanta, Georgia, or Columbus, Ohio, and The Depository Trust Company of New York is open for business. "Calculation Period" means a calendar month. "Change of Control" means (a) the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 20% or more of the outstanding shares of voting stock of Originator, or (b) Originator ceases to own 100% of the outstanding shares of voting stock of Seller. "Collection Notice" means a notice, in substantially the form of Annex A to Exhibit VI, from the Administrative Agent to a Blocked Account Bank. "Collections" means, with respect to any Receivable, all cash collections and other cash proceeds in respect of such Receivable, including, without limitation, all Finance Charges or other related amounts accruing in respect thereof and all cash proceeds of Related Security with respect to such Receivable. "Commercial Paper" means promissory notes of Blue Ridge issued by Blue Ridge in the commercial paper market. "Contingent Obligation" of a Person means any agreement, undertaking or arrangement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes or is contingently liable upon, the obligation or liability of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person, or otherwise assures any creditor of such other Person against loss, including, without limitation, any comfort letter, operating agreement, take-or-pay contract or application for a letter of credit. "Contract" means, with respect to any Receivable, any and all instruments, agreements, invoices or other writings pursuant to which such Receivable arises or which evidences such Receivable. "CP Costs" means, for each day, the sum of (i) discount or interest accrued on Pooled Commercial Paper on such day, plus (ii) any and all accrued commissions in respect of placement agents and Commercial Paper dealers, and issuing and paying agent fees incurred, in respect of such Pooled Commercial Paper for such day, plus (iii) other costs associated with funding small or odd-lot amounts with respect to all receivable purchase or financing facilities which are funded by Pooled Commercial Paper for such day, minus (iv) any accrual of income net of expenses received on such day from investment of collections received under all receivable purchase or financing facilities funded substantially with Pooled Commercial Paper, minus (v) any payment received on such day net of expenses in respect of Broken Funding Costs related to the prepayment of any investment of Blue Ridge pursuant to the terms of any receivable purchase or financing facilities funded substantially with Pooled Commercial Paper. In addition to the foregoing costs, if Seller shall request any Purchase during any period of time determined by the Administrative Agent in its sole discretion, to result in incrementally higher CP Costs applicable to such Purchase, the principal associated with any such Purchase shall, during such period, be deemed to be funded by Blue Ridge in a special pool (which may include capital associated with other receivable purchase or financing facilities) for purposes of determining such additional CP Costs applicable only to such special pool and charged each day during such period against such principal. "Credit and Collection Policy" means Seller's reasonable and customary credit and collection policies and practices relating to Contracts and Receivables existing on the date hereof, as modified from time to time in accordance with this Agreement. "Cut-Off Date" means the last day of a Calculation Period. "Days Sales Outstanding" means, as of any day, an amount equal to the product of (x) 91, multiplied by (y) the amount obtained by dividing (i) the aggregate outstanding balance of Receivables as of the most recent Cut-Off Date, by (ii) the aggregate amount of Receivables created during the three (3) Calculation Periods including and immediately preceding such Cut-Off Date. "Deemed Collections" means Collections deemed received by Seller under Section 1.4(a). "Default Horizon Ratio" means, as of any Cut-Off Date, the ratio (expressed as a decimal) computed by dividing (i) the aggregate sales generated by the Originator during the immediately preceding four Calculation Periods ending on such Cut-Off Date, by (ii) the Net Pool Balance as of such Cut-off Date. "Default Rate" means a rate per annum equal to the sum of (i) the Alternate Base Rate plus (ii) 2.00%, changing when and as the Alternate Base Rate changes. "Default Ratio" means, as of any Cut-Off Date, the ratio (expressed as a percentage) computed by dividing (x) the total amount of Receivables which became Defaulted Receivables during the Calculation Period that includes such Cut-Off Date, by (y) the aggregate sales generated by the Originator during the Calculation Period occurring four months prior to the Calculation Period ending on such Cut-Off Date. "Defaulted Receivable" means a Receivable: (i) as to which the Obligor thereof has suffered an Event of Bankruptcy; (ii) which, consistent with the Credit and Collection Policy, would be written off Seller's books as uncollectible; (iii) as to which payments have been extended, or the terms of payment thereof rewritten, other than as permitted by Section 8.2(c); or (iv) as to which any payment, or part thereof, remains unpaid for 121 days or more from the original invoice date of such Receivable. "Delinquency Ratio" means, at any time, a percentage equal to (i) the aggregate Outstanding Balance of all Receivables that were Delinquent Receivables at such time divided by (ii) the aggregate Outstanding Balance of all Receivables at such time. "Delinquent Receivable" means a Receivable as to which any payment, or part thereof, remains unpaid for 91-120 days from the original invoice date of such Receivable. "Delivery Order" means, with respect to any Lock-Box, a delivery order, in substantially the form attached hereto as Exhibit X, which permits the Person designated thereon to require delivery to such Person of all items in such Lock-Box. "Dilution" means the amount of any reduction or cancellation of the Outstanding Balance of a Receivable as described in Section 1.4(a). "Dilution Horizon Ratio" means as of any Cut-Off Date, a ratio (expressed as a decimal), computed by dividing (i) the aggregate dollar amount of Receivables generated by the Originator for the two (2) most recent Settlement Periods by (ii) the Net Pool Balance as of the most recent Cut-Off Date. "Dilution Ratio" means, as of any Cut-Off Date, a ratio (expressed as a percentage), computed by dividing (i) the total amount of decreases in Outstanding Balances due to Dilutions during the previous Calculation Period ending on such Cut-Off Date, by (ii) the aggregate sales generated by the Originator during the second preceding Calculation Period prior to the Calculation Period ending on such Cut-Off Date. "Dilution Reserve" means, for any Calculation Period, the product (expressed as a percentage) of: (a) the sum of (i) two (2) times the Adjusted Dilution Ratio as of the immediately preceding Cut-Off Date, plus (ii) the Dilution Volatility Component as of the immediately preceding Cut- Off Date, times (b) the Dilution Horizon Ratio as of the immediately preceding Cut-Off Date. "Dilution Volatility Component" means the product (expressed as a percentage) of (i) the difference between (a) the highest three (3)-month rolling average Dilution Ratio over the past 12 Calculation Periods and (b) the Adjusted Dilution Ratio, and (ii) a fraction, the numerator of which is equal to the amount calculated in (i)(a) of this definition and the denominator of which is equal to the amount calculated in (i)(b) of this definition. "Dollar" means lawful currency of the United States of America. "Downgraded Liquidity Bank" means a Liquidity Bank which has been the subject of a Downgrading Event. "Downgrading Event" with respect to any Person means the lowering of the rating with regard to the short-term securities of such Person to below (i) A-1 by S&P, or (ii) P-1 by Moody's. "Eligible Assignee" means a commercial bank having a combined capital and surplus of at least $250,000,000 with a rating of its (or its holding company's) short-term securities equal to or higher than (i) A-1 by S&P and (ii) P-1 by Moody's. "Eligible Receivable" means, at any time, a Receivable: (a) the Obligor of which (i) if a natural person, is a resident of the United States or, if a corporation or other business organization, has a billing address in the United States; (ii) is not an Affiliate of any of Seller Parties or the Originator; and (iii) is not a government or a governmental subdivision or agency, (b) [reserved], (c) which is not a Defaulted Receivable; (d) which is not a Delinquent Receivable on the date on which it was acquired by the Seller from the Originator, (e) which by its terms is due and payable within 60 days of the original invoice date therefor, (f) the original term of which has not been extended and has not had its unpaid balance adjusted more than once, (g) as to which perfection of the Administrative Agent's security interest therein is governed by the laws of a jurisdiction where the UCC is in force, and which is an "account" within the meaning of Section 9-106 of the UCC of all applicable jurisdictions, (h) which is denominated and payable only in United States dollars in the United States, (i) which arises under a Contract in substantially the form of one of the form contracts set forth on Exhibit IX hereto or otherwise approved by the Administrative Agent in writing, which, together with such Receivable, is in full force and effect and constitutes the legal, valid and binding obligation of the related Obligor enforceable against such Obligor in accordance with its terms subject to no dispute, offset, counterclaim or other defense, (j) which arises under a Contract which (i) does not require the Obligor under such Contract to consent to the transfer, sale, pledge or assignment of the rights of the Originator or any of its assignees under such Contract, (ii) does not contain a confidentiality provision that purports to restrict the ability of Blue Ridge to exercise its rights under this Agreement and (iii) to the extent that such Contract contains a confidentiality provision, permits disclosure of such Contract in accordance with applicable law, (k) the sale of an undivided interest in which does not contravene or conflict with any law, (l) which arises under a Contract that contains an obligation to pay a specified sum of money, contingent only upon the sale of goods or the provision of serves by the Originator, (m) which, together with the Contract related thereto, does not contravene any law, rule or regulation applicable thereto (including, without limitation, any law, rule and regulation relating to truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy) and with respect to which no party to the Contract related thereto is in violation of any such law, rule or regulation in any material respect if such violation would impair the collectibility of such Receivable, (n) which satisfies in all material respects all applicable requirements of the Credit and Collection Policy, (o) which was generated in the ordinary course of the Originator's business, (p) which arises under a Contract solely from the sale of goods or the provision of services to the related Obligor by the Originator, and not by any other Person (in whole or in part), (q) as to which the Administrative Agent has not notified Seller that the Administrative Agent has determined that such Receivable or class of Receivables is not acceptable as an Eligible Receivable, including, without limitation, because such Receivable arises under a Contract that is not acceptable to the Administrative Agent, (r) which is not subject to any dispute, counterclaim, right of rescission, set-off, counterclaim or any other defense (including defenses arising out of violations of usury laws) of the applicable Obligor against the Originator or any other Adverse Claim, and the Obligor thereon holds no right as against the Originator to cause the Originator to repurchase the goods or merchandise the sale of which shall have given rise to such Receivable (except with respect to sale discounts effected pursuant to the Contract, or defective goods returned in accordance with the terms of the Contract); provided, however, that if such dispute, offset, counterclaim or defense affects only a portion of the Outstanding Balance of such Receivable, then such Receivable may be deemed an Eligible Receivable to the extent of the portion of such Outstanding Balance which is not so affected, and provided, further, that Receivables of any Obligor which has any accounts payable by the Originator or by a wholly- owned Subsidiary of the Originator (thus giving rise to a potential offset against such Receivables) may be treated as Eligible Receivables to the extent that the Obligor of such Receivables has agreed pursuant to a written agreement in form and substance satisfactory to the Administrative Agent, that such Receivables shall not be subject to such offset,] (s) as to which the Originator has satisfied and fully performed all obligations on its part with respect to such Receivable required to be fulfilled by it, and no further action is required to be performed by any Person with respect thereto other than payment thereon by the applicable Obligor, (t) as to which each of the representations and warranties in this Agreement and the Transaction Documents is true and correct, and (u) all right, title and interest to and in which has been validly transferred by the Originator directly to Seller under and in accordance with the Receivables Sale Agreement, and Seller has good and marketable title thereto free and clear of any Adverse Claim. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any rule or regulation issued thereunder. "ERISA Affiliate" means any trade or business (whether or not incorporated) under common control with the Performance Guarantor within the meaning of Section 414(b) or (c) of the Tax Code (and Sections 414(m) and (o) of the Tax Code for purposes of provisions relating to Section 412 of the Tax Code). "Eurodollar Business Day" means any day on which dealings in dollar deposits are carried on in the London interbank market. "Eurodollar Rate" means for any Tranche Period of a Liquidity Funding, the rate per annum determined on the basis of the offered rate for deposits in Dollars of amounts equal or comparable to the principal amount of the related funding under the Liquidity Funding offered for a term comparable to such Tranche Period, which rates appear on the Telerate Page 3750 effective as of 11:00 a.m., London time, two Eurodollar Business Days prior to the first day of such Tranche Period, provided that if no such offered rates appear on such page, the Eurodollar Rate for such Tranche Period will be the arithmetic average (rounded upwards, if necessary, to the next higher 1/100th of 1%) of rates quoted by not less than two major banks in New York City, selected by the Administrative Agent, at approximately 10:00 a.m., New York City time, two Eurodollar Business Days prior to the first day of such Tranche Period, for deposits in Dollars offered by leading European banks for a period comparable to such Tranche Period in an amount comparable to the principal amount of such funding under a Liquidity Funding. "Eurodollar Rate (Reserve Adjusted)" means with respect to any Tranche Period of a Liquidity Funding, a rate per annum equal to the quotient obtained (rounded upwards, if necessary, to the next higher 1/100th of 1%) by dividing (i) the applicable Eurodollar Rate for such Tranche Period by (ii) 1.0 minus the Eurodollar Reserve Percentage. "Eurodollar Reserve Percentage" means with respect to any Tranche Period of a Liquidity Funding, the maximum reserve percentage, if any, applicable to the Liquidity Bank under Regulation D during such Tranche Period (or if more than one percentage shall be applicable, the daily average of such percentages for those days in such Tranche Period during which any such percentage shall be applicable) for determining the Liquidity Bank's reserve requirement (including any marginal, supplemental or emergency reserves) with respect to liabilities or assets having a term comparable to such Tranche Period consisting or included in the computation of "Eurocurrency Liabilities" pursuant to Regulation D. Without limiting the effect of the foregoing, the Eurodollar Reserve Percentage shall reflect any other reserves required to be maintained by the Liquidity Bank by reason of any regulatory change. "Event of Bankruptcy" shall be deemed to have occurred with respect to a Person if either: (a) a case or other proceeding shall be commenced, without the application or consent of such Person, in any court, seeking the liquidation, reorganization, debt arrangement, dissolution, winding up, or composition or readjustment of debts of such Person, the appointment of a trustee, receiver, custodian, liquidator, assignee, sequestrator or the like for such Person or all or substantially all of its assets, or any similar action with respect to such Person under any law relating to bankruptcy, insolvency, reorganization, winding up or composition or adjustment of debts, and such case or proceeding shall continue undismissed, or unstayed and in effect, for a period of 60 consecutive days; or an order for relief in respect of such Person shall be entered in an involuntary case under the federal bankruptcy laws or other similar laws now or hereafter in effect; or (b) such Person shall commence a voluntary case or other proceeding under any applicable bankruptcy, insolvency, reorganization, debt arrangement, dissolution or other similar law now or hereafter in effect, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee (other than a trustee under a deed of trust, indenture or similar instrument), custodian, sequestrator (or other similar official) for, such Person or for any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall be adjudicated insolvent, or admit in writing its inability to pay its debts generally as they become due, or, if a corporation or similar entity, its board of directors shall vote to implement any of the foregoing. "Facility Account" means Seller's account no. 8736000912 at Wachovia. "Facility Termination Date" means the earliest to occur of (i) the day on which any of the conditions precedent set forth in Section 6.2 are not satisfied, (ii) the Business Day immediately prior to the occurrence of an Event of Bankruptcy with respect to any Seller Party, (iii) the Business Day specified in a written notice from the Administrative Agent following the occurrence of any other Amortization Event, (iv) the date which is 30 Business Days after the Administrative Agent's receipt of written notice from Seller that it wishes to terminate the facility evidenced by this Agreement, (v) the date that is three years from the effective date of this Agreement, (vi) the Liquidity Termination Date and (vii) the date on which the Purchaser shall become an "investment company" within the meaning of the Investment Company Act of 1940. "Federal Bankruptcy Code" means Title 11 of the United States Code entitled "Bankruptcy," as amended and any successor statute thereto. "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum for each day during such period (rounded upwards if necessary, to the next higher 1/100th of 1%) equal to (i) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the preceding Business Day) by the Federal Reserve Bank of New York in the Composite Closing Quotations for U.S. Government Securities; or (ii) if such rate is not so published for any day which is a Business Day, the average rate of the quotations at approximately 11:30 a.m. (New York time) for such day on such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. "Fee Letter" means that certain letter agreement dated as of December 28, 2000 among Seller, Originator and the Administrative Agent, as it may be amended, restated or otherwise modified and in effect from time to time. "Final Payout Date" means the date on which all Aggregate Unpaids have been paid in full and the Purchase Limit has been reduced to zero. "Finance Charges" means, with respect to a Contract, any finance, interest, late payment charges or similar charges owing by an Obligor pursuant to such Contract. "Funding Agreement" means (i) this Agreement, (ii) the Liquidity Agreement and (iii) any other agreement or instrument executed by any Funding Source with or for the benefit of Blue Ridge. "Funding Source" means (i) any Liquidity Bank or (ii) any insurance company, bank or other funding entity providing liquidity, credit enhancement or back-up purchase support or facilities to Blue Ridge. "GAAP" means generally accepted accounting principles in effect in the United States of America as of the date of this Agreement. "Incremental Purchase" means a purchase of one or more Receivable Interests which increases the total outstanding Aggregate Invested Amount hereunder. "Indebtedness" of a Person means such Person's (i) obligations for borrowed money, (ii) obligations representing the deferred purchase price of property or services (other than accounts payable arising in the ordinary course of such Person's business payable on terms customary in the trade), (iii) obligations, whether or not assumed, secured by liens or payable out of the proceeds or production from property now or hereafter owned or acquired by such Person, (iv) obligations which are evidenced by notes, acceptances, or other instruments, (v) capitalized lease obligations, (vi) net liabilities under interest rate swap, exchange or cap agreements, (vii) Contingent Obligations and (viii) liabilities in respect of unfunded vested benefits under plans covered by Title IV of ERISA. "Indemnified Amounts" has the meaning specified in Section 10.1. "Indemnified Party" has the meaning specified in Section 10.1. "Independent Director" shall mean a member of the Board of Directors of Seller who is not at such time, and has not been at any time during the preceding five (5) years: (A) a director, officer, employee or affiliate of the Performance Guarantor, the Originator or any of their respective Subsidiaries or Affiliates (other than Seller), or (B) the beneficial owner (at the time of such individual's appointment as an Independent Director or at any time thereafter while serving as an Independent Director) of any of the outstanding common shares of Seller, the Originator, or any of their respective Subsidiaries or Affiliates, having general voting rights. "Invested Amount" of any Receivable Interest means, at any time, (A) the Purchase Price of such Receivable Interest, minus (B) the sum of the aggregate amount of Collections and other payments received by the Administrative Agent which in each case are applied to reduce such Invested Amount in accordance with the terms and conditions of this Agreement; provided that such Invested Amount shall be restored (in accordance with Section 2.5) in the amount of any Collections or other payments so received and applied if at any time the distribution of such Collections or payments are rescinded, returned or refunded for any reason. "Liquidity Agreement" means that certain Liquidity Asset Purchase Agreement dated as of December 28, 2000, by and among Blue Ridge, the Administrative Agent and the banks from time to time party thereto, as the same may be amended, restated and/or otherwise modified from time to time in accordance with the terms thereof. "Liquidity Bank" means each bank from time to time party to the Liquidity Agreement (other than the Administrative Agent acting in its capacity as the Administrative Agent thereunder). "Liquidity Commitment" means, as to each Liquidity Bank, its commitment under the Liquidity Agreement. The Liquidity Commitments, in the aggregate, shall equal 102% of the Purchase Limit hereunder. "Liquidity Funding" means a purchase by any Liquidity Bank pursuant to its Liquidity Commitment of all or any portion of, or any undivided interest in, a Receivable Interest. "Liquidity Termination Date" means the earlier to occur of the following: (a) the date on which the Liquidity Banks' Liquidity Commitments expire, cease to be available to Blue Ridge or otherwise cease to be in full force and effect; or (b) the date on which a Downgrading Event with respect to a Liquidity Bank shall have occurred and been continuing for not less than 45 days, and either (i) the Downgraded Liquidity Bank shall not have been replaced by an Eligible Assignee pursuant to the Liquidity Agreement, or (ii) the Liquidity Commitment of such Downgraded Liquidity Bank shall not have been funded or collateralized in such a manner that will avoid a reduction in or withdrawal of the credit rating applied to the Commercial Paper to which such Liquidity Agreement applies by any of the rating agencies then rating such Commercial Paper. "Lock-Box" means each locked postal box which is listed on Exhibit IV. "Loss Reserve" means, for any Calculation Period, the product (expressed as a percentage) of (a) 2.0, times (b) the highest three-month rolling average Default Ratio during the 12 Calculation Periods ending on the immediately preceding Cut-Off Date, times (c) the Default Horizon Ratio as of the immediately preceding Cut-Off Date. "Material Adverse Effect" means a material adverse effect on (i) the financial condition or operations of any Seller Party and its Subsidiaries, (ii) the ability of any Seller Party to perform its obligations under this Agreement or the Performance Guarantor to perform its obligations under the Performance Undertaking (iii) the legality, validity or enforceability of this Agreement or any other Transaction Document, (iv) the Administrative Agent's security interest, for the benefit of the Secured Parties, in the Receivables generally or in any significant portion of the Receivables, the Related Security or the Collections with respect thereto, or (v) the collectibility of the Receivables generally or of any material portion of the Receivables. "Material Indebtedness" has the meaning set forth in Section 9.1(f). "Monthly Report" means a report, in substantially the form of Exhibit VIII hereto (appropriately completed), furnished by the Servicer to the Administrative Agent pursuant to Section 8.5. "Monthly Reporting Date" means the first Friday after the third Monday of each calendar month after the date of this Agreement (or if any such day is not a Business Day, the next succeeding Business Day thereafter). "Moody's" means Moody's Investors Service, Inc. "Net Pool Balance" means, at any time, the aggregate Outstanding Balance of all Eligible Receivables at such time reduced by the aggregate amount by which the Outstanding Balance of all Eligible Receivables of each Obligor and its Affiliates exceeds the Obligor Concentration Limit for such Obligor. "Obligor" means a Person obligated to make payments pursuant to a Contract. "Obligor Concentration Limit" means, at any time, in relation to the aggregate Outstanding Balance of Receivables owed by any single Obligor and its Affiliates (if any), the applicable concentration limit shall be determined as follows: (a) for Obligors who have short term unsecured debt ratings currently assigned to them by S&P and Moody's (or in the absence thereof, the equivalent long term unsecured senior debt ratings), the applicable concentration limit shall be determined according to the following table: Allowable % of S&P Rating Moody's Rating Eligible Receivables A-1+ P-1 10% A-1 P-1 8% A-2 P-2 6% A-3 P-3 3% Below A-3 or Not Below P-3 or Rated by either Not Rated by 3% S&P or Moody's either S&P or Moody's provided, however, that (i) if any Obligor has a split rating, the applicable rating will be the lower of the two, (ii) if any Obligor is not rated by either S&P or Moody's, the applicable Obligor Concentration Limit shall be the one set forth in the last line of the table above, and (iii) subject to satisfaction of the Rating Agency Condition and/or an increase in the percentage set forth in clause (a)(i) of the definition of "Required Reserve," upon the Seller's request from time to time, the Administrative Agent may agree to a higher percentage of Eligible Receivables for a particular Obligor and its Affiliates (each such higher percentage, a "Special Concentration Limit"), it being understood that any Special Concentration Limit may be cancelled by the Administrative Agent upon not less than five (5) Business Days' written notice to the Seller Parties. "Originator" means Airborne Express, Inc., in its capacity as seller under the Receivables Sale Agreement. "Other Costs" has the meaning set forth in Section 10.3. "Other Customers" has the meaning set forth in Section 10.4. "Outstanding Balance" of any Receivable at any time means the then outstanding principal balance thereof, excluding all late payment charges, delinquency charges and extension or collection fees. "PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereto. "Pension Plan" means a pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA which the Performance Guarantor or any of its ERISA Affiliates sponsors or maintains, or to which it makes, is making, or is obligated to make contributions, or in the case of a multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions at any time during the immediately preceding five plan years. "Performance Guarantor" means Airborne, Inc., a Delaware corporation. "Performance Undertaking" means that certain Performance Undertaking, dated as of December 28, 2000 by Performance Guarantor in favor of Seller, substantially in the form of Exhibit VII, as the same may be amended, restated or otherwise modified from time to time. "Person" means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA) which the Performance Guarantor or any of its ERISA Affiliates sponsors or maintains or to which the Performance Guarantor or any of its ERISA Affiliates makes, is making, or is obligated to make contributions and includes any Pension Plan, other than a Plan maintained outside the United States primarily for the benefit of Persons who are not U.S. residents. "Pooled Commercial Paper" means all short-term Commercial Paper issued by the Purchaser from time to time, subject to any pooling arrangement by the Purchaser, but excluding short-term Commercial Paper issued by the Purchaser both for a tenor and in an amount specifically requested by any Person in connection with any receivables purchase facility effected by the Purchaser. "Prime Rate" means an interest rate per annum so denominated and set by Wachovia from time to time as an interest rate basis for the borrowings. The Prime Rate is but one of several interest rates used by Wachovia. Wachovia lends at interest rates above and below the Prime Rate. "Proposed Reduction Date" has the meaning set forth in Section 1.3. "Purchase" means an Incremental Purchase or a Reinvestment. "Purchase Date" means each Business Day on which a Purchase is made hereunder. "Purchase Limit" means up to $200,000,000. "Purchase Notice" has the meaning set forth in Section 1.2. "Purchase Price" means, with respect to any Incremental Purchase of a Receivable Interest, the amount paid to Seller for such Receivable Interest which shall not exceed the least of (i) the amount requested by Seller in the applicable Purchase Notice, (ii) the unused portion of the Purchase Limit on the applicable purchase date and (iii) the excess, if any, of the Net Pool Balance (less the Required Reserve) on the applicable purchase date over the aggregate outstanding amount of Aggregate Invested Amount determined as of the date of the most recent Monthly Report, taking into account such proposed Incremental Purchase. "Purchased Assets" means all of Seller's right, title and interest, whether now owned and existing or hereafter arising in and to all of the Receivables, the Related Security, the Collections and all proceeds of the foregoing. "Purchaser" means Blue Ridge Asset Funding Corporation and its successors and assigns. "Rating Agency Condition" means that Blue Ridge has received written notice from S&P and Moody's that an amendment, a change or a waiver will not result in a withdrawal or downgrade of the then current ratings on Blue Ridge's Commercial Paper. "Receivable" means all indebtedness and other obligations owed to Seller or the Originator (at the time it arises, and before giving effect to any transfer or conveyance under the Receivables Sale Agreement) or in which Seller or the Originator has a security interest or other interest, including, without limitation, any indebtedness, obligation or interest constituting an account, chattel paper, instrument or general intangible, arising in connection with the sale of goods or the rendering of services by the Originator and further includes, without limitation, the obligation to pay any Finance Charges with respect thereto. Indebtedness and other rights and obligations arising from any one transaction, including, without limitation, indebtedness and other rights and obligations represented by an individual invoice, shall constitute a Receivable separate from a Receivable consisting of the indebtedness and other rights and obligations arising from any other transaction; provided further, that any indebtedness, rights or obligations referred to in the immediately preceding sentence shall be a Receivable regardless of whether the account debtor or Seller treats such indebtedness, rights or obligations as a separate payment obligation. "Receivable Interest" means, at any time, an undivided percentage ownership interest (computed as set forth below) associated with a designated amount of Invested Amount, selected pursuant to the terms and conditions hereof in (i) each Receivable arising prior to the time of the most recent computation or recomputation of such undivided interest, (ii) all Related Security with respect to each such Receivable, and (iii) all Collections with respect to, and other proceeds of, each such Receivable. Each such undivided percentage interest shall equal: IA + RR NPB where: IA = the Invested Amount of such Receivable Interest. NPB = the Net Pool Balance. RR = the Required Reserve. Such undivided percentage ownership interest shall be initially computed on its date of purchase. Thereafter, until the Facility Termination Date, each Receivable Interest shall be automatically recomputed (or deemed to be recomputed) on each day prior to the Facility Termination Date. The variable percentage represented by any Receivable Interest as computed (or deemed recomputed) as of the close of the business day immediately preceding the Facility Termination Date shall remain constant at all times thereafter. "Receivables Sale Agreement" means that certain Receivables Sale Agreement, dated as of December 28, 2000, among the Originator and Seller, as the same may be amended, restated or otherwise modified from time to time. "Records" means, with respect to any Receivable, all Contracts and other documents, books, records and other information (including, without limitation, computer programs, tapes, disks, punch cards, data processing software and related property and rights) relating to such Receivable, any Related Security therefor and the related Obligor. "Recourse Obligations" has the meaning set forth in Section 2.1. "Reduction Notice" has the meaning set forth in Section 1.3. "Regulatory Change" has the meaning set forth in Section 10.2. "Reinvestment" has the meaning set forth in Section 2.2. "Related Security" means, with respect to any Receivable: (a) all of Seller's interest in the inventory and goods (including returned or repossessed inventory or goods), if any, the sale of which by the Originator gave rise to such Receivable, and all insurance contracts with respect thereto, (b) all other security interests or liens and property subject thereto from time to time, if any, purporting to secure payment of such Receivable, whether pursuant to the Contract related to such Receivable or otherwise, together with all financing statements and security agreements describing any collateral securing such Receivable, (c) all guaranties, letters of credit, insurance and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Receivable whether pursuant to the Contract related to such Receivable or otherwise, (d) all service contracts and other contracts and agreements associated with such Receivable, (e) all Records related to such Receivable, (f) all of Seller's right, title and interest in, to and under the Receivables Sale Agreement in respect of such Receivable and all of Seller's right, title and interest in, to and under the Performance Undertaking. (g) all proceeds of any of the foregoing. "Required Liquidity Banks" means, at any time, Liquidity Banks with Liquidity Commitments in excess of 50% of the aggregate amount of all Liquidity Commitments. "Required Notice Period" means the number of days required notice set forth below applicable to the Aggregate Reduction indicated below: Aggregate Reduction Required Notice Period up to 25% of the 2 Business Days Purchase Limit 25% and up to 50% of 5 Business Days the Purchase Limit 50% or more of the 10 Business Days Purchase Limit "Required Reserve" means, on any day during a Calculation Period, the product of (a) the greater of (i) the Required Reserve Factor Floor and (ii) the sum of the Loss Reserve, the Yield Reserve, the Dilution Reserve and the Servicing Reserve, times (b) the Net Pool Balance as of such date. "Required Reserve Factor Floor" means the sum of (a) 12.0% and (b) the product of (i) the Adjusted Dilution Ratio and (ii) the Dilution Horizon Ratio. "Restricted Junior Payment" means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of capital stock of Seller now or hereafter outstanding, except a dividend payable solely in shares of that class of stock or in any junior class of stock of Seller, (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of capital stock of Seller now or hereafter outstanding, (iii) any payment or prepayment of principal of, premium, if any, or interest, fees or other charges on or with respect to, and any redemption, purchase, retirement, defeasance, sinking fund or similar payment and any claim for rescission with respect to the Subordinated Loans (as defined in the Receivables Sale Agreement), (iv) any payment made to redeem, purchase, repurchase or retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of capital stock of Seller now or hereafter outstanding, and (v) any payment of management fees by Seller (except for reasonable management fees to the Originator or its Affiliates in reimbursement of actual management services performed). "Review" has the meaning specified in Section 7.1(d). "S&P" means Standard and Poor's Ratings Services, a division of The McGraw Hill Companies, Inc. "Secured Parties" means the Indemnified Parties. "Seller" has the meaning set forth in the preamble to this Agreement. "Seller Parties" has the meaning set forth in the preamble to this Agreement. "Servicer" means at any time the Person (which may be the Administrative Agent) then authorized pursuant to Article VIII to service, administer and collect Receivables. "Servicing Fee" means, for each day in a Calculation Period: (a) an amount equal to (i) 0.50% per annum or 1.0% if the original Servicer is replaced (the "Servicing Fee Rate") times (ii) the aggregate Outstanding Balance of all Receivables at the close of business on the Cut-Off Date immediately preceding such Calculation Period, times (iii) 1/360; or (b) on and after the Servicer's reasonable request made at any time when no Airborne affiliate is acting as Servicer hereunder, an alternative amount specified by the successor Servicer not exceeding (i) 110% of such successor Servicer's reasonable costs and expenses of performing its obligations under this Agreement during the preceding Calculation Period, divided by (ii) the number of days in the current Calculation Period. "Servicing Fee Rate" means 1.0% per annum. "Servicing Reserve" means, for any Calculation Period, the product (expressed as a percentage) of (a) the Servicing Fee Rate, times (b) a fraction, the numerator of which is the highest Days Sales Outstanding for the most recent 12 Calculation Periods and the denominator of which is 360. "Settlement Date" means (A) the 2nd Business Day after each Monthly Reporting Date, and (B) the last day of the relevant Tranche Period in respect of each Receivable Interest funded through a Liquidity Funding, provided however, with respect to any Tranche Period for any Receivable Interest funded through a Liquidity Funding that is six months, the Settlement Date for such Tranche Period shall occur on the last day of the third (3rd) month of such Tranche Period and on the last day of such Tranche Period. "Settlement Period" means (A) in respect of each Receivable Interest funded through the issuance of Commercial Paper, the immediately preceding Calculation Period, and (B) in respect of each Receivable Interest funded through a Liquidity Funding, the entire Tranche Period of such Liquidity Funding. "Subsidiary" of a Person means (i) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any partnership, association, limited liability company, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. "Tax Code" means the Internal Revenue Code of 1986, as the same may be amended from time to time. "Terminating Tranche" has the meaning set forth in Section 4.3(b). "Tranche Period" means, with respect to any Receivable Interest funded through a Liquidity Funding: (a) if Yield for such Receivable Interest is calculated on the basis of the Eurodollar Rate (Reserve Adjusted), a period of one, two, three or six months, or such other period as may be mutually agreeable to the Administrative Agent and Seller, commencing on a Business Day selected by Seller or the Administrative Agent pursuant to this Agreement. Such Tranche Period shall end on the day in the applicable succeeding calendar month which corresponds numerically to the beginning day of such Tranche Period, provided, however, that if there is no such numerically corresponding day in such succeeding month, such Tranche Period shall end on the last Business Day of such succeeding month; or (b) if Yield for such Receivable Interest is calculated on the basis of the Alternate Base Rate, a period commencing on a Business Day selected by the Administrative Agent, commencing on the day such Liquidity Funding occurs, provided that no such period shall exceed one month. If any Tranche Period would end on a day which is not a Business Day, such Tranche Period shall end on the next succeeding Business Day, provided, however, that in the case of Tranche Periods corresponding to the Eurodollar Rate (Reserve Adjusted), if such next succeeding Business Day falls in a new month, such Tranche Period shall end on the immediately preceding Business Day. In the case of any Tranche Period which commences before the Facility Termination Date and would otherwise end on a date occurring after the Facility Termination Date, such Tranche Period shall end on the Facility Termination Date. The duration of each Tranche Period which commences after the Facility Termination Date shall be of such duration as selected by the Administrative Agent. "Transaction Documents" means, collectively, this Agreement, each Purchase Notice, the Receivables Sale Agreement, each Blocked Account Agreement, the Performance Undertaking, the Fee Letter, each Subordinated Note (as defined in the Receivables Sale Agreement) and all other instruments, documents and agreements executed and delivered in connection herewith. "UCC" means the Uniform Commercial Code as from time to time in effect in the specified jurisdiction. "Unmatured Amortization Event" means an event which, with the passage of time or the giving of notice, or both, would constitute an Amortization Event. "Wachovia" means Wachovia Bank, N.A. in its individual capacity and its successors. "Wachovia Blocked Account" means, collectively, those depositary account numbers 8735-028902 and 8736-000912 maintained in the name of the Seller with Wachovia and in which any Collections are collected or deposited. "Yield" means for each Tranche Period relating to a Receivable Interest funded through a Liquidity Funding, an amount equal to the product of the applicable Yield Rate for such Receivable Interest multiplied by the Invested Amount of such Receivable Interest for each day elapsed during such Tranche Period, annualized on a 360 day basis. "Yield Rate" means, with respect to each Receivable Interest funded through a Liquidity Funding, the Eurodollar Rate (Reserve Adjusted), the Alternate Base Rate or the Default Rate, as applicable. "Yield Reserve" means, for any Calculation Period, the product (expressed as a percentage) of (i) 1.5 times (ii) the Alternate Base Rate as of the immediately preceding Cut-Off Date times (iii) a fraction the numerator of which is the highest Days Sales Outstanding for the most recent 12 Calculation Periods and the denominator of which is 360. All accounting terms not specifically defined herein shall be construed in accordance with GAAP. All terms used in Article 9 of the UCC in the State of New York, and not specifically defined herein, are used herein as defined in such Article 9. EXHIBIT II FORM OF PURCHASE NOTICE Airborne Credit, Inc. PURCHASE NOTICE dated ______________, 20__ for Purchase on ________________, 20__ Wachovia Bank, N.A., as Administrative Agent 191 Peachtree Street, N.E., GA-423 Atlanta, Georgia 30303 Attention: ____________, Fax No. (404) _______ With a copy to: John Dillon, Fax No. (336) ______________ Ladies and Gentlemen: Reference is made to the Receivables Purchase Agreement dated as of December 28, 2000 (as amended, supplemented or otherwise modified from time to time, the "Receivables Purchase Agreement") among Airborne Credit, Inc. (the "Seller"), Airborne Express, Inc. (the "Servicer"), Blue Ridge Asset Funding Corporation, and Wachovia Bank N.A., as Administrative Agent. Capitalized terms defined in the Receivables Purchase Agreement are used herein with the same meanings. 1. The [Servicer, on behalf of the] Seller hereby certifies, represents and warrants to the Administrative Agent and Blue Ridge that on and as of the Purchase Date (as hereinafter defined): (a) all applicable conditions precedent set forth in Article VI of the Receivables Purchase Agreement have been satisfied; (b) each of its representations and warranties contained in Section 5.1 of the Receivables Purchase Agreement will be true and correct, in all material respects, as if made on and as of the Purchase Date; (c) no event will have occurred and is continuing, or would result from the requested Purchase, that constitutes an Amortization Event or Unmatured Amortization Event; (d) the Facility Termination Date has not occurred; and (e) after giving effect to the Purchase requested below, the Aggregate Invested Amount will not exceed the Purchase Limit and the aggregate Receivable Interests will not exceed 100%. 2. The [Servicer, on behalf of the] Seller hereby requests that Blue Ridge make a Purchase on ___________, 20__ (the "Purchase Date") as follows: (a) Purchase Price: $_____________ (b) If the Purchase is funded with a Liquidity Funding, [Servicer on behalf of the] Seller requests that the Invested Amount (which will initially accrue Yield at the Alternate Base Rate) begin to accrued Yield at a Eurodollar Rate (Reserve Adjusted) for a Tranche Period of _____ months on the third Business Day after the Purchase Date). 3. Please disburse the proceeds of the Purchase as follows: [Apply $________ to payment of Aggregate Unpaids due on the Purchase Date]. [Wire transfer $________ to account no. ________ at ___________ Bank, in [city, state], ABA No. __________, Reference: ________]. IN WITNESS WHEREOF, the [Servicer, on behalf of the] Seller has caused this Purchase Request to be executed and delivered as of this ____ day of ___________, _____. [_______________________, as Servicer, on behalf of:] ____________., as Seller By: Name: Title: EXHIBIT III PLACES OF BUSINESS OF THE SELLER; LOCATIONS OF RECORDS; FEDERAL EMPLOYER IDENTIFICATION NUMBER Places of Business: Airborne Credit, Inc. 21240 Ridgetop Circle Sterling, VA 20166 Tel.: Locations of Records: Airborne Credit, Inc. 21240 Ridgetop Circle Sterling, VA 20166 Tel.: And: Airborne Credit, Inc. 3101 Western Avenue Seattle, WA 98121-1043 Mailing Address: P.O. Box 662 Seattle, WA 98111-0662 Tel.: (206) 830-4600 Federal Employer Identification Number: Airborne Credit, Inc.: EIN # Legal, Trade and Assumed Names: Airborne Credit, Inc. EXHIBIT IV LOCK-BOXES & BLOCKED ACCOUNTS Lock-Box Related Blocked Account Name of Current Account Airborne Credit, Inc. Holder: (Current Name: Airborne Freight Corporation Airborne Express) P.O Box 91001 Bank of America, N.T.S.A. Seattle, WA 98111 Account Number: 1233386558 ABA Number: 121000358 Contact Person: Aaron Van Antwerp Contact's Tel: (925) 675- 7052 Contact's Fax: (877) 681- 1132 Name of Current Account Holder: Airborne Freight Corp. Wachovia Bank, N.A. Account Number: 8736-000912 ABA Number: 053100494 Contact Person: Betty Howard Contact's Tel: (404) 332- 6458 Contact's Fax: (404) 332- 5253 Name of Current Account Holder: Airborne Freight Corporation Wachovia Bank, N.A. Account Number: 8735-028902 ABA Number: 053100494 Contact Person: Betty Howard Contact's Tel: (404) 332- 6458 Contact's Fax: (404) 332- 5253 Name of Current Account Holder: Airborne Freight Corporation Bank of Boston, a ________ banking association Account Number: 580-35308 ABA Number: 011000390 Contact Person: _________________ Contact's Tel: ( )_______________ Contact's Fax: ( )_______________ EXHIBIT V FORM OF COMPLIANCE CERTIFICATE To: Wachovia Bank, N.A., as Administrative Agent This Compliance Certificate is furnished pursuant to that certain Receivables Purchase Agreement dated as of December 28, 2000 among Airborne Credit, Inc. (the "Seller"), Airborne Express, Inc. (the "Servicer"), Blue Ridge Asset Funding Corporation and Wachovia Bank, N.A., as administrative Agent (the "Agreement"). THE UNDERSIGNED HEREBY CERTIFIES THAT: 1. I am the duly elected _________________ of Seller. 2. I have reviewed the terms of the Agreement and I have made, or have caused to be made under my supervision, a detailed review of the transactions and conditions of Seller and its Subsidiaries during the accounting period covered by the attached financial statements. 3. The examinations described in paragraph 2 did not disclose, and I have no knowledge of, the existence of any condition or event which constitutes an Amortization Event or Unmatured Amortization Event, as each such term is defined under the Agreement, during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate[, except as set forth in paragraph 5 below]. 4. Schedule I attached hereto sets forth financial data and computations evidencing the compliance with certain covenants of the Agreement, all of which data and computations are true, complete and correct. [5. Described below are the exceptions, if any, to paragraph 3 by listing, in detail, the nature of the condition or event, the period during which it has existed and the action which Seller has taken, is taking, or proposes to take with respect to each such condition or event: ____________________] The foregoing certifications, together with the computations set forth in Schedule I hereto and the financial statements delivered with this Certificate in support hereof, are made and delivered as of ______________, 20__. By: Name: Title: SCHEDULE I TO COMPLIANCE CERTIFICATE A. Schedule of Compliance as of __________, ____ with Section ___ of the Agreement. Unless otherwise defined herein, the terms used in this Compliance Certificate have the meanings ascribed thereto in the Agreement. This schedule relates to the month ended: _______________ EXHIBIT VI FORM OF BLOCKED ACCOUNT AGREEMENT BLOCKED ACCOUNT AGREEMENT _____________, 2000 [Blocked Account Bank Name] [Blocked Account Bank Address] Attn: ____________________ Fax No. (___) ______________ Re: [Name of current Blocked Account owner]/Airborne Credit, Inc. Ladies and Gentlemen: Reference is hereby made to the bank account[s] number[ed] ___________ (each, a "Blocked Account") of which [Blocked Account Bank Name], a _________ banking association (hereinafter "you"), has exclusive control for the purpose of processing deposits therefrom pursuant to the [Account Agreement] originally by and between Airborne Express, Inc. (the "Company") and you (the "Account Agreement"). 1. The Company hereby informs you that it has transferred to its affiliate, Airborne Credit, Inc., an Ohio corporation (the "Seller") all of the Company's right, title and interest in and to the items from time to time deposited in the Blocked Account, but that the Company has agreed to continue to service the receivables giving rise to such items. Accordingly, the Company and Seller hereby request that the name of the Blocked Account be changed to "Airborne Credit, Inc." Seller hereby further advises you that it has pledged the receivables giving rise to such items to Wachovia Bank, N.A., as administrative agent for various parties (in such capacity, the "Administrative Agent") and has granted a security interest to the Administrative Agent on behalf the Secured Parties in all of Seller's right, title and interest in and to the Blocked Account and the funds therein. 2. Each of the Company and Seller hereby irrevocably instructs you, and you hereby agree, that upon receiving notice from the Administrative Agent in the form attached hereto as Annex A: (i) the name of the Blocked Account will be changed to "Wachovia Bank, N.A., as Administrative Agent" (or any designee of the Administrative Agent), and the Administrative Agent will have exclusive ownership of and access to the Blocked Account and none of the Company, Seller, nor any of their respective affiliates will have any control of the Blocked Account or any access thereto, (ii) you will transfer monies on deposit in the Blocked Account to the following account: Bank Name: Wachovia Bank, N.A. Location: Winston-Salem, SC ABA Routing No.: ABA # 053100494 Credit Account No.: For credit to Blue Ridge Asset Funding Account #8735-098787. Reference: Blue Ridge/Airborne Credit, Inc. Attention: John Dillon, tel. (336) 732-2690 or to such other account as the Administrative Agent may specify, (iii) all services to be performed by you under the Account Agreement will be performed on behalf of the Administrative Agent, and (iv) all correspondence or other mail which you have agreed to send to the Company or Seller will be sent to the Administrative Agent at the following address: Wachovia Bank, N.A., as Administrative Agent 191 Peachtree Street Mail Stop GA-423 Atlanta, GA 30303 Attn: Elizabeth K. Wagner, Asset-Backed Finance FAX: (404) 332- 5152 Moreover, upon such notice, the Administrative Agent will have all rights and remedies given to the Company (and Seller, as the Company's assignee) under the Account Agreement. The Company agrees, however, to continue to pay all fees and other assessments due thereunder at any time. 3. You hereby acknowledge that monies deposited in the Blocked Account or any other account established with you by the Administrative Agent for the purpose of receiving funds from the Blocked Account are subject to the liens of the Administrative Agent, and will not be subject to deduction, set-off, banker's lien or any other right you or any other party may have against the Company or Seller except that you may debit the Blocked Account for any items deposited therein that are returned or otherwise not collected and for all charges, fees, commissions and expenses incurred by you in providing services hereunder, all in accordance with your customary practices for the charge back of returned items and expenses. 4. You will be liable only for direct damages in the event you fail to exercise ordinary care. You shall be deemed to have exercised ordinary care if your action or failure to act is in conformity with general banking usages or is otherwise a commercially reasonable practice of the banking industry. You shall not be liable for any special, indirect or consequential damages, even if you have been advised of the possibility of these damages. 5. The parties acknowledge that you may assign or transfer your rights and obligations hereunder solely to a wholly-owned subsidiary of [insert name of Blocked Account Bank's holding company]. 6. Seller agrees to indemnify you for, and hold you harmless from, all claims, damages, losses, liabilities and expenses, including legal fees and expenses, resulting from or with respect to this letter agreement and the administration and maintenance of the Blocked Account and the services provided hereunder, including, without limitation: (a) any action taken, or not taken, by you in regard thereto in accordance with the terms of this letter agreement, (b) the breach of any representation or warranty made by Seller pursuant to this letter agreement, (c) any item, including, without limitation, any automated clearinghouse transaction, which is returned for any reason, and (d) any failure of Seller to pay any invoice or charge to you for services in respect to this letter agreement and the Blocked Account or any amount owing to you from Seller with respect thereto or to the service provided hereunder. 7. THIS LETTER AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER WILL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF _________, WHICH STATE SHALL BE YOUR "LOCATION" FOR PURPOSES OF THE UNIFORM COMMERCIAL CODE FROM AND AFTER JULY 1, 2001. This letter agreement may be executed in any number of counterparts and all of such counterparts taken together will be deemed to constitute one and the same instrument. 8. This letter agreement contains the entire agreement between the parties, and may not be altered, modified, terminated or amended in any respect, nor may any right, power or privilege of any party hereunder be waived or released or discharged, except upon execution by all parties hereto of a written instrument so providing. In the event that any provision in this letter agreement is in conflict with, or is inconsistent with, any provision of the Account Agreement, this letter agreement will exclusively govern and control. Each party agrees to take all actions reasonably requested by any other party to carry out the purposes of this letter agreement or to preserve and protect the rights of each party hereunder. Please indicate your agreement to the terms of this letter agreement by signing in the space provided below. This letter agreement will become effective immediately upon execution of a counterpart of this letter agreement by all parties hereto. Very truly yours, AIRBORNE EXPRESS, INC. By: Name: Title: Acknowledged and agreed to as of the date first above written: [BLOCKED ACCOUNT BANK] By: Name: Title: WACHOVIA BANK, N.A., AS ADMINISTRATIVE AGENT By: Name: Title: AIRBORNE CREDIT, INC. By: Name: Title: ANNEX A FORM OF NOTICE [On letterhead of the Administrative Agent] [Date] [Blocked Account Bank Name] [Blocked Account Bank Address] Attn: ____________________ Fax No. (___) ______________ Re: [Name of current Blocked Account owner]/Airborne Express, Inc. Ladies and Gentlemen: We hereby notify you that we are exercising our rights pursuant to that certain letter agreement dated December 28, 2000 (the "Letter Agreement") among [Name of current Blocked Account Owner], Airborne Credit, Inc., you and us, to have the name of, and to have exclusive ownership and control of, account no. __________ identified in the Letter Agreement (the "Blocked Account") maintained with you, transferred to us. The Blocked Account will henceforth be a zero-balance account, and funds deposited in the Blocked Account should be sent at the end of each day to the account specified in Section 2 of the Letter Agreement, or as otherwise directed by the undersigned. You have further agreed to perform all other services you are performing under the "Account Agreement" (as defined in the Letter Agreement) on our behalf. We appreciate your cooperation in this matter. Very truly yours, WACHOVIA BANK, N.A., AS ADMINISTRATIVE AGENT By: Name: Title: FORM OF PERFORMANCE UNDERTAKING THIS PERFORMANCE UNDERTAKING (this "Undertaking"), dated as of December 28, 2000, is executed by Airborne, Inc., a Delaware corporation (the "Performance Guarantor") in favor of Airborne Credit, Inc., a Virginia corporation (together with its successors and assigns, "Recipient"). RECITALS 1. Airborne Express, Inc. ("Airborne Express" or the "Originator"), and Recipient have entered into a Receivables Sale Agreement, dated as of December 28, 2000 (as amended, restated or otherwise modified from time to time, the "Sale Agreement"), pursuant to which Originator, subject to the terms and conditions contained therein, is selling and/or contributing its right, title and interest in its accounts receivable to Recipient. 2. Performance Guarantor owns one hundred percent (100%) of the capital stock of the Originator and Recipient and accordingly, Performance Guarantor, is expected to receive substantial direct and indirect benefits from its sale or contribution of receivables to Recipient pursuant to the Sale Agreement (which benefits are hereby acknowledged). 3. As an inducement for Recipient to acquire Originator's accounts receivable pursuant to the Sale Agreement, Performance Guarantor has agreed to guaranty the due and punctual performance by Originator of its obligations under the Sale Agreement, as well as Airborne Express's Servicing Related Obligations (as hereinafter defined). 4. Performance Guarantor wishes to guaranty the due and punctual performance by Originator of its obligations to Recipient under or in respect of the Sale Agreement and Airborne Express' Servicing Related Obligations (as hereinafter defined), as provided herein. AGREEMENT NOW, THEREFORE, Performance Guarantor hereby agrees as follows: Section 1. Definitions. Capitalized terms used herein and not defined herein shall the respective meanings assigned thereto in the Sale Agreement or the Receivables Purchase Agreement (as hereinafter defined). In addition: "Guaranteed Obligations" means, collectively: (a) all covenants, agreements, terms, conditions and indemnities to be performed and observed by the Originator under and pursuant to the Receivables Sale Agreement and each other document executed and delivered by the Originator pursuant to the Sale Agreement, including, without limitation, the due and punctual payment of all sums which are or may become due and owing by the Originator under the Sale Agreement, whether for fees, expenses (including counsel fees), indemnified amounts or otherwise, whether upon any termination or for any other reason and (b) all obligations of Airborne Express (i) as Servicer under the Receivables Purchase Agreement, dated as of December 28, 2000 by and among Recipient, as Seller, Airborne Express, Inc., as Servicer, Blue Ridge Asset Funding Corporation, as Purchaser and Wachovia Bank, N.A., as Administrative Agent (the "Administrative Agent") (as amended, restated or otherwise modified, the "Receivables Purchase Agreement" and, together with the Sale Agreement, the "Agreements") or (ii) which arise pursuant to Sections 8.2, 8.3 or 14.3(a) of the Receivables Purchase Agreement as a result of its termination as Servicer (all such obligations under this clause (b), collectively, the "Servicing Related Obligations"). Section 2. Guaranty of Performance of Guaranteed Obligations. Performance Guarantor hereby guarantees to Recipient, the full and punctual payment and performance by the Originator of its Guaranteed Obligations. This Undertaking is an absolute, unconditional and continuing guaranty of the full and punctual performance of all Guaranteed Obligations of the Originator under the Agreements and each other document executed and delivered by the Originator pursuant to the Agreements and is in no way conditioned upon any requirement that Recipient first attempt to collect any amounts owing by the Originator to Recipient, the Administrative Agent or the Purchaser from any other Person or resort to any collateral security, any balance of any deposit account or credit on the books of Recipient, the Administrative Agent or the Purchaser in favor of the Originator or any other Person or other means of obtaining payment. Should the Originator default in the payment or performance of any of its Guaranteed Obligations, Recipient (or its assigns) may cause the immediate performance by Performance Guarantor of the Guaranteed Obligations and cause any payment of Guaranteed Obligations to become forthwith due and payable to Recipient (or its assigns), without demand or notice of any nature (other than as expressly provided herein), all of which are hereby expressly waived by Performance Guarantor. Notwithstanding the foregoing, this Undertaking is not a guarantee of the collection of any of the Receivables and Performance Guarantor shall not be responsible for any Guaranteed Obligations to the extent the failure to perform such Guaranteed Obligations by the Originator results from Receivables being uncollectible on account of the insolvency, bankruptcy or lack of creditworthiness of the related Obligor; provided that nothing herein shall relieve the Originator from performing in full its Guaranteed Obligations under the Agreements or Performance Guarantor of its undertaking hereunder with respect to the full performance of such duties. Section 3. Performance Guarantor's Further Agreements to Pay. Performance Guarantor further agrees, as the principal obligor and not as a guarantor only, to pay to Recipient (and its assigns), forthwith upon demand in funds immediately available to Recipient, all reasonable costs and expenses (including court costs and reasonable legal expenses) incurred or expended by Recipient in connection with the Guaranteed Obligations, this Undertaking and the enforcement thereof, together with interest on amounts recoverable under this Undertaking from the time when such amounts become due until payment, at a rate of interest (computed for the actual number of days elapsed based on a 360 day year) equal to the Prime Rate plus 2% per annum, such rate of interest changing when and as the Prime Rate changes. Section 4. Waivers by Performance Guarantor. Performance Guarantor waives notice of acceptance of this Undertaking, notice of any action taken or omitted by Recipient (or its assigns) in reliance on this Undertaking, and any requirement that Recipient (or its assigns) be diligent or prompt in making demands under this Undertaking, giving notice of any Termination Event, Amortization Event, other default or omission by the Originator or asserting any other rights of Recipient under this Undertaking. Performance Guarantor warrants that it has adequate means to obtain from the Originator, on a continuing basis, information concerning the financial condition of such Originator, and that it is not relying on Recipient to provide such information, now or in the future. Performance Guarantor also irrevocably waives all defenses (i) that at any time may be available in respect of the Obligations by virtue of any statute of limitations, valuation, stay, moratorium law or other similar law now or hereafter in effect or (ii) that arise under the law of suretyship, including impairment of collateral. Recipient (and its assigns) shall be at liberty, without giving notice to or obtaining the assent of Performance Guarantor and without relieving Performance Guarantor of any liability under this Undertaking, to deal with the Originator and with each other party who now is or after the date hereof becomes liable in any manner for any of the Guaranteed Obligations, in such manner as Recipient in its sole discretion deems fit, and to this end Performance Guarantor agrees that the validity and enforceability of this Undertaking, including without limitation, the provisions of Section 7 hereof, shall not be impaired or affected by any of the following: (a) any extension, modification or renewal of, or indulgence with respect to, or substitutions for, the Guaranteed Obligations or any part thereof or any agreement relating thereto at any time; (b) any failure or omission to enforce any right, power or remedy with respect to the Guaranteed Obligations or any part thereof or any agreement relating thereto, or any collateral securing the Guaranteed Obligations or any part thereof; (c) any waiver of any right, power or remedy or of any Termination Event, Amortization Event, or default with respect to the Guaranteed Obligations or any part thereof or any agreement relating thereto; (d) any release, surrender, compromise, settlement, waiver, subordination or modification, with or without consideration, of any other obligation of any person or entity with respect to the Guaranteed Obligations or any part thereof; (e) the enforceability or validity of the Guaranteed Obligations or any part thereof or the genuineness, enforceability or validity of any agreement relating thereto or with respect to the Guaranteed Obligations or any part thereof; (f) the application of payments received from any source to the payment of any payment Obligations of the Originator or any part thereof or amounts which are not covered by this Undertaking even though Recipient (or its assigns) might lawfully have elected to apply such payments to any part or all of the payment Obligations of such Originator or to amounts which are not covered by this Undertaking; (g) the existence of any claim, setoff or other rights which Performance Guarantor may have at any time against the Originator in connection herewith or any unrelated transaction; (h) any assignment or transfer of the Guaranteed Obligations or any part thereof; or (i) any failure on the part of the Originator to perform or comply with any term of the Agreements or any other document executed in connection therewith or delivered thereunder, all whether or not Performance Guarantor shall have had notice or knowledge of any act or omission referred to in the foregoing clauses (a) through (i) of this Section 4. Section 5. Unenforceability of Guaranteed Obligations Against Originators. Notwithstanding (a) any change of ownership of the Originator or the insolvency, bankruptcy or any other change in the legal status of the Originator; (b) the change in or the imposition of any law, decree, regulation or other governmental act which does or might impair, delay or in any way affect the validity, enforceability or the payment when due of the Guaranteed Obligations; (c) the failure of the Originator or Performance Guarantor to maintain in full force, validity or effect or to obtain or renew when required all governmental and other approvals, licenses or consents required in connection with the Guaranteed Obligations or this Undertaking, or to take any other action required in connection with the performance of all obligations pursuant to the Guaranteed Obligations or this Undertaking; or (d) if any of the moneys included in the Guaranteed Obligations have become irrecoverable from the Originator for any other reason other than final payment in full of the payment Obligations in accordance with their terms, this Undertaking shall nevertheless be binding on Performance Guarantor. This Undertaking shall be in addition to any other guaranty or other security for the Guaranteed Obligations, and it shall not be rendered unenforceable by the invalidity of any such other guaranty or security. In the event that acceleration of the time for payment of any of the Guaranteed Obligations is stayed upon the insolvency, bankruptcy or reorganization of the Originator or for any other reason with respect to the Originator, all such amounts then due and owing with respect to the Guaranteed Obligations under the terms of the Agreements, or any other agreement evidencing, securing or otherwise executed in connection with the Guaranteed Obligations, shall be immediately due and payable by Performance Guarantor. Section 6. Representations and Warranties. Performance Guarantor hereby represents and warrants to Recipient that: (a) Existence and Standing. Performance Guarantor is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation. Performance Guarantor is duly qualified to do business and is in good standing as a foreign corporation, and has and holds all corporate power and all governmental licenses, authorizations, consents and approvals required to carry on its business in each jurisdiction in which its business is conducted except where the failure to so qualify or so hold could not reasonably be expected to have a Material Adverse Effect. (b) Authorization, Execution and Delivery; Binding Effect. The execution and delivery by Performance Guarantor of this Undertaking, and the performance of its obligations hereunder, are within its corporate powers and authority and have been duly authorized by all necessary corporate action on its part. This Undertaking has been duly executed and delivered by Performance Guarantor. This Undertaking constitutes the legal, valid and binding obligation of Performance Guarantor enforceable against Performance Guarantor in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). (c) No Conflict; Government Consent. The execution and delivery by Performance Guarantor of this Undertaking, and the performance of its obligations hereunder do not contravene or violate (i) its certificate or articles of incorporation or by- laws, (ii) any law, rule or regulation applicable to it, (iii) any restrictions under any agreement, contract or instrument to which it is a party or by which it or any of its property is bound, or (iv) any order, writ, judgment, award, injunction or decree binding on or affecting it or its property, and do not result in the creation or imposition of any Adverse Claim on assets of Performance Guarantor or its Subsidiaries (except as created hereunder) except, in any case, where such contravention or violation could not reasonably be expected to have a Material Adverse Effect. (d) Financial Statements. The consolidated financial statements of Performance Guarantor and its consolidated Subsidiaries dated as of December 31, 1999 and September 30, 2000 heretofore delivered to Recipient have been prepared in accordance with generally accepted accounting principles consistently applied and fairly present in all material respects the consolidated financial condition and results of operations of Performance Guarantor and its consolidated Subsidiaries as of such dates and for the periods ended on such dates. Since the later of (i) September 30, 2000 and (ii) the last time this representation was made or deemed made, no event has occurred which would or could reasonably be expected to have a Material Adverse Effect. (e) Taxes. Performance Guarantor has filed all United States federal tax returns and all other tax returns which are required to be filed and have paid all taxes due pursuant to said returns or pursuant to any assessment received by Performance Guarantor or any of its Subsidiaries, except such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided. The United States income tax returns of Performance Guarantor have been audited by the Internal Revenue Service through the fiscal year ended December 31, 1999. No federal or state tax liens have been filed and no claims are being asserted with respect to any such taxes. The charges, accruals and reserves on the books of Performance Guarantor in respect of any taxes or other governmental charges are adequate. (f) Litigation and Contingent Obligations. Except as disclosed in the filings made by Performance Guarantor with the Securities and Exchange Commission, there are no actions, suits or proceedings pending or, to the best of Performance Guarantor's knowledge threatened against or affecting Performance Guarantor or any of its properties, in or before any court, arbitrator or other body, that could reasonably be expected to have a Material Adverse Effect on (i) the business, properties, condition (financial or otherwise) or results of operations of Performance Guarantor and its Subsidiaries taken as a whole, (ii) the ability of Performance Guarantor to perform its obligations under this Undertaking, or (iii) the validity or enforceability of any of this Undertaking or the rights or remedies of Recipient hereunder. Performance Guarantor does not have any material Contingent Obligations not provided for or disclosed in the financial statements referred to in Section 6(d). Section 7. Subrogation; Subordination. Notwithstanding anything to the contrary contained herein, until the Guaranteed Obligations are paid in full Performance Guarantor: (a) will not enforce or otherwise exercise any right of subrogation to any of the rights of Recipient, the Administrative Agent or any Lender against the Originator, (b) hereby waives all rights of subrogation (whether contractual, under Section 509 of the United States Bankruptcy Code, at law or in equity or otherwise) to the claims of Recipient, the Administrative Agent and the Purchaser against the Originator and all contractual, statutory or legal or equitable rights of contribution, reimbursement, indemnification and similar rights and "claims" (as that term is defined in the United States Bankruptcy Code) which Performance Guarantor might now have or hereafter acquire against the Originator that arise from the existence or performance of Performance Guarantor's obligations hereunder, (c) will not claim any setoff, recoupment or counterclaim against the Originator in respect of any liability of Performance Guarantor to such Originator and (d) waives any benefit of and any right to participate in any collateral security which may be held by Beneficiaries, the Administrative Agent or the Purchaser. The payment of any amounts due with respect to any indebtedness of the Originator now or hereafter owed to Performance Guarantor is hereby subordinated to the prior payment in full of all of the Guaranteed Obligations. Performance Guarantor agrees that, after the occurrence of any default in the payment or performance of any of the Guaranteed Obligations, Performance Guarantor will not demand, sue for or otherwise attempt to collect any such indebtedness of the Originator to Performance Guarantor until all of the Guaranteed Obligations shall have been paid and performed in full. If, notwithstanding the foregoing sentence, Performance Guarantor shall collect, enforce or receive any amounts in respect of such indebtedness while any Obligations are still unperformed or outstanding, such amounts shall be collected, enforced and received by Performance Guarantor as trustee for Recipient (and its assigns) and be paid over to Recipient (or its assigns) on account of the Guaranteed Obligations without affecting in any manner the liability of Performance Guarantor under the other provisions of this Undertaking. The provisions of this Section 7 shall be supplemental to and not in derogation of any rights and remedies of Recipient under any separate subordination agreement which Recipient may at any time and from time to time enter into with Performance Guarantor. Section 8. Termination of Performance Undertaking. Performance Guarantor's obligations hereunder shall continue in full force and effect until all Obligations are finally paid and satisfied in full and the Credit and Security Agreement is terminated, provided that this Undertaking shall continue to be effective or shall be reinstated, as the case may be, if at any time payment or other satisfaction of any of the Guaranteed Obligations is rescinded or must otherwise be restored or returned upon the bankruptcy, insolvency, or reorganization of the Originator or otherwise, as though such payment had not been made or other satisfaction occurred, whether or not Recipient (or its assigns) is in possession of this Undertaking. No invalidity, irregularity or unenforceability by reason of the federal bankruptcy code or any insolvency or other similar law, or any law or order of any government or agency thereof purporting to reduce, amend or otherwise affect the Guaranteed Obligations shall impair, affect, be a defense to or claim against the obligations of Performance Guarantor under this Undertaking. Section 9. Effect of Bankruptcy. This Performance Undertaking shall survive the insolvency of the Originator and the commencement of any case or proceeding by or against the Originator under the federal bankruptcy code or other federal, state or other applicable bankruptcy, insolvency or reorganization statutes. No automatic stay under the federal bankruptcy code with respect to the Originator or other federal, state or other applicable bankruptcy, insolvency or reorganization statutes to which the Originator is subject shall postpone the obligations of Performance Guarantor under this Undertaking. Section 10. Setoff. Regardless of the other means of obtaining payment of any of the Guaranteed Obligations, Recipient (and its assigns) is hereby authorized at any time and from time to time, without notice to Performance Guarantor (any such notice being expressly waived by Performance Guarantor) and to the fullest extent permitted by law, to set off and apply any deposits and other sums against the obligations of Performance Guarantor under this Undertaking, whether or not Recipient (or any such assign) shall have made any demand under this Undertaking and although such Obligations may be contingent or unmatured. Section 11. Taxes. All payments to be made by Performance Guarantor hereunder shall be made free and clear of any deduction or withholding. If Performance Guarantor is required by law to make any deduction or withholding on account of tax or otherwise from any such payment, the sum due from it in respect of such payment shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding, Recipient receive a net sum equal to the sum which they would have received had no deduction or withholding been made. Section 12. Further Assurances. Performance Guarantor agrees that it will from time to time, at the request of Recipient (or its assigns), provide information relating to the business and affairs of Performance Guarantor as Recipient may reasonably request. Performance Guarantor also agrees to do all such things and execute all such documents as Recipient (or its assigns) may reasonably consider necessary or desirable to give full effect to this Undertaking and to perfect and preserve the rights and powers of Recipient hereunder. Section 13. Successors and Assigns. This Performance Undertaking shall be binding upon Performance Guarantor, its successors and permitted assigns, and shall inure to the benefit of and be enforceable by Recipient and its successors and assigns. Performance Guarantor may not assign or transfer any of its obligations hereunder without the prior written consent of each of Recipient and the Administrative Agent. Without limiting the generality of the foregoing sentence, Recipient may assign or otherwise transfer the Agreements, any other documents executed in connection therewith or delivered thereunder or any other agreement or note held by them evidencing, securing or otherwise executed in connection with the Guaranteed Obligations, or sell participations in any interest therein, to any other entity or other person, and such other entity or other person shall thereupon become vested, to the extent set forth in the agreement evidencing such assignment, transfer or participation, with all the rights in respect thereof granted to the Beneficiaries herein. Section 14. Amendments and Waivers. No amendment or waiver of any provision of this Undertaking nor consent to any departure by Performance Guarantor therefrom shall be effective unless the same shall be in writing and signed by Recipient, the Administrative Agent and Performance Guarantor. No failure on the part of Recipient to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. Section 15. Notices. All notices and other communications provided for hereunder shall be made in writing and shall be addressed as follows: if to Performance Guarantor, at the address set forth beneath its signature hereto, and if to Recipient, at the addresses set forth beneath its signature hereto, or at such other addresses as each of Performance Guarantor or any Recipient may designate in writing to the other. Each such notice or other communication shall be effective (1) if given by telecopy, upon the receipt thereof, (2) if given by mail, three (3) Business Days after the time such communication is deposited in the mail with first class postage prepaid or (3) if given by any other means, when received at the address specified in this Section 15. Section 16. GOVERNING LAW. THIS UNDERTAKING SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK (AND NOT THE LAW OF CONFLICTS OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). Section 17. CONSENT TO JURISDICTION. EACH OF PERFORMANCE GUARANTOR AND RECIPIENT HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS UNDERTAKING, THE AGREEMENTS OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION THEREWITH OR DELIVERED THEREUNDER AND EACH OF THE PERFORMANCE GUARANTOR AND RECIPIENT HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. Section 18. Bankruptcy Petition. Performance Guarantor hereby covenants and agrees that, prior to the date that is one year and one day after the payment in full of all outstanding senior Indebtedness of Recipient, it will not institute against, or join any other Person in instituting against, Recipient any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States. Section 19. Miscellaneous. This Undertaking constitutes the entire agreement of Performance Guarantor with respect to the matters set forth herein. The rights and remedies herein provided are cumulative and not exclusive of any remedies provided by law or any other agreement, and this Undertaking shall be in addition to any other guaranty of or collateral security for any of the Guaranteed Obligations. The provisions of this Undertaking are severable, and in any action or proceeding involving any state corporate law, or any state or federal bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of Performance Guarantor hereunder would otherwise be held or determined to be avoidable, invalid or unenforceable on account of the amount of Performance Guarantor's liability under this Undertaking, then, notwithstanding any other provision of this Undertaking to the contrary, the amount of such liability shall, without any further action by Performance Guarantor or Recipient, be automatically limited and reduced to the highest amount that is valid and enforceable as determined in such action or proceeding. Any provisions of this Undertaking which are 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. Unless otherwise specified, references herein to "Section" shall mean a reference to sections of this Undertaking. IN WITNESS WHEREOF, Performance Guarantor has caused this Undertaking to be executed and delivered as of the date first above written. AIRBORNE, INC. By: ______________________________ Name: ____________________________ Title: _____________________________ Address: 3101 Western Avenue Seattle, WA 98121-1043 Telephone: (206) 281-1003 Fax: (206) 281-1444 EXHIBIT VIII FORM OF MONTHLY REPORT [EXHIBIT IX FORM OF CONTRACT(S)] [See Attached] EXHIBIT X FORM OF DELIVERY ORDER [On letterhead of the Airborne Credit, Inc.] [Date] United States Postal Service [Address] Attn: ____________________ Fax No. (___) ______________ Re: Post Office Box Number [___________] (the "P.O. Box"). Ladies and Gentlemen: We hereby notify you that we have assigned all of our rights, titles and interests, including, without limitation, all of our rights to control the P.O. Box and/or remove any or all of the items from the P.O. Box to Wachovia Bank, N.A and its successors and designees. From the date hereof, immediately upon the receipt of any item in the P.O. Box, please forward all such items to the following address: Wachovia Bank, N.A., as Administrative Agent 191 Peachtree Street Mail Stop GA-423 Atlanta, GA 30303 Attn: Elizabeth K. Wagner, Asset-Backed Finance FAX: (404) 332- 5152 We appreciate your cooperation in this matter. Very truly yours, AIRBORNE CREDIT, INC. By: Name: Title: SCHEDULE A DOCUMENTS TO BE DELIVERED TO THE ADMINISTRATIVE AGENT ON OR PRIOR TO THE INITIAL PURCHASE 1. Executed copies of the Receivables Purchase Agreement, duly executed by the parties thereto. 2. Copy of the Resolutions of the Board of Directors of each Seller Party certified by its Secretary authorizing such Person's execution, delivery and performance of this Agreement and the other documents to be delivered by it hereunder. 3. Articles or Certificate of Incorporation of each Seller Party certified by the Secretary of State of its jurisdiction of incorporation on or within thirty (30) days prior to the initial Purchase. 4. Good Standing Certificate for each Seller Party issued by the Secretaries of State of its state of incorporation and each jurisdiction where it has material operations, each of which is listed below: (a) Seller: (b) Servicer: 5. A certificate of the Secretary of each Seller Party certifying (i) the names and signatures of the officers authorized on its behalf to execute this Agreement and any other documents to be delivered by it hereunder and (ii) a copy of such Person's By-Laws. 6. Pre-filing state and federal tax lien, judgment lien and UCC lien searches against each Seller Party from the following jurisdictions: (a) Seller: (b) Servicer: 7. Time stamped receipt copies of proper financing statements, duly filed under the UCC on or before the date of the initial Purchase in all jurisdictions as may be necessary or, in the opinion of the Administrative Agent, desirable, under the UCC of all appropriate jurisdictions or any comparable law in order to perfect the ownership interests contemplated by this Agreement. 8. Time stamped receipt copies of proper UCC termination statements, if any, necessary to release all security interests and other rights of any Person in the Receivables, Contracts or Related Security previously granted by Seller. 9. [Reserved]. 10. A favorable opinion of legal counsel for the Seller Parties reasonably acceptable to the Administrative Agent which addresses the following matters and such other matters as the Administrative Agent may reasonably request: (a) due authorization, execution, delivery, enforceability and other corporate matters of the Seller Parties and the Originator as to the Transaction Documents; (b) The creation of a first priority perfected security interest in favor of the Purchaser in (1) all of the Receivables and Related Security (and including specifically any undivided interest therein retained by the Seller hereunder), the Receivables Sale Agreement and other Transaction Documents and (2) all proceeds of any of the foregoing; (c) The existence of a "true sale" of the Receivables from the Originator to the Seller under the Receivables Sale Agreement; (d) The inapplicability of the doctrine of substantive consolidation to the Seller and the Originator in connection with any bankruptcy proceeding involving any Seller Party; and (e) Such other matters as such other matters as the Administrative Agent, acting on behalf of the Purchaser, may reasonably request. 11. A Compliance Certificate. 12. The Fee Letter. 13. A Monthly Report as at November 30, 2000. 14. Executed copies of (i) all consents from and authorizations by any Persons and (ii) all waivers and amendments to existing credit facilities, that are necessary in connection with this Agreement. 15. Executed copies of Delivery Orders for each Lock-Box. 16. If applicable, a direction letter executed by each of the Seller Parties authorizing the Administrative Agent and Blue Ridge, and directing warehousemen to allow the Administrative Agent and Blue Ridge to inspect and make copies from such Seller Party's books and records maintained at off-site data processing or storage facilities. 17. The Liquidity Agreement, duly executed by each of the parties thereto. 18. If applicable, for each Liquidity Bank that is not incorporated under the laws of the United States of America, or a state thereof, two duly completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI, as applicable, certifying in either case that such Liquidity Bank is entitled to receive payments under the Agreement without deduction or withholding of any United States federal income taxes.

Exhibit 10.5 Confidential Materials omitted and filed separately with the Securities and Exchange Commission. Asterisks denote omissions. LICENSE, ASSIGNMENT AND SUPPLY AGREEMENT              THIS LICENSE, ASSIGNMENT AND SUPPLY AGREEMENT (the "Agreement”) is effective as of February 13, 1997 (the "Effective Date"), by and between COULTER CORPORATION (hereinafter "Coulter Corporation") and its wholly-owned subsidiary COULTER INTERNATIONAL CORPORATION (hereinafter "CIC"), each having its respective principal place of business at 11800 S.W. 147th Avenue, Miami, Florida 33196, and COULTER CELLULAR THERAPIES, INC. (hereinafter "CCTI"), having its principal place of business at 3000 Sand Hill Road, Building 3, Suite 255, Menlo Park, California 94025. Coulter Corporation and its Affiliates (including, but not limited to, CIC) shall be referred to collectively in this Agreement as "Coulter". WITNESSETH              WHEREAS, Coulter owns or Controls certain Patent Property, Contractual Rights, Regulatory Rights, Technical Know-How, Biotechnology Assets and Equipment, all relating to the use of Dense Particles (as such terms are defined below) for separating, treating and/or conditioning selected blood cells or other particles in a biological fluid; and              WHEREAS, CCTI has expressed an interest in acquiring and/or licensing said Patent Property, Contractual Rights, Regulatory Rights, Technical Know-How, Biotechnology Assets and Equipment from Coulter; and              WHEREAS, Coulter is willing to transfer ownership and/or license said Patent Property, Contractual Rights, Regulatory Rights, Technical Know-How, Biotechnology Assets and Equipment to CCTI subject to the terms and conditions contained herein;              NOW, THEREFORE, in consideration of the mutual covenants herein contained and intending to be legally bound thereby, the parties hereto agree as follows: 1.          DEFINITIONS.              1.1.       "Affiliate" of a party shall mean any corporation or other business entity controlled, controlling or under common control with such party. For purposes of this section, "control" shall mean direct or indirect beneficial ownership of at least fifty percent (50%) of the voting securities of such corporation or other business entity. Notwithstanding the foregoing, for the purposes of this Agreement, neither Coulter Corporation nor CIC shall be deemed to be an Affiliate of CCTI, and CCTI shall not be deemed to be an Affiliate of Coulter Corporation or CIC.              1.2.       "Biotechnology Assets" shall mean all hybridomas owned or Controlled by Coulter as of the Effective Date. Such hybridomas shall include, but not be limited to, those capable of producing the monoclonal antibodies ("MABs") listed below. The parties agree and acknowledge that: (1) the hybridomas which are capable of producing the Dana-Farber MABs listed below are Controlled by Coulter pursuant to one or more of the Dana-Farber License Agreements; and (2) the MABs marked with an asterisk (*) are subject to the terms of the Ortho Settlement Agreement. Coulter MABs Dana-Farber MABs -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- [**] [**] [**] [**] [**] [**] [**] [**] [**] [**]   [**]   [**]   [**]   [**]   [**]   [**]   [**]              1.3.       "CCTI Field" shall mean the fields of (a) Therapeutic Applications using Dense Particle Cell Separation Technology and (b) RUO Applications using Dense Particle Cell Separation Technology.              1.4.       "Contractual Rights" shall mean Coulter's rights and obligations under the following agreements:              (a)         Research and Development Agreement between Coulter Corporation and University of Miami, Diabetes Research Institute, dated December 29, 1995, as amended by a Research and Development Agreement Amendment dated on or about January 29, 1997 (the "Miami Research Agreement"). Such rights include all of Coulter's rights in U.S. Patent Application Serial No. [**], filed [**] entitled [**] both (i) as a joint owner under such patent application and (ii) all rights Coulter has to obtain an exclusive license from the University of Miami under the foregoing patent application pursuant to Article 5 of the Miami Research Agreement.              (b)         Therapeutic Consulting Agreements:                            (ii)        Between Coulter Corporation and Dr. Lee Nadler, dated April 1, 1996.                            (iii)       Between Coulter Corporation and Dr. Jerome Ritz, dated April 1, 1996.                            (iv)        Between Coulter Corporation and Dr. James Griffin, dated April 1, 1996.                            (v)         Between Coulter Corporation and Dr. John Gribben, dated April 1, 1996.                            (vi)        Between Coulter Corporation and Dr. Norma Kenyon, dated April 1, 1996.              (a)         Research Service Agreement between Coulter Corporation and McMaster University, dated January 30, 1997 (the "McMaster Agreement").              (b)         Agreement for Purchase of Goods and Supplies between Novamet Specialty Products. Corporation and Coulter Corporation, dated January 29, 1997 (the "Novamet Agreement").              1.5.       "Control" shall mean the ability to grant the licenses or sublicenses herein or to make the assignments or transfers set forth herein, as the case may be, without violating the terms of any agreement or other arrangement with any third party.              1.6.       "Dana-Farber License Agreements" shall mean the following five agreements and one acknowledgment letter, between Coulter Corporation (or its predecessor) and the Dana-Farber Cancer Institute, Inc. (or its predecessor) (hereinafter, "Dana-Farber"):                            (i)          Agreement between Sidney Farber Cancer Institute and Coulter Electronics, Inc,, dated July 23, 1981;                            (ii)         Agreement between Dana-Farber Cancer Institute and Coulter Electronics, Inc., dated March 1, 1983;                            (iii)        Agreement between Dana-Farber Cancer Institute and Coulter Immunology, Division of Coulter Corporation, dated April 28, 1983;                            (iv)       Agreement between Dana-Farber Cancer Institute and Coulter Immunology, Division of Coulter Corporation, dated April 1, 1987;                            (v)        Agreement between Coulter Corporation and Dana-Farber Cancer Institute, dated April 1, 1994 (the "1994 Dana-Farber Agreement"); and                            (vi)       Acknowledgment Letter from Dana-Farber Cancer Institute, dated February 4, 1997.              1.7.       "Dense Particle Cell Separation Technology" shall mean technology in which Dense Particles are used to separate, treat and/or condition selected human or animal blood cells or other particulate material in a biological fluid.              1.8.       "Dense Particles" shall mean particles having a density significantly greater than the density of human blood cells or other human cellular material, whereby such particles settle, under gravitational force, in a suspending medium at a rate significantly faster than blood cells settle in the same medium.              1.9.       "Diagnostic Applications" shall mean applications for diagnosing or monitoring a human or animal disease or condition.              1.10.    "Equipment" shall mean instrumentation useful in the analysis of biological fluids, as described in Section 2.8 hereof.              1.11.    "Ortho Settlement Agreement" shall mean that Settlement Agreement, dated March 31, 1992, among Johnson and Johnson, Ortho Diagnostics Systems, Inc. and Ortho Pharmaceutical Corporation (collectively, "Ortho"), Coulter Corporation, and Dana-Farber Cancer Institute, as amended by that certain Amendment to Settlement Agreement, dated February 4, 1997 ("Amendment to Settlement Agreement").              1.12.    "Patent Property" shall mean:                            (a)         the U.S. PATENTS listed on Exhibit 1 and any and all continuations, continuations-in-part and divisions thereof; as well as any re-issuance and/or re-examination or any extension of the U.S. PATENTS listed on Exhibit 1;                            (b)         the U.S. PATENT APPLICATIONS listed on Exhibit 1 and any and all continuations, continuations-in-part and divisions thereof;                            (c)         any U.S. patents issuing on applications, continuations, continuations-in-part and divisions described in clause (b) of this paragraph;                            (d)         any re-issuance and/or re-examination of the patents described in clause (c) of this paragraph;                            (e)         the CORRESPONDING FOREIGN PATENTS AND APPLICATIONS listed on Exhibit 1 (and all continuations, continuations-in-part, divisions and any foreign equivalents thereof) and any foreign patents issuing on such applications, including any re-issuance, re-examination, and any foreign equivalents thereof;                            (f)         any other U.S. or foreign patent applications and patents which claim as a priority date under 35 U.S.C. §119 or §120 one of the filing dates of, or priority dates claimed in, those U.S. PATENTS and U.S. PATENT APPLICATIONS listed on Exhibit 1;                            (g)        the INVENTION DISCLOSURE listed on Exhibit 1, as well as any U.S. and foreign patent applications containing such disclosures (and all continuations, continuations-in-part and divisions thereof);                            (h)        any U.S. and foreign patents issuing on applications, continuations, continuations-in-part, divisions and foreign equivalents thereof described in clauses (f) and (g), including any re-issued and/or re-examined patents and foreign equivalents based thereon;                            (i)         all patents and inventions to which Coulter obtained rights and licenses pursuant to the Ortho Settlement Agreement; and                            (j)         all patents and inventions to which Coulter obtained rights and licenses pursuant to the Dana-Farber License Agreements or any Additional Biotechnology Asset License Agreement (excluding any rights or licenses set forth in Section 1.12(i)).              1.13.    "Property" shall mean the Patent Property, Contractual Rights, Regulatory Rights, Technical Know-How, Biotechnology Assets and Equipment.              1.14.    "Regulatory Rights" shall mean the following regulatory filings, filed by Coulter with the United States Food and Drug Administration ("FDA"): the Pre-IDE Meeting Briefing Document, dated May 15, 1996; the Investigational Device Exemption Application for use of T8 Mab-DP, dated December 19, 1996; and the Type II Drug Master File for T8 Mab-DP product, dated December 23, 1996.              1.15.    "RUO Applications" shall mean applications intended solely for research purposes pertaining to Therapeutic Applications.              1.16.    "Technical Know-How" shall mean any technical knowledge owned or Controlled by Coulter and related to the: (a) automation of the cell separation process using Dense Particles; (b) the use of Dense Particles for protein purification; or (c) cell separation using Dense Particles for therapeutic applications and research purposes.              1.17.    "Therapeutic Applications" shall mean applications for preventing, treating or mitigating a disease or condition in humans and animals.              1.18.    "Additional Biotechnology Asset License Agreement" shall mean any license agreement between Coulter and a third party (other than the Ortho Settlement Agreement and the Dana-Farber License Agreements) which (i) is in existence as of the Effective Date and (ii) grants Coulter a license to one or more Biotechnology Assets. 2.          GRANTS.              2.1.       Grant Related to Coulter-Owned Patent Property and Biotechnology Assets.                            2.1.1    Coulter hereby grants to CCTI a worldwide, royalty-free, exclusive license under (i) the Patent Property described in Section 1.12 (a) - (h) and (ii) the Biotechnology Assets owned by Coulter (including those set forth in Section 1.2), to practice any and all methods, and to make, have made, use, offer for sale, sell and import any and all processes, apparatus and products which are covered by one or more claims in said Patent Property or which contain one or more Biotechnology Assets (or an MAB produced by such Biotechnology Asset) owned by Coulter. Such license is limited to the CCTI Field. The foregoing grant shall be subject to the provisions of Section 2.10 regarding distribution rights.                            2.1.2    CCTI has the right to sublicense, sell or otherwise transfer its rights described in Section 2.1.1 to any other entity.              2.2.       Grant Related to Other Patent Property and Other Biotechnology Assets.                            2.2.1    Coulter hereby grants to CCTI a worldwide, royalty bearing (but only to the extent set forth in Section 2.2.2), exclusive sublicense under (i) the Patent Property described in Section 1.12(i) and (ii) those Biotechnology Assets Controlled by Coulter pursuant to any of the Dana Farber License Agreements or any Additional Biotechnology Asset License Agreement, to practice any and all methods, and to make, have made, use, offer for sale, sell and import any and all processes, apparatus and products which are covered by one or more claims in said Patent Property or which contain one or more such Biotechnology Assets (or an MAB produced by such Biotechnology Asset). Such sublicense is limited to the CCTI Field. The foregoing grant shall be subject to the provisions of Section 2.10 regarding distribution rights. It is understood by the parties that the exclusive sublicense granted from Coulter to CCTI pursuant to this Section 2.2.1 may be under a non-exclusive license from the licensor to Coulter.                            2.2.2    The royalty rate applicable to the sublicense granted pursuant to Section 2.2.1 shall be equal to any amounts which Coulter becomes obligated to pay to (i) Dana-Farber under the Dana Farber License Agreements (including the amount by which Coulter's advanced royalty balance with Dana-Farber is reduced) and (ii) any third party under any Additional Biotechnology Asset License Agreement, as a result of sales by, CCTI pursuant to the sublicense set forth in Section 2.2.1.                            2.2.3    CCTI has the right to sublicense, sell or otherwise transfer its rights described in Section 2.2.1 to any other entity, subject to the same limitations that apply to the underlying license or sublicense.              2.3.       Acknowledgment Regarding Ortho Patent Rights.                            2.3.1    The parties acknowledge and agree that, pursuant to Section 5.1 of the Ortho Settlement Agreement, Coulter Corporation and its "Affiliates" (as such term is defined in the Ortho Settlement Agreement) have a worldwide, non-exclusive right and license under the "Subject Patents" (as such term is defined in the Ortho Settlement Agreement) to make, have made, use and sell certain "Research Products" and "Therapeutic Products" (as such terms are defined in the Ortho Settlement Agreement). The parties further acknowledge and agree that, pursuant to the Amendment to Settlement Agreement, CCTI will be deemed to be an "Affiliate" of Coulter Corporation for so long as Coulter Corporation owns in excess of ten percent (10%) of the voting securities of CCTI and certain other conditions, as set forth in Section 5.1A of the Ortho Settlement Agreement, are met. Accordingly, the parties acknowledge that the license of Patent Property described in Section 1.12(i) extends from Ortho to CCTI (as an "Affiliate" of Coulter Corporation under the terms of the Ortho Settlement Agreement) and Coulter Corporation hereby covenants: (i) that it will not practice any rights it has to such Patent Property in the CCTI Field during the term of this Agreement; and (ii) that it will not permit any other Affiliate of Coulter to practice any rights Coulter and its other Affiliates have to such Patent Property in the CCTI Field during the term of this Agreement. The foregoing covenant shall be subject to the provisions of Section 2.10 regarding distribution rights. As additional consideration for the foregoing covenant, CCTI agrees to pay royalties to Coulter to the extent set forth in Section 2.3.2.                            2.3.2    The royalty rate applicable to the acknowledgment of rights set forth in Section 2.3.1 shall be equal to any amounts which Coulter becomes obligated to pay to Ortho as a result of sales by CCTI pursuant to the Ortho Settlement Agreement.                            2.3.3    CCTI has the right to sublicense, sell or otherwise transfer its rights described in Section 2.3.1 to any other entity; provided, however, that the parties agree and acknowledge that such sublicense, sale or other transfer of those Patent Rights described in Section 1.12(i) which refer to rights derived pursuant to Article 5 of the Ortho Settlement Agreement will require the prior written consent of Ortho.              2.4.       Grant Related to Technical Know-How. Coulter hereby grants to CCTI a worldwide, royalty-free, exclusive-license or sublicense, as the case may be, under the Technical Know-How to-practice any and all methods, and to make, have made, use, offer for sale, sell and import any and all processes, apparatus and products. Such license is limited to the CCTI Field. The license or sublicense includes the right to sublicense to third parties subject to the same limitations that apply to the underlying license or sublicense; provided, however, that the foregoing grant is subject to the provisions of Section 2.10 relating to distribution rights. CCTI will use the same efforts to protect the confidentiality of such Technical Know-How as it uses to protect the confidentiality of its own technical know-how of like character.              2.5.       Assignment Related to Contractual Rights.                            2.5.1    Subject to the terms of this Agreement, Coulter hereby assigns to CCTI Coulter's entire right and interest in and to the Contractual Rights; provided, however, any obligations incurred by Coulter prior to the Effective Date shall remain with Coulter.                            2.5.2    As regards the Miami Research Agreement, CCTI hereby grants to Coulter Corporation, under rights obtained by CCTI pursuant to the Miami Research Agreement, a worldwide, royalty bearing (but only to the extent set forth in Section 2.5.2), exclusive sublicense to make, have made, use, offer for sale, sell and import any and all processes, apparatus and products (i) covered by the invention disclosed and claimed in U.S. Patent Application No. [**], filed [**]; or (ii) which utilize any technical know-how derived by CCTI under the Miami Research Agreement. The sublicense is limited to the field of Diagnostic Applications and related research applications which are used for commercializing the Diagnostic Applications. The sublicense granted under this Section 2.5.2 includes the right to further sublicense to third parties subject to the same limitations that apply to the underlying exclusive sublicense. The royalty rate applicable to the sublicense described in this Section 2.5.2 shall be equal to any amounts which CCTI becomes obligated to pay the University of Miami as a result of sales by Coulter Corporation.                            2.5.3    Within thirty (30) days of the Effective Date, Coulter Corporation will arrange to have executed and filed with the U.S. Patent and Trademark Office the assignment of its rights to U.S. Patent Application No. [**], and any continuations, divisionals, and foreign counterparts thereof, to CCTI.  CCTI will further arrange, with Coulter's reasonable assistance, to have executed and filed any other assignments necessary to perfect such rights.                            2.5.4    As regards the McMaster Agreement, CCTI hereby grants to Coulter Corporation, under any rights obtained by CCTI pursuant to the McMaster Agreement, a worldwide, royalty-free, exclusive license (except with respect to any rights granted by CCTI to McMaster University) to make, have made, use, offer for sale, sell and import any and all processes, apparatus and products which (i) are covered by any patents or (ii) utilize any technical know-how resulting from research work performed under and during the term of the McMaster Agreement. The license is limited to the field of Diagnostic Applications and related research applications which are used for commercializing the Diagnostic Applications. The license granted pursuant to this Section 2.5.4 includes the right to further sublicense to third parties subject to the same limitations that apply to the underlying exclusive sublicense.              2.6.       Assignment Related to Regulatory Rights. Coulter hereby assigns to CCTI its entire right and interest in and to the Regulatory Rights. Coulter shall directly and promptly inform the FDA in writing that all such rights and interests are transferred to CCTI, and Coulter will have primary responsibility for responding to the FDA pertaining to any questions the FDA may have regarding the assignment of such Regulatory Rights.              2.7.       Option Related to Equipment. During the 12 month period commencing on the Effective Date, CCTI is hereby granted an option to purchase any or all of the following Coulter-made instruments at Coulter's [**]:                            (a)         Hematology Analyzers                            (b)         Elite Flow Cytometer (Sorter)                            (c)         XL Flow Cytometer (Analyzer)                            (d)         Multi-Q-Prep Sample Mixer CCTI may exercise such option upon 30 days written notice to Coulter Corporation. Should CCTI exercise such option, the purchase price is due within 60 days of the exercise date.              2.8.       Future Intellectual Property and Biological Materials. During the term of this Agreement, as may be reasonably requested by CCTI, the parties hereto will meet to discuss in good faith any U.S. or foreign patents or patent applications, any know-how and any biological materials which are owned or Controlled by Coulter at the time of such meeting, which are not already included in the Property and which may be necessary or useful to CCTI in developing and commercializing products or processes in the CCTI Field. Each of the foregoing patents, patent applications, know-how and biological materials shall be deemed to be a "New Property Right."                            2.8.1    In the event that (i) a New Property Right is first owned or Controlled by Coulter at any time during which Coulter owns or controls at least fifty percent (50%) of the voting securities of CCTI and (ii) CCTI indicates to Coulter that it is interested in obtaining a license or sublicense to such New Property Right in the CCTI Field, the parties will promptly modify this Agreement to add such New Property Right to the definition of Patent Property, Technical Know-How or Biotechnology Assets (whichever is applicable) and to make such New Property Right subject to the license grants contained in Article 2.                            2.8.2    In the event that (i) a New Property Right is first owned or Controlled by Coulter at any time during which Coulter owns or controls at least ten percent (10%) but less than fifty percent (50%) of the voting securities of CCTI and (ii) CCTI indicates to Coulter that it is interested in obtaining a license or sublicense to such New Property Right in the CCTI Field, the parties will promptly meet to negotiate in good faith an agreement pursuant to which Coulter will grant an exclusive license or sublicense, as appropriate, to CCTI to such New Property Right, upon commercially reasonable terms to be agreed to by Coulter and CCTI.              2.9.       Offers to Coulter Personnel. Coulter agrees to allow CCTI to provide offers of employment to those Coulter personnel who CCTI believes are necessary or useful to achieve the scientific objectives of CCTI.              2.10.    Distribution Rights for RUO Applications. In the event CCTI intends to distribute or have distributed RUO Applications for any products sold under the license set forth in Sections 2.1-2.3, CCTI shall provide written notice to Coulter Corporation of such intention; provided, that such notice shall be delivered in the manner specified in Section 2.10, with an additional notice to Coulter's Director of Business Development at the same address as Coulter. Such notice shall describe the RUO Applications markets to which CCTI intends to distribute. Within [**] days of receipt of such notice, Coulter Corporation shall provide written notice to CCTI indicating whether it is interested in distributing such products to such markets. If Coulter Corporation indicates it is not interested in undertaking such distribution or has not provided written notice to CCTI within such [**] day period, CCTI shall be free to distribute such products to such RUO Applications markets either itself or through a third party. If Coulter Corporation provides timely written notice of its interest in undertaking such distribution, then CCTI and Coulter Corporation will negotiate in good faith for a period of [**] to enter into a commercially reasonable distribution agreement for such RUO Applications markets. In the event the parties are unable, after good faith negotiations, to agree on a distribution arrangement within such [**] period, CCTI shall be free to distribute such products to such RUO Applications markets either itself or through a third party; provided, however, that CCTI may not enter into an agreement for distribution of RUO Applications described in this Section 2.10 on terms less favorable to CCTI than those offered by Coulter during such [**] good faith negotiation period. 3.          TRANSFER OF HYBRIDOMAS.              3.1.       Provision of Biotechnology Assets. Coulter shall provide CCTI with sufficient quantities (up to [**] vials) of each of those Biotechnology Assets (including, but not limited to, those Biotechnology Assets which are useful in producing the Coulter MABs and Dana-Farber MABs listed in Section 1.2) which CCTI deems to be necessary and useful in developing and/or commercializing Dense Particle Cell Separation Technology, in order for CCTI to prepare a manufacturing lot of each such Biotechnology Asset. Such Biotechnology Assets shall be provided from the Manufacturers' Working Cell Bank ("MWCB"), located at Coulter within [**] of a written request by CCTI.              3.2.       Delivery to CCTI. Deliveries shall be made from Coulter's facility and shall be shipped by a carrier selected by CCTI to any address as directed by CCTI in writing. Biotechnology Assets will be shipped by Coulter freight collect, or if prepaid, such freight will be subsequently billed to CCTI.  If requested by CCTI, Coulter will insure the shipments against damage to or loss of the Biotechnology Assets and will subsequently bill CCTI for such shipping insurance. CCTI will reimburse Coulter for shipping and insurance expenses, if any, within [**] days after the date of its receipt of such invoices.              3.3.       Title. Title to Biotechnology Assets shall pass to CCTI when the Biotechnology Assets are delivered to a carrier pursuant to Section 3.2.              3.4.       Acceptance. CCTI shall inspect all Biotechnology Asset shipments promptly upon receipt thereof at the shipping destination and may reject any Biotechnology Assets which are damaged or otherwise unusable as intended by CCTL Biotechnology Assets not rejected by written notification to Coulter within [**] days after receipt shall be deemed to have been accepted, except for latent defects which are not reasonably detectable at the time of acceptance. Rejected Biotechnology Assets shall be destroyed by CCTI within [**] days after rejection. Upon receipt of written notice that goods have been properly rejected, Coulter shall promptly replace the rejected Biotechnology Assets at Coulter's expense. For properly rejected Biotechnology Assets, Coulter will prepay transportation and insurance charges for shipping any replaced Biotechnology Assets back to CCTL.              3.5.       New Manufacturers' Working Cell Banks.                            3.5.1    If CCTI's requirement for a given Biotechnology Asset is such that Coulter is required to prepare and certify a new MWCB for such Biotechnology Asset in order to provide such Biotechnology Asset to CCTI, Coulter will use commercially reasonable efforts to establish such new MWCB in such time as to allow it to meet CCTI's requirements, subject to CCTI's obligation to pay Coulter for such new MWCB as set forth in Section 4.2. 1.                            3.5.2    In the event that Coulter, despite using commercially reasonable efforts, is not able to establish a working cell bank for a given hybridoma cell line in such time to meet CCTI's requirements for a given Biotechnology Asset, Coulter will provide to CCTI in a timely manner the hybridoma cell line capable of producing the required monoclonal antibodies. In the event that Coulter provides a hybridoma cell line pursuant to this Section 3.5.2, no amounts shall then be payable to Coulter under Section 4.2 for such hybridoma cell line. In the event that this Section 3.5.2 is applicable, Coulter will cooperate with CCTI in enabling CCTI to establish its own working cell bank for such hybridoma cell line.              3.6.       Use of Biotechnology Assets. CCTI agrees that it will not produce NIABs from the Biotechnology Assets except for those to be used in the development and/or commercialization of processes and products in the CCTI Field. CCTI will use its efforts to protect the intellectual property relating to the Biotechnology Assets which are at least as protective as those used by CCTI to protect its own biotechnology assets of comparable value. CCTI will keep a record of the distribution and location history of each hybridoma and its progeny and derivatives for reference by Coulter, if needed. 4.          CONSIDERATION.              4.1.       Stock In CCTI. As consideration for the grants and other rights set forth in this Agreement, CCTI shall convey to Coulter Corporation the ownership of Seven Million, Five Hundred Thousand (7,500,000) shares of CCTI's Series A Preferred Stock, pursuant to that certain Series A Preferred Stock Purchase Agreement, dated as of February 13, 1997, by and among Coulter Corporation, CCTI and certain other parties.              4.2.       Cash Payments.                            4.2.1    In addition to the consideration described in Section 4. 1, CCTI shall pay Coulter Corporation the sum of [**] Dollars ($[**]) per shipment of hybridoma from a MWCB (typically [**] vials) to CCTI or its designee, pursuant to Section 3. 1, to offset Coulter's administrative, shipping and handling costs.                            4.2.2    Further, if Coulter is required to prepare and certify a new MWCB pursuant to the provisions of Section 3.5. 1, then CCTI shall pay Coulter Corporation the sum of [**] Dollars ($[**]) per each new MWCB, upon receipt of documentation from Coulter that such new MWCB is in fact capable of producing the requested Biotechnology Asset. 5.          COULTER REPRESENTATIONS AND WARRANTIES.              Coulter Corporation and CIC each represent and warrant to CCTI that the statements contained in this Article 5 are true, accurate, complete and not misleading in any material respect.              5.1.       Organization and Good Standing. Coulter Corporation is a corporation, legally and validly incorporated, organized, existing and in good standing under the laws of the State of Delaware. CIC is a corporation, legally and validly incorporated, organized, existing and in good standing under the laws of the State of Florida.              5.2.       Authority Regarding this Agreement.                            5.2.1    Coulter Corporation and CIC each has the complete and unrestricted right, power, authority and capacity to: (a) execute and deliver this Agreement; (b) subject to the provisions of the Ortho Settlement Agreement and the Dana Farber License Agreements, sell, transfer, assign, license or sublicense, as applicable, the Property to CCTI; and (c) carry out and perform Coulter Corporation's and CIC's other obligations pursuant to this Agreement; provided, however, to the extent the representation and warranty set forth in clause (b) of this sentence applies to a given Biotechnology Asset which was acquired by Coulter pursuant to an Additional Biotechnology Asset License Agreement, such representation and warranty shall be subject to any limitations on Coulter contained in such third-party agreement.                            5.2.2    No further corporate or shareholder approvals or proceedings are necessary on the part of Coulter Corporation or CIC to authorize this Agreement or any of the transactions contemplated hereby. The execution, delivery and performance of this Agreement by Coulter Corporation or CIC do not require notice to, or consent or approval from, any governmental body or other regulatory authority.                            5.2.3    This Agreement has been duly and validly executed and delivered by Coulter Corporation and CIC, is a legal, valid and binding obligation of Coulter Corporation and CIC, enforceable in accordance with its terms.              5.3.       Property.                            5.3.1    Coulter owns or Controls all Property.                            5.3.2    No claims with respect to the Property have been asserted nor, to the best of Coulter's knowledge, are any claims with respect to the Property threatened, by any person, nor is there any valid grounds, to the best of Coulter's knowledge, for any bona fide claims challenging the ownership, validity, enforceability or effectiveness of any of the Property. To the best of Coulter's knowledge, there is no material unauthorized use, infringement or misappropriation of any of the Property by any third party, including any employee or former employee of Coulter.                            5.3.3    Neither Coulter Corporation nor CIC has been sued or charged as a defendant in any claim, suit, action or proceeding which involves a claim of infringement of any patents or violation of any trade secret or other proprietary right of any third party with respect to the Property, and to the best of Coulter's knowledge, there is not any infringement liability with respect to, or infringement or violation by, Coulter of any patent, trade secret or other proprietary right of another. The Property is not subject to any outstanding order, judgment, decree, stipulation or agreement restricting in any manner the sale, assignment, licensing or sublicensing thereof by Coulter. No inequitable conduct or fraud has occurred during the prosecution of any of the patents or patent applications with respect to the Property.                            5.3.4    All patents and patent applications owned or Controlled by Coulter as of the Effective Date which contain claims to Dense Particle Cell Separation Technology are set forth on Exhibit 1 attached hereto.              5.4.       No Conflict. The execution, delivery and-performance of this Agreement and the consummation of the transactions specified herein hereby will not: (a) breach or constitute grounds for declaration or occurrence of a default under any agreement or other document to which Coulter is a party or by which the Property may be bound or affected; (b) violate any law, regulation, order, judgment or decree of any court or governmental agency; or (c) result in the creation or imposition of any lien on the Property. Reduction of Coulter Corporation's equity ownership of CCTI below fifty percent (50%) of CCTI's outstanding securities will not cause Coulter to be in breach or default of any agreement. Notwithstanding the preceding sentence, it is understood by the parties that pursuant to the Amendment to Settlement Agreement, in the event Coulter Corporation's ownership interest in CCTI's voting securities falls to ten percent (10%) or lower, CCTI will no longer have the license set forth in Section 2.3. Except as restricted by the terms of the Ortho Settlement Agreement, the Dana Farber License Agreements, and any Additional Biotechnology Asset License Agreement, sublicense, assignment or other transfer by CCTI of any of the Property owned or Controlled by Coulter as of the Effective Date will not cause Coulter or CCTI to be in breach or default of any agreement to which Coulter is a party or is otherwise bound, nor will any such sublicense, assignment or transfer require Coulter or CCTI to obtain any waiver or approval of any third party.              5.5.       Litigation. There is no litigation, investigation, arbitration or other proceeding pending or threatened against or adversely affecting the Property, or Coulter Corporation's and CIC's right and ability to consummate the transactions specified herein by this Agreement; nor does Coulter know or have reason to know of any basis for the same.              5.6.       Compliance with Laws. Coulter Corporation and CIC are in compliance with all statutes, laws, rules and regulations with respect to or affecting the ownership and use of the Property.              5.7.       No Bankruptcy Proceedings. No petition, decree or order has been filed by or against Coulter Corporation or CIC under any bankruptcy, insolvency or similar laws, and no receiver, liquidator, trustee, custodian or other officer has been appointed with respect to Coulter Corporation or CIC, or their assets and liabilities pursuant to any such law. Coulter Corporation and CIC have no reason to expect that any such actions will take place.              5.8.       Coulter Agreements. Neither Coulter Corporation nor CIC is in material breach of any of the agreements described in Sections 1.4, 1.6, and 1.11 or the Additional Biotechnology Asset License Agreements (collectively, the "Coulter Agreements"). There are no grounds for any party to any of the Coulter Agreements to terminate such agreements and Coulter has not received a notice of default with respect to any of the Coulter Agreements.              5.9.       No Other Agreements. Except for the Coulter Agreements, neither Coulter Corporation nor CIC, nor any Affiliate of Coulter Corporation or CIC, has entered into any other agreements reasonably necessary to CCTI's practice of the Dense Particle Cell Separation Technology or use of the Biotechnology Assets in the CCTI Field. If any other agreement comes to Coulter's attention relating to the Dense Particle Cell Separation Technology, Coulter shall provide a copy to CCTI and will cooperate with CCTI to assign, license, sublicense or transfer rights under such agreement as applicable.              5.10.    No Regulatory Issues with Respect to Dense Particle Cell Separation Technology. Coulter is not aware of any regulatory rulings or inquiries which would have a material adverse effect on the ability of CCTI to develop and commercialize Dense Particle Cell Separation Technology under the Property.              5.11.    Limitation on Warranties. Nothing in this agreement shall be construed as a warranty or representation by Coulter that anything made, used, sold, or otherwise disposed of by CCTI under any license or sublicense granted in this agreement is or will be free from infringement of patents of third parties; provided, however, Coulter represents that it is not aware of any such infringement as of the Effective Date. Coulter makes no warranty, express or implied, concerning the fitness for any particular purpose of any products licensed or the property rights licensed to CCTI. 6.          CCTI REPRESENTATIONS AND WARRANTIES.              CCTI hereby represents and warrants that the statements contained in this Article 6 are true, accurate, complete and not misleading in any material respect.              6.1.       Organization and Good Standing. CCTI is a corporation, legally and validly incorporated, organized, existing and in good standing under the laws of the State of Delaware.              6.2.       Authority Regarding this Agreement.                            6.2.1    CCTI has the complete and unrestricted right, power, authority and capacity to: (a) execute and deliver this Agreement; and (b) carry out and perform CCTI's obligations pursuant to this Agreement.                            6.2.2    No further corporate or shareholder approvals or proceedings are necessary on the part of CCTI to authorize this Agreement or any of the transactions contemplated hereby. The execution, delivery and performance of this Agreement by CCTI does not require notice to, or consent or approval from, any governmental body or other regulatory authority.                            6.2.3    This Agreement has been duly and validly executed and delivered by CCTI and is a legal, valid and binding obligation of CCTI, enforceable in accordance with its terms. 7.          PATENT PROPERTY.              7.1.       Prosecution and Maintenance.  Coulter shall, at its own expense, have the first right to (i) file and prosecute all patent applications contained within the Patent Property and (ii) maintain all patents contained within the Patent Property. In the event that Coulter decides not to proceed with prosecuting a patent application for, or maintaining a patent on, an invention for which it is responsible under this Section 7.1, it shall give CCTI [**] days notice before any relevant deadline and transmit all information reasonable and appropriate relating to such patent application or patent, and CCTI shall have the right to pursue, at its own expense, prosecution of such application for, or maintenance of, such patent.              7.2.       Infringement of Patent Property by Third Parties.                            (a)         Notice.  Each party shall promptly notify the other in writing of any alleged or threatened infringement of the Patent Property of which it becomes aware and which may adversely impact the rights of CCTI hereunder.                            (b)         Enforcement Action.  In the event that the parties become aware of any alleged or threatened infringement of the Patent Property, Coulter shall have the right, but not the obligation, to take appropriate action against any person or entity directly or contributorily infringing such Patent Property. In the event Coulter fails to institute an infringement suit or take other reasonable action in response to such infringement within [**] days, CCTI shall have the right, but not the obligation upon [**] days notice to Coulter, to institute such suit or take other appropriate action in its own name; provided however, that if necessary, Coulter agrees to be joined as a party plaintiff. Regardless of which party brings such enforcement action, the other parties hereby agree to cooperate reasonably in any such effort. The parties not bringing the action shall have the right to participate in such action at their own expense with their own counsel and any recovery obtained by settlement or otherwise shall be disbursed as follows: each party shall first recover any reasonable expenses incurred in such action (including counsel fees). Thereafter, the parties shall share any remaining recovery in accordance with their economic interests in the infringed Patent Property. In the event that the party not bringing the action does not want to participate in the recovery obtained by settlement or otherwise, then the party instituting the law suit shall be responsible for all costs and expenses of the non-participating party in cooperating with the party instituting the law suit.              7.3.       Infringement of Third Party Patent Rights.                            7.3.1    Joint Strategy.  In the event that the use or sale of a process or product incorporating Dense Particle Cell Separation Technology in the CCTI Field and covered by the Patent Property becomes the subject of a claim of infringement of a patent or other proprietary right, the parties shall promptly confer to discuss the claim.                            7.3.2    Defense. Unless the parties otherwise agree, CCTI shall assume the primary responsibility for the conduct of the defense of any such claim described in Section 7.3.1. Coulter shall have the right, but not the obligation, to participate in any such suit at its sole option and at its own expense. Each party shall reasonably cooperate with the party conducting the defense of the claim. No party shall enter into any settlement that affects any other party's rights or interests without such other party's written consent, not to be unreasonably withheld. 8.          TERM.              This Agreement shall continue in effect until the last to expire of any patents within the Patent Property or the New Property Rights (as such term is defined in Section 2.9) to which CCTI has exercised its option to a license or sublicense, whether such patent is currently issued or issues from any patent application contained within the Patent Property or the New Property Rights, or for so long as CCTI is using a Biotechnology Asset. 9.          ASSIGNABILITY.              Neither this Agreement nor any part hereof shall be assignable by any party without the prior, express, written permission of the other parties, which permission shall not be unreasonably withheld. Any attempted assignment without such consent shall be void. Notwithstanding the preceding two sentences, any party may assign this Agreement in connection with the merger, consolidation, transfer or sale of substantially all of its assets relating to the Property. 10.        NOTICES.              All notices required or permitted to be given under this Agreement shall be in writing and shall be mailed by registered or certified mail, postage prepaid, addressed to the signatory to whom such notice is required or permitted to be given. All notices shall be deemed to have been given when mailed, as evidenced by the postmark at the point of mailing. To Coulter:     Wayne A. Barlin, Esq. Coulter Corporation 11800 S.W. 147th Avenue Miami, Florida  33196     To CIC:     Warren W. Kurz, Esq. Coulter International Corp. 11800 S.W. 147th Avenue Miami, Florida  33196     To CCTI:     Coulter Cellular Therapies, Inc. c/o InterWest Partners 3000 Sand Hill Road Building 3 Suite 225 Menlo Park, California  94025 Attention:  Dr. Arnold Oronsky       Any party may, by written notice to the others, designate a new addressee or address to which notices to the party giving the notice shall thereafter be mailed. 11.        SEVERABILITY.              If a court of competent jurisdiction declares any provision of this Agreement invalid or unenforceable, or if any government or other agency having jurisdiction over either Coulter Corporation or CIC or CCTI deems any provision to be contrary to any laws, then that provision shall be severed and the remainder of the Agreement shall continue in full force and effect. To the extent possible, the parties shall revise such invalidated provision in a manner that will render such provision valid without impairing the parties' original interests. 12.        ENTIRE AGREEMENT.              This instrument contains the entire Agreement between the parties hereto. No verbal agreement, conversation or representation between any officers, agents or employees of the parties hereto either before or after the execution of this Agreement shall affect or modify any of the terms or obligations herein contained. 13.        MODIFICATIONS IN WRITING.              No change, modification, extension, termination or waiver of this Agreement, or any of the provisions herein contained, shall be valid unless made in writing and signed by a duly authorized representative of each party. 14.        GOVERNING LAW.              The validity and interpretation of this Agreement and the legal relations of the parties to it shall be governed by the laws of the State of Delaware, excluding Delaware's conflict of laws principles. 15.        CONSTRUCTION.              The parties agree that they have participated equally in the formation of this Agreement and that the language herein should be not be presumptively construed against any of them. 16.        ARBITRATION.              16.1.    Any controversy or claim arising out of, or relating to this Agreement shall be resolved by final and binding arbitration in Chicago, Illinois under the Commercial Arbitration Rules of the American Arbitration Association then obtaining.              The arbitration shall be subject to the following terms:                            (a)         The number of arbitrators shall be three (3) unless otherwise agreed to by the parties to the dispute.                            (b)         The arbitrators shall be independent, impartial third parties having no direct or indirect personal or financial relationship to any of the parties to the dispute, who have agreed to accept the appointment as arbitrators on the terms set forth in this Article 16.                            (c)         The arbitrators shall be active or retired attorneys, law professors, or judicial officers with at least five (5) years experience in general commercial matters and a familiarity with the laws governing proprietary rights in intellectual property.                            (d)         The arbitrators shall be selected as follows:                                         (i)         Each of Coulter Corporation and CCTI shall select one arbitrator and these two arbitrators shall then agree on the selection of a third arbitrator.                                         (ii)        If the method of selection set out in Section 16.1(d)(i) fails for any reason, then either party may petition the United States District Court for the Northern District of Illinois for appointment of the arbitrators in accordance with applicable law, provided that the arbitrators must satisfy the requirements of (b) and (c) above.                            (e)         The arbitrators shall announce a decision in writing accompanied by written findings explaining the facts determined in support of the decision and any relevant conclusions of law.                            (f)         Unless otherwise provided in this Article 16 or extended by agreement of the parties, each of Coulter Corporation and CCTI shall select an arbitrator within thirty (30) days after any request for arbitration. The dispute shall be submitted to the three arbitrators within ninety (90) days after they have been selected. A decision shall be rendered within sixty (60) days after the dispute is submitted.                            (g)        The fees of the arbitrators and any other costs and fees associated with the arbitration shall be paid in accordance with the decision of the arbitrators.                            (h)        The arbitrators shall have no power to add to, subtract from, or modify any of the terms or conditions of this Agreement. Any decision rendered in such arbitration may be enforced by either party in the United States District Court for the Northern District of Illinois, to whose jurisdiction for such purposes the parties to the dispute hereby irrevocably consent and submit.              16.2.    Notwithstanding the foregoing, nothing in this Article shall be construed to waive any rights or timely performance of any obligations existing under this Agreement. 17.        FURTHER ASSURANCES.              Each party agrees to furnish, upon request of one of the other parties to this Agreement, such further information as may be required to give effect to the transactions contemplated by this Agreement and to permit CCTI to fully enjoy the benefit of the Property transferred hereunder. In the event a party makes a good faith determination that it is necessary for the other parties to take certain additional actions to give full effect to the transactions contemplated by this Agreement and to permit CCTI to fully enjoy the benefit of the Property transferred hereunder, such party shall notify the other parties of its determination and the parties agree to meet to discuss in good faith the possibility of such additional actions being taken. 18.        COUNTERPARTS.              This Agreement may be executed in one or more counterparts, each of which shall be an original and all of which shall constitute together the same document.              IN WITNESS WHEREOF, the parties hereto have caused this License, Assignment and Supply Agreement to be executed in triplicate by their duly authorized representatives as of the dates noted below.   COULTER CORPORATION       By:       --------------------------------------------------------------------------------   Title: Executive Vice President   Date: February 13, 1997         COULTER INTERNATIONAL CORP.       By: /s/ Warren W. Kurz     --------------------------------------------------------------------------------   Title: Secretary/Corporate Patent Counsel   Date: February 11, 1997         COULTER CELLULAR THERAPIES, INC.       By: /s/ Arnold Aronsky     --------------------------------------------------------------------------------   Title: Chief Executive Officer   Date: February 13, 1997 EXHIBIT 1 PATENT PROPERTY              (a)         U.S. PATENTS:                                         (i)  U.S. PATENT NO. 5,576,185, (HEREINAFTER "THE 'l85 PATENT"), ISSUED NOVEMBER 19, 1996, ENTITLED "METHOD OF POSITIVE OR NEGATIVE SELECTION OF A POPULATION OR SUBPOPULATION OF A SAMPLE UTILIZING PARTICLES AND GRAVITY SEDIMENTATION."                                         (ii)  U.S. PATENT NO. 5,466,609, (HEREINAFTER "THE '609 PATENT"), ISSUED NOVEMBER 14, 1995, ENTITLED "BIODEGRADABLE GELATIN-AMINNODEXTRAN PARTICLE COATINGS AND PROCESSES FOR MAKING SAME."                                         (iii)  U.S. PATENT NO. 5,169,754, (HEREINAFTER "THE '754 PATENT"), ISSUED DECEMBER 8, 1992, ENTITLED "BIODEGRADABLE PARTICLE COATINGS HAVING A PROTEIN COVALENTLY IMMOBILIZED BY MEANS OF A CROSSLINKING AGENT AND PROCESSES FOR MAKING SAME."                                         (iv)  U.S. PATENT NO. 4,752,563, (HEREINAFTER "THE '563 PATENT"), ISSUED JUNE 21, 1988, ENTITLED "MONOCLONAL ANTIBODY FOR RECOVERY OF LEUKOCYTES IN HUMAN PERIPHERAL BLOOD AND METHOD OF RECOVERY EMPLOYING SAID MONOCLONAL ANTIBODY."                                         (v)  U.S. PATENT NO. 4,708,930, (HEREINAFTER "THE '930 PATENT"), ISSUED NOVEMBER 24, 1987, ENTITLED "MONOCLONAL ANTIBODY TO A HUMAN CARCINOMA TUMOR ASSOCIATED ANTIGEN."                                         (vi)  U.S. PATENT NO. 4,865,971, (HEREINAFTER "THE '971 PATENT"), ISSUED SEPTEMBER 12, 1989, ENTITLED "MONOCLONAL ANTIBODY SPECIFIC TO A COMMON DETERMINANT SITE OF NEUTROPHILS AND EOSINOPHILS."              (b)         U.S. PATENT APPLICATIONS:                                         (i)  U.S. SERIAL NO. [**], FILED [**] (CONTINUATION OF THE '185 PATENT) ENTITLED [**]                                         (ii)  U.S. SERIAL NO. [**], FILED [**] (CONTINUATION-IN-PART OF THE 1185 PATENT) ENTITLED [**]                                         (iii)  U.S. SERIAL NO. [**], FILED [**], (DIVISIONAL OF '609 PATENT), ENTITLED [**]                                         (iv)  U.S. SERIAL NO. [**], FILED [**], (CONTINUATION OF U.S. SERIAL NO. 08/961,157, WHICH IS A CONTINUATION-IN-PART OF THE '754 PATENT), ENTITLED [**]              (c)         CORRESPONDING FOREIGN PATENTS AND APPLICATIONS:                                         (i)  INTERNATIONAL APPLICATION No. PCT/US96M7577, FILED NOVEMBER 5, 1996, BASED ON USSN [**].                                         (ii)  ARGENTINE SERIAL NO. 331-641, FILED APRIL 1, 1995, BASED ON THE 85/PATENT.                                         (iii)  AUSTRALIAN SERIAL NO. 24799/56, FILED APRIL 11, 1995, BASED ON THE 'l85 PATENT.                                         (iv)  BRAZILIAN SERIAL NO. PI9507373.6, FILED APRIL 11, 1995, BASED ON THE '185 PATENT.                                         (v)  CANADIAN SERIAL NO. (TO BE ASSIGNED), FILED APRIL 11, 1995, BASED ON THE '185 PATENT.                                         (vi)  CHINESE SERIAL NO. 95192581.4, FILED APRIL 11, 1995, BASED ON THE '185 PATENT.                                         (vii)  COLOMBIAN SERIAL NO. 013,790, FILED APRIL 5, 1995, BASED ON THE 'l85 PATENT.                                         (viii)  EUROPEAN SERIAL NO. 95919112.3, FILED APRIL 11, 1995, BASED ON THE '185 PATENT.                                         (ix)  ISRAEL SERIAL NO. 113,265, FILED APRIL 5, 1995, BASED ON THE 'l85 PATENT.                                         (x)  JAPANESE SERIAL NO. 7-527193, FILED APRIL 11, 1995, BASED ON THE 'l85 PATENT.                                         (xi)  MEXICAN SERJAL NO. 964,813, FILED APRIL 11, 1995, BASED ON THE 'l85 PATENT.                                         (xii)  NORWEGIAN SERIAL NO. P964,362, FILED APRIL 11, 1995, BASED ON THE '185 PATENT.                                         (xiii)  RUSSIAN SERIAL NO. 013,790, FILED APRIL 11, 1995, BASED ON THE '185 PATENT.                                         (xiv)  TAIWANESE SERIAL NO. 84103316, FILED APRIL 7, 1995, BASED ON THE '185 PATENT.                                         (xv)  VENEZUELAN SERIAL NO. 585/96, FILED APRIL 12, 1995, BASED ON THE 'l85 PATENT.                                         (xvi)  SOUTH AFRICAN SERIAL NO.95/2723, FILED APRIL 3, 1995, BASED ON THE '185 PATENT.                                         (xvii)  CANADIAN SERIAL NO. 2146964, FILED OCTOBER 14, 1993, BASED ON THE '609 PATENT.                                         (xviii)  EUROPEAN SERIAL NO. 93923887, FILED OCTOBER 14, 1993, BASED ON THE '609 PATENT.                                         (xix)  JAPANESE SERIAL NO. 51027/94, FILED OCTOBER 14, 1993, BASED ON THE '609 PATENT.                                         (xx)  CANADIAN SERIAL NO. 2095148, FILED OCTOBER 25, 1991, BASED ON THE '754 PATENT.                                         xi)  EUROPEAN SERIAL NO. 92904811, FILED OCTOBER 25, 1991, BASED ON THE '754 PATENT.                                         (xxii)  JAPANESE SERIAL NO. 505159/92, FILED OCTOBER 25, 1991, BASED ON THE '754 PATENT.                                         (xxiii)  ARGENTINE PATENT NO. 235801, ISSUED OCTOBER 3, 1986, BASED ON THE '563 PATENT.                                         (xxiv)  AUSTRALIAN PATENT NO. 590615, ISSUED MARCH 8, 1990, BASED ON THE '563 PATENT.                                         (xxv)  BRAZILIAN APPLICATION NO. PCT P18606994, FILED AUGUST 25, 1986, BASED ON THE '563 PATENT.                                         (xxvi)  CANADIAN PATENT NO. 1294233, ISSUED JANUARY 14, 1992, BASED ON THE '563 PATENT.                                         (xxvii)  GERMAN PATENT NO. P3685023.3, ISSUED APRIL 22, 1992, BASED ON THE '563 PATENT.                                         (xxviii)  SPANISH PATENT NO. 2001973, ISSUED MAY 27, 1988, BASED ON THE '563 PATENT.                                         (xxix)  FRENCH PATENT NO. 0245291, ISSUED APRIL 22, 1992, BASED ON THE '563 PATENT.                                         (xxx)  IRISH PATENT NO. 59433, ISSUED FEBRUARY 18, 1994, BASED ON THE '563 PATENT.                                         (xxxi)  ISRAEL PATENT NO. 80082, ISSUED MARCH 24, 1991, BASED ON THE '563 PATENT.                                         (xxxii)  ITALIAN PATENT NO. 0245291, ISSUED APRIL 22, 1992, BASED ON THE '563 PATENT.                                         (xxxiii)  JAPANESE APPLICATION NO. 504547/86, FILED AUGUST 25, 1986, BASED ON THE '563 PATENT.                                         (xxxiv)  JAPANESE APPLICATION, DIVISIONAL OF 178276 (504547/86), BASED ON THE '563 PATENT.                                         (xxxv)  KOREAN APPLICATION NO. 700622/87, FILED AUGUST 25, 1986, BASED ON THE '563 PATENT.                                         (xxxvi)  MEXICAN APPLICATION NO. 3792, FILED SEPTEMBER 22, 1986, BASED ON THE '563 PATENT.                                         (xxxvii)  NORWEGIAN PATENT NO. I69243, ISSUED MAY 27, 1992, BASED ON THE '563 PATENT.                                         (xxxviii)  VENEZUELAN PATENT NO. 49397, ISSUED AUGUST 27, 1993, BASED ON THE '563 PATENT.                                         (xxxix)  SOUTH AFRICAN PATENT NO. 86/7150, ISSUED MAY 25, 1988, BASED ON THE '563 PATENT.                                         (xl)  CANADIAN PATENT NO. 1243969, ISSUED NOVEMBER 1, 1988, BASED ON THE '930 PATENT.                                         (xli)  ARGENTINE PATENT NO. 241656, ISSUED OCTOBER 30, 1992, BASED ON THE '971 PATENT.                                         (xlii)  AUSTRIAN PATENT NO. 0371026, ISSUED APRIL 6, 1994, BASED ON THE '971 PATENT.                                         (xliii)  AUSTRALIAN PATENT NO. 618212, ISSUED APRIL 6, 1992, BASED ON THE '971 PATENT.                                         (xliv)  BELGIUM PATENT NO. 0371026, ISSUED APRIL 6, 1994, BASED ON THE '971 PATENT.                                         (xlv)  CANADIAN PATENT NO. 1297817, ISSUED MARCH 24, 1992, BASED ON THE '971 PATENT.                                         (xlvi)  SWISS PATENT NO. 0371026, ISSUED APRIL 6, 1994, BASED ON THE '971 PATENT.                                         (xlvii)  CHINESE PATENT NO. 88103992, ISSUED FEBRUARY 18, 1996, BASED ON THE '971 PATENT.                                         (xlviii)  GERMAN PATENT NO. P3888971.4, ISSUED APRIL 6, 1994, BASED ON THE  '971 PATENT.                                         (xlix)  SPANISH PATENT NO. 2010761, ISSUED OCTOBER 3, 1989, BASED ON THE '971 PATENT.                                         (l)  FRENCH PATENT NO. 0371026, ISSUED APRIL 6, 1994, BASED ON THE '971 PATENT.                                         (li)  UNITED KINGDOM PATENT NO. 0371026, ISSUED APRIL 6, 1994, BASED ON THE '971 PATENT.                                         (lii)  IRISH PATENT NO. 61554, ISSUED NOVEMBER 4, 1994, BASED ON THE '971 PATENT.                                         (liii)  ITALIAN PATENT NO. 0371026, ISSUED APRIL 6, 1994, BASED ON THE '971 PATENT.                                         (liv)  JAPANESE PATENT NO. 2579354, ISSUED NOVEMBER 7, 1996, BASED ON THE '971 PATENT.                                         (lv)  SOUTH KOREAN APPLICATION NO. 700359/89, FILED APRIL 25, 1988, BASED ON THE '971 PATENT.                                         (lvi)  LUXEMBOURG PATENT NO. 0371026, ISSUED APRIL 6, 1994, BASED ON THE '971 PATENT.                                         (lvii)  MEXICAN PATENT NO. 175142, ISSUED JULY 8, 1994, BASED ON THE '971 PATENT.                                         (lviii)  NETHERLANDS PATENT NO. 0371026, ISSUED APRIL 6, 1994, BASED ON THE '971 PATENT.                                         (lix)  NORWEGIAN PATENT NO. 176614, ISSUED MAY 3, 1995, BASED ON THE '971 PATENT.                                         (lx)  VENEZUELAN PATENT NO. 50.869, ISSUED JANUARY 17, 1994, BASED ON THE '971 PATENT.                                         (lxi)  SOUTH AFRICAN PATENT NO. 88/3178, ISSUED JANUARY 31, 1990, BASED ON THE '971 PATENT.              (d)         INVENTION DISCLOSURE:                                         (i)  CIC'S INVENTION DISCLOSURE 196,012 ENTITLED "CELLULAR DEBRIS REMOVAL."

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.55 PARKING LOT AND STORAGE LEASE 1900 Walker Ave., Monrovia CA 91016     THIS LEASE, entered into this 11th day of June, 2000, by and between and Gilbert Bates & LaVonne Bates, and Staar Surgical Company., hereinafter called respectively Landlord and Tenant. This Lease replaces the previous leases between the Parties dated August 3, 1995 and June 20, 1997.     WITNESSETH; that for and in consideration of the payment of the rents and the performance of the covenants contained on the part of Tenant, said Landlord does hereby demise and let unto the Tenant, for use as a parking lot those premises described as South 1/2 of parking lot, as well as 4,464 s.f. of inside storage located as per Exhibit "A", at 1900 Walker Avenue, Monrovia, California, for tenancy commencing on the 1st day of July 2000, and at a monthly lease of Forty Thousand Eighty Two, ($4,082)* GROSS dollars per month, payable monthly in advance on the 1st day of each and every month for a period of one year. -------------------------------------------------------------------------------- *The above rent is based on $2,232 rent for the warehouse and $1,850 for the parking lot.     It is further mutually agreed between the parties as follows:     (1) Parking lot shall be occupied by no more than 35 cars. Each car must be parked in a striped stall. Personnel using Inside Storage shall not have access to restrooms, electrical room, telephones or any other area not contained in the leased area without approval of Landlord.     (2) Tenant absolves Landlord of any responsibility or liability in connection with Tenants use of property. Tenant shall maintain gate motor in proper working order. Tenants shall keep premises clear and free of excessive engine oil, trash and other debris. Tenant shall not park vehicles overnight. Tenant shall keep the trees and shrubs trimmed and in good appearance.     (3) Tenant shall not violate any city ordinance or state law in or about said premises.     (4) That all alterations, additions or improvements made in and to said premises shall, unless otherwise provided by written agreement between the parties hereto, be the property of Landlord and shall remain upon and be surrendered with the premises.     (5) Tenant shall not sub-let the demised premises, or any part thereof, or assign this agreement without the Landlord's written consent.     (6) Any failure by Tenant to pay rent or other charges promptly when due, or to comply with any other term or condition hereof, shall at the option of the Landlord, and after sixty lawful notice given, forthwith terminate this tenancy.     (7) Tenant shall keep and maintain the premises in a clean and sanitary condition at all times, and upon the termination of the tenancy shall surrender the control keys and premises to the Landlord in as good condition as when received, ordinary wear and damage by the elements excepted.     (8) Tenant shall provide Landlord evidence of adequate insurance for the use of premises, naming Gilbert Bates, LaVonne Bates, L. Bates, Inc. and GLB Apparel, Inc., as additional insured in an amount not less that $1,000,000.     (9) Nothing contained in this agreement shall be construed as waiving any of Landlord's right under the laws of the State of California.     (10) After completion of the term of this lease, there shall be no holdover unless there is a written agreement to that effect signed by Staar, Unitek Miyachi & Lessor in place (thirty) 30 days prior to 1 -------------------------------------------------------------------------------- the expiration of June 1st, 2001. Absent such an agreement, Tenant agrees to be vacated by the Expiration Date.     (12) The prevailing party in an action brought for the recovery of rent or other moneys due or to become due under the lease or by reason of a breach of any covenant herein contained or for the recovery of the possession of said premised, or to compel the performance of anything agreed to be done herein, or to recover for damages to said property, or to enjoin any act contrary to the provisions hereof, shall be awarded all of the costs in connection therewith, including, but not by way of limitation, reasonable attorney's fees.     (13) Landlord shall not be liable or responsible in any way for injury to any person, or for loss of, or damage to, any article belonging to Tenant, or located in said premises, or other premises under control of Landlord. Landlord shall not liable for and this agreement shall not be terminated by reason of any interruption of, or interference with, services or accommodation due Tenant, caused by strike, riot, orders of public authorities, acts of other Tenants, accident, the making of necessary repairs to the building of which said premises are a part or any other cause beyond the Landlord's control.     (14) Except in case of emergency, Landlord agrees to not enter the Inside Storage Area leased by Tenant. Upon request, Tenant shall provide access to Landlord, or his agent, to said premises for reasonable purposes including inspection, maintenance and showing same to prospective Tenants or purchasers. Tenant agrees to provide Landlord a key and access code to be used by Landlord only in the event of an Emergency, in which case Landlord agrees to notify Tenant or Tenant's Security Personnel of such access as soon as practically possible, but in no case later than the commencement of the next business day. Tenant hereby agrees not to change any lock or access device to said premises without the prior written consent of Landlord.     15) Tenant agrees that he has inspected the premises, and equipment and that the same are now in good order and condition; and that he will on demand pay Landlord for all loss, breakage and damage. Landlord agrees to provide labor to move the partition wall and gate in order to segregate the inside storage space. Tenant agrees to pay for the relocating their security sensors. Tenant is responsible for security of this area. Tenant will be provided access to north ground level loading doors at any time during normal working hours. Tenant will have 24-hour pedestrian access to the storage space via the man door on the north side of the building (El Norte Street). Tenant agrees to maintain the fencing, gate and electrical fixtures. Tenant will be provided with an alarm keypad and code, which will deactivate the alarm for the area of this lease. Landlord may enter the parking area leased by Tenant without notice for any reasonable purpose.     (16) The following items are furnished: 35 remote activators/changes. Landlord agrees to resurface and restripe the parking lot prior to the Tenants occupancy.     (17) The security deposit is refundable provided all rents have been paid and and no damage has occurred and no repairs are necessary to return premises to original condition. The security deposit is hereby reduced to four thousand eighty two and no/100 ($4,082). Excess Security Deposit may be applied to the next months rent.     (18) This lease is a confidential transaction between Landlord and Tenant. The terms, including but not limited to the length of the agreement, are not to be disclosed in whole or in part by either party without prior written consent of the other party.     (19) Tenant agrees to cooperate with Landlord (at Landlords expense) in the repair, resurfacing and restriping of the parking lot. Landlord will attempt to perform this work on the weekend so as to not unduly inconvenience Tenant. In the event the parking lot is unusable for any work day due to this work, Tenant will be credited at the rate of $70.00 per day. 2 -------------------------------------------------------------------------------- All rent checks are to be made payable to Gilbert Bates. Rent shall be paid at 425 E. Huntington Drive, Monrovia, CA 91016. Rent is due on the first day of each month. Rent payments paid after the third day of the month must include a late charge of $200 plus $50 for each additional day that the rent continues to be unpaid. The total late charges for any one-month shall not exceed $500. Returned checks will be charged $20. -------------------------------------------------------------------------------- LANDLORD --------------------------------------------------------------------------------   TENANT -------------------------------------------------------------------------------- /s/ GILBERT L. BATES    -------------------------------------------------------------------------------- GILBERT L. BATES   /s/ SANDRA K. WOOD    -------------------------------------------------------------------------------- WILLIAM HUDDLESTON STAAR SURGICAL, INC. /s/ LAVONNE BATES    -------------------------------------------------------------------------------- LAVONNE BATES   Assist. V.P. Corp Services -------------------------------------------------------------------------------- TITLE 6-29-00 -------------------------------------------------------------------------------- DATE   6-29-00 -------------------------------------------------------------------------------- DATE 3 -------------------------------------------------------------------------------- EXHIBIT "A" 1900 Walker Ave Monrovia CA     [FLOOR PLAN] 4 -------------------------------------------------------------------------------- QuickLinks PARKING LOT AND STORAGE LEASE 1900 Walker Ave., Monrovia CA 91016 EXHIBIT "A" 1900 Walker Ave Monrovia CA

            DATED 8th February, 2001     --------------------------------------------------------------------------------                 SYSTEMS UNION LIMITED   (1) And     CORILLIAN INTERNATIONAL LIMITED   (2) CORILLIAN CORPORATION   (3)             --------------------------------------------------------------------------------     SUB-UNDERLEASE relating to Part Ground Floor North Wing Systems Union House (Building S2) Farnborough Aerospace Centre Farnborough Hampshire     --------------------------------------------------------------------------------                 COMMENCING:         2000 EXPIRING:   2005 INITIAL RENT:   £ 327,015.00 pa   RENT REVIEW DATES:     18 July 2001     --------------------------------------------------------------------------------     THIS SUB-UNDERLEASE is made the 8th day of February 2001 BETWEEN (1)SYSTEMS UNION LIMITED (Company Registration Number 2766416) whose registered office is at Systems Union House 1 Lakeside Road Farnborough Hampshire GU14 6XP ("the Landlord") (2)CORILLIAN INTERNATIONAL LIMITED (Company Registration Number 04007036 whose registered office is at 75 Cannon Street London EC4N 5BN ("the Tenant") (3)CORILLIAN CORPORATION of 3400 NW John Olsen Place, Hillsboro, OR97124 ("the Guarantor")     WITNESSES as follows: 1  Definitions 1.1In this Lease unless the context otherwise requires the following expressions shall have the following meanings: "Building" means the building and external areas including the Car Park known as Systems Union House (Building S2), Farnborough Aerospace Centre of which the Premises forms part "Car Park" means the car park at the Building "Car Park Plan" means the attached plan marked as such "Common Parts" means all parts of the Building from time to time provided for the common use of more than one of the tenants or occupiers of the Building and their visitors including any vehicular and pedestrian accesses passages circulation areas landscaped areas fire escapes toilet facilities refuse collection and disposal areas and the café on the ground floor of the Building but excluding the meeting rooms on the ground floor any part of the Building above the ground floor "Conduits" means sewers drains pipes wires cables ducts gutters fibres and any other medium for the passage or transmission of soil water gas electricity air smoke light information or other matters and includes where relevant ancillary equipment and structures "Commencement Date" means the date 12th January 2001 "Head Landlord" means any party having an interest in the Premises in reversion to the Head Lease "Head Lease" means the Lease dated 18 July 1996 and made between British Aerospace (Farnborough 2) Limited (1) the Superior Landlord (2) International Cabletel Incorporated (3) and Farnborough Aerospace Centre Management Limited (4) "Latent Defect" means any defect in the Building or anything installed in or on the Property attributable to:- (a)defective design (b)defective workmanship or materials (c)defective supervision of the construction of or the installation of anything in or on the property or (d)defective preparation of the site on which the property is constructed "Lettable Area" means a part of the Building designed or intended for letting or exclusive occupation (except in connection with the management of the Building) the boundaries of any 1 -------------------------------------------------------------------------------- Lettable Area being determined in the same manner as the boundaries of the Premises under Schedule 1 "Managing Agent" means any party from time to time appointed by the Landlord to manage the Building (who may be an employee of the Landlord) "Outgoings" means all rates taxes charges duties assessments impositions and outgoings of any sort relating to the Building which are at any time during the Term payable whether by the owner or occupier of the Building but excluding charges for electricity gas water sewerage telecommunications and other services rendered to or consumed by the Premises or a Lettable Area and tax payable by the Landlord on the receipt of the Basic Rent or on any dealings with its reversion to this Lease and input Value Added Tax suffered by the Landlord in respect of the Building "Plant" means the plant equipment and machinery from time to time in or on the Building including without limitation lifts hoists generators and equipment for air-conditioning ventilation heating cooling fire alarm fire prevention or fire control communication and security "Premises" means that part of the Building described in Schedule 1 and all additions and improvements made to it and references to the Premises shall include reference to any part of them "Premises Plan" means the plan attached to this Lease marked as such "Rent Commencement Date" means the date one month after the Commencement Date "Retained Property" means all parts of the Building except for the Premises and the other Lettable Areas and includes without limitation the Common Parts the Conduits the foundations roof exterior and structure of the Building the Plant (except where part of the Premises or any Lettable Area) any external areas of the Building and any parts of the Building used for the management of the Building or the provision of services to it "Superior Landlord" means any party having an interest in the Premises in reversion to the Superior Lease "Superior Lease" means the Lease dated 17 March 2000 and made between Cabletel (UK) Limited (1) the Landlord (2) and Systems Union Group Limited (3) 2  Demise and Rents IN consideration of the rents and covenants hereinafter reserved and contained the Landlord HEREBY DEMISES to the Tenant the Premises TOGETHER WITH (in common with the Landlord and all others from time to time entitled thereto) for the benefit of the Tenant its successors in title servants agents and visitors and all others from time to time entitled to like or similar rights the rights and easements set out in Part 2 of the First Schedule to the Head Lease insofar as they relate to the Premises and the rights set out in Schedule 2 of this Lease EXCEPTING AND RESERVING unto the Landlord the persons for the time being entitled to any interest or interests reversionary (whether immediate or mediate) upon the Landlord's interest and all other persons entitled to the same the rights and easements excepted and reserved by the Headlease and Superior Lease insofar as they relate to the Premises and the rights set out in Schedule 3 of this Lease TO HOLD the same unto the Tenant for the term of five years from and including the Commencement Date ("the Term") YIELDING AND PAYING therefor to the Landlord throughout the term by way of rent:- FIRSTLY the annual rent of THREE HUNDRED AND TWENTY SEVEN THOUSAND AND FIFTEEN POUNDS (£327,015) plus VAT (subject to review on 18 July 2001 in accordance with clause 8 of the Head Lease as incorporated by clause 5.2 of this Lease) such rent to be paid by equal quarterly payments in advance on the usual quarter days in every year without 2 -------------------------------------------------------------------------------- deduction or set off except for that required by statute the first of such payments or a proportionate part thereof to be made on the Rent Commencement Date for the period from the Rent Commencement Date to the next succeeding quarter day SECONDLY any other sums which may become due from the Tenant to the Landlord under the provisions of this Lease THIRDLY by way of further rent the Value Added Tax (or any tax of a similar nature that may be substituted for it or levied in addition to it) (by reason of an election of a Landlord or otherwise) in respect of the rents first and secondly and thirdly reserved (except in so far as the Landlord is able to recover the same as input tax) to be paid by equal quarterly payments in advance on the usual quarter days. 3  Tenant's Covenants     THE Tenant HEREBY COVENANTS with the Landlord as follows:- 3.1To pay the rents reserved in clause 2 on the dates and in the manner stated 3.2To pay and discharge all charges for electricity gas sewerage telecommunications and other services rendered to or consumed by the Premises at the times when they become due 3.3To reimburse the Landlord with 7 days of demand its costs incurred in installing and maintaining telephone connection and equipment for the benefit of the Tenant 3.4If due to any act or omission by the Tenant the sums payable by the Landlord to the Superior Landlord pursuant to the Superior Lease in respect of insurance premiums shall substantially increase then the Tenant shall pay on demand a due proportion determined by the Landlord (acting reasonably) of such increase for so long as those circumstances subsist 3.5To observe and perform in so far as they relate to the Premises the covenants and conditions on the part of the lessee in clause 3 (other than sub-clauses 3.1, 3,3, 3.4, 3.5, 3.6, 3.7, 3.9, 3.18, 3.22, 3.23 and 3.24) of the Head Lease as if the same were set out at length herein and with such modifications only as are necessary to make them applicable to this demise and such modifications as are specified in this Lease and to indemnify the Landlord from and against any actions proceedings claims damages costs expenses or losses arising from any breach non-observance or non-performance of such covenants and conditions 3.6Not to do omit suffer or permit in relation to the Premises any act or thing which would or might cause the Landlord to be in breach of the Headlease or Superior Lease 3.7During the last three months of the Term to redecorate the internal walls of the Premises with one good coat of emulsion paint and to clean (or replace if necessary) the carpet at the Premises 3.8Alienation (a)Not to assign mortgage charge underlet or part with the possession or occupation of whole or any part of the Premises save for assignment of the whole of the Premises as permitted below (b)Not to assign the whole of the Premises without the prior written consent of the Landlord which shall not be unreasonably withheld provided that for the purposes of sub-section 1(A) of section 19 of the Landlord and Tenant Act 1927 (and without prejudice to any other right of the Landlord to withhold consent on any other reasonable ground) it is hereby agreed that the Landlord (i) may withhold consent to any assignment of the whole of the Premises if any one or more of the circumstances set out in clause 3.8 (c) applies and (ii) may impose all or any of the requirements set out in clause 3.8 (d) as a condition of its consent 3 -------------------------------------------------------------------------------- (c)The circumstances referred to in clause 3.8 (b) are that: (i)in the Landlord's reasonable opinion the proposed assignee is not of sufficient financial standing to enable it to comply with the Tenant's covenants in this Lease (ii)if there has not been delivered to the Landlord such information as the Landlord may reasonably request to enable it to form a judgment on the matters mentioned in sub-clause 3.8 (c) (i) (iii)if any rent firstly reserved payable to the Landlord under this Lease are unpaid 14 days after the due date for payment or if there is any subsisting material breach of any of the Tenant's covenants in this Lease (d)Any consent given by to any assignment to a proposed assignee:- (i)shall be subject to a condition that the Tenant not later than the date of assignment enters into an authorised guarantee agreement in such form as the Landlord may reasonably require and that any guarantor or surety for the Tenant enters into a guarantee of such authorised guarantee agreement in such form as the Landlord may reasonably require (ii)may if the Landlord reasonably so requires be subject to a condition that a guarantor reasonably acceptable to the Landlord executes and delivers to the Landlord a deed in such form as the Landlord may jointly reasonably require wherein it covenants (jointly and severally if more than one) as a primary obligation that:- (A)that the assignee will during the residue of the Term then subsisting pay the rents for the time being hereby reserved and perform and observe the covenants on the part of the Tenant herein contained and (B)that if the assignee enters into an authorised guarantee agreement the assignee will pay all sums payable under and observe and perform its covenants contained in the authorised guarantee agreement and (C)that the guarantor will keep the Landlord indemnified from and against all actions proceedings costs claims expenses damages losses and demands arising by reason of any default by the assignee and (D)that any neglect or forbearance of the Landlord or the Superior Landlord or any disability or immunity or lack of power of the assignee or the assignee ceasing to exist shall not release or exonerate the guarantor and (E)that if the assignee shall be wound up or cease to exist or if any liquidator of the assignee shall disclaim this Lease or if the Landlord would under any authorised guarantee agreement be entitled to require the assignee to take a new lease of the demised premises then the guarantor will should the Landlord so require accept a new lease of the demised premises such new lease to commence from the date of such event as aforesaid and be for the residue then unexpired of the Term and to be at the rents then payable (such rents to commence from such date as aforesaid) and to be subject to the same tenant's covenants and to the same provisos and conditions as those in force immediately before such event as aforesaid and to be granted at the cost in all respects of the guarantor in exchange for a counterpart duly executed by the guarantor or (F)the payment to the Landlord of all rents and other sums under this Lease which have fallen due prior to the date of assignment and the remedying of all or any subsisting material breaches of Tenant's covenant in this Lease which are capable of remedy 4 -------------------------------------------------------------------------------- (e)Not to share the possession or occupation of the whole or any part of the Premises except with a company which is a member of the same group of companies as the Tenant within the meaning of Section 42 of the Landlord and Tenant Act 1954 provided that no relationship of landlord and tenant is thereby created and provided that such arrangement shall be determined upon such company ceasing to be within the same group of companies as aforesaid 3.9Repair To keep the Premises in good and substantial repair and condition and repair or replace forthwith by new articles of similar kind and quality all Landlord's fixtures fittings and carpets belonging to the Premises which shall be damaged worn out or removed (excepting damage caused by a risk against which the Head Landlord Superior Landlord or Landlord insures and excepting Latent Defects and any want of repair attributable to such a Latent Defect) provided that the Tenant shall not be obliged to put the Premises into a better state of repair than at the date of this Lease as evidenced by the schedule of condition annexed hereto 3.10Signs That no mast dish aerial pole sign fascia placard bill notice or other notification whatsoever shall be placed or affixed on or to the outside of the Premises or on the inside so as to be visible from the outside or otherwise in or on the Premises save for a sign at the entrance to the Premises on the ground floor and a sign at the front entrance of the Building in such position as the Landlord shall from time to time reasonably specify stating the Tenant's name and business such sign to be of a size design and lettering previously approved in writing by the Landlord such approval not to be unreasonably withheld 3.11Yielding up on Determination (a)On Determination the Tenant shall yield up the Premises to the Landlord with vacant possession in a state of repair condition and decoration which is consistent with the proper performance of the Tenant's covenants in this Lease (b)If on Determination the Tenant leaves any fixtures fittings or other items in the Premises the Landlord may 15 working days after notifying the Tenant in writing in writing of the items so left behind treat them as having been abandoned and may remove destroy or dispose of them as the Landlord wishes and the Tenant shall pay to the Landlord on demand the proper cost of this properly incurred with interest at the Interest Rate from the date of demand to the date of payment and indemnify the Landlord against any and all resulting liability (c)Immediately before Determination if and to the extent required by the Landlord in writing at least two months before the determination the Tenant shall reinstate all alterations (including partitioning) additions or improvements made to the Premises at any time during the Term (or pursuant to any agreement for lease made before the start of the Term) and where this involves the disconnection of Plant or Conduits the Tenant shall ensure that the disconnection is carried out properly and safely and that the Plant and Conduits are suitably sealed off or capped and left in a safe condition so as not to interfere with the continued functioning of the Plant or use of the Conduits elsewhere in the Building (d)The Tenant shall make good any damage caused to the Premises Plant and Conduits in complying with paragraph 3.11(c) and shall carry out all relevant works (including the making good of damage) to the reasonable satisfaction of the Landlord 5 -------------------------------------------------------------------------------- 4  Landlord's Covenants     THE Landlord HEREBY COVENANTS with the Tenant as follows:- 4.1that the Tenant paying the rent hereinbefore reserved and performing and observing the several covenants conditions and agreements on the part of the Tenant herein contained shall and may peaceably hold and enjoy the Premises during the term hereby granted without any interruption by the Landlord or by any person lawfully claiming through under or in trust for the Landlord or by title paramount 4.2to pay the rent reserved by the Superior Lease and observe and perform the lessees covenants therein contained in relation to the demise hereby made in so far as the same are not to be observed and performed by the Tenant in terms of this Lease 4.3The Landlord shall: (a)pay promptly to the Superior Landlord all sums relating to insurance and service charge required under the Superior Lease (b)request from the Superior Landlord whenever reasonably requested by the Tenant and to the extent permitted under the Superior Lease evidence of the terms of the Insurance Policies effected by the Superior Landlord or the Head Landlord and of payment of the last premium and shall pass on to the Tenant the evidence obtained from the Superior Landlord; (c)pass on to the Tenant copies of all communications about insurance of the Building received from the Insurers or the Superior Landlord or from any person on their behalf and to provide a copy upon request by the Tenant of the plate glass insurance effected by the Landlord under the Superior Lease together with last premium receipt 4.4on the request of the Tenant to take such steps as the Tenant may reasonably require to enforce (through the Superior Landlord) the covenants on the part of the Head Landlord and Management Company contained in clauses 4 5 and clauses 6.2 of the Head Lease so far as they remain outstanding and relate to the Premises and on the part of the Management Company contained in clause 6 of the Head Lease 4.5To use it's reasonable endeavours at the Tenant's expense to obtain the consent of the Superior Landlord's whenever the Tenant makes application for any consent required under this Lease whether the consent of both the Landlord and the Superior Landlord is needed by virtue of this Lease and the Headlease 4.6To provide to the Tenant a copy of any notice served on the Landlord and relating to the Premises and provide a copy of the estimated service charges as soon as the same are received together with a copy of any revisions to the estimated service charges and a copy of the Service Charge Statement together with any other information given to the Landlord by the Superior Landlord under the Superior Lease 4.7The Landlord shall at its own expense remedy any Latent Defects and any want of repair which is attributable to any such Latent Defects and the Landlord shall not recover or seek to recover from the Tenant any Contribution or other payment pursuant to this Lease in respect of any cost incurred by the Landlord in or incidental to the remedying of any Latent Defect or of any want of repair attributable to such Latent Defect 4.8To provide the following services (unless unable to do so because of circumstances outside of its control): (a)maintaining repairing renewing reinstating and where appropriate treating washing down painting and decorating the Common Parts; 6 -------------------------------------------------------------------------------- (b)inspecting servicing maintaining repairing amending overhauling or replacing and insuring all apparatus plant machinery and equipment within the common Parts from time to time including without prejudice to the generality above stand by generators boilers and items relating to mechanical ventilation heating cooling and security; (c)maintaining repairing cleansing emptying draining amending and renewing all Conduits within the Building and all other conduits on any other adjoining property which serve the Building; (d)maintaining and renewing the fire alarms and ancillary apparatus and fire prevention and fire fighting equipment and apparatus in the Common Parts; (e)cleaning treating polishing heating and lighting the Common Parts to such standard as may be reasonably adequate; (f)providing such mechanical ventilation heating and cooling to the Common Parts for such hours and times of year as the Landlord shall in its reasonable discretion determine; (g)cleaning at least once a month the exterior and interior of all windows and window frames in the Building; (h)collecting and disposing of refuse from the Building; (i)providing and maintaining a reception facility to include without limitation an area on the ground floor of the building for receiving visitors and guests properly furnished for such purposes and a reception desk which is manned between the hours of 0830 and 1800 inclusive during the days Monday to Friday inclusive; (j)providing hot and cold water to the toilet facilities and providing all other toilet requisites commonly found in toilet facilities 5  General Provisions     PROVIDED ALWAYS AND IT IS HEREBY AGREED AND DECLARED as follows:- 5.1the definitions referred to the Head Lease shall be incorporated in this Lease (mutatis mutandis) as if the same had been set out herein in extenso except that where the same terms are defined in their Lease, the definitions in this Lease shall subsist 5.2the provisions of clauses 5.5 to 5.15 (inclusive) except 5.6, 7 and 8 of the Head Lease shall apply to this demise (including without prejudice to the generality of the foregoing the proviso for re-entry therein contained) as if the same were set out at length herein and demised premises refers to the Premises demised by this Lease save that for the purposes of this Lease the definition of the "Review Date" in Clause 8 of the Head Lease shall be 18 July 2001 and the words "15 years" in clause 8.1.2 shall be replaced with "5 years" 5.3Except to the extent that the Landlord may be liable by law notwithstanding any agreement to the contrary the Landlord shall not be liable in any way to the Tenant or any undertenant or any servant agent licensee or invitee of the Tenant or any undertenant by reason of: (a)any act neglect default or omission of any of the tenants or owners or occupiers of any adjoining or neighbouring premises (whether within the Building or not) (b)the defective working stoppage or breakage of or leakage or overflow from any Conduit or any of the Plant or (c)the obstruction by others of the Common Parts or the areas over which rights are granted by this Lease 7 -------------------------------------------------------------------------------- 5.4The Landlord shall be entitled to make alterations to the Common Parts or to alter renew or replace any Plant and to obstruct the Common Parts while doing so but shall in so doing ensure that reasonable access to the Premises or reasonable alternative and no less commodious access to the Premises is always available 5.5In the interests of security the Landlord: (a)may require anyone entering or leaving the Building to identify themselves and the party in the Building whom they are visiting and to record this information and their arrival and departure times in a book or other form of record kept for the purpose (b)may prevent anyone entering the Building for the purpose of visiting the Premises unless that person has a key to the Premises or is authorised by the Tenant or any other permitted occupier of the Premises (c)may require the Tenant or permitted occupier of the Premises to escort any person visiting them from the security or reception desk to the Premises (and back again when that person leaves) (d)may prevent anyone removing any items from the Building unless that person is authorised to do so by the Landlord or any tenant or permitted occupier of the Building and in this regard: (A)the rights of access and egress granted in Schedule 2 are subject to this clause and (B)any authorisation required by this clause must be produced to the person requiring it or confirmed by a written or oral (or telephoned) statement from the person giving it 5.6The Landlord may add to vary or discontinue any of the Services where the Landlord acting reasonably considers it appropriate to do so having regard to the principles of good estate management and where it is in the interest of all Tenants and occupiers of the Building 5.7that nothing herein contained or implied or in any licence or consent hereafter granted shall be taken to be a covenant warranty or representation by the Landlord that the Premises can be lawfully used for the purpose referred to in the Head Lease or for any other particular purpose whatsoever 5.8notwithstanding anything contained herein or in the Head Lease the rent hereby reserved shall not be suspended for a period longer than the period for the suspension of the rent reserved by the Head Lease 5.9where any issue question or matter arising out of or under or relating to the Head Lease or the Superior Lease which also affects or relates to the provisions of this Lease is to be determined as provided in the Head Lease or the Superior Lease the determination of such issue question or matter pursuant to the provisions of the Head Lease or the Superior Lease shall be binding on the Tenant as well as the Landlord for the purposes of the Head Lease, Superior Lease and this Lease 5.10where under the terms of this Lease the consent of the Landlord is required for any act or matter the consent of the Head Landlord under the terms of the Head Lease and the Superior Landlord under the terms of the Superior Lease shall also be required wherever requisite PROVIDED THAT nothing in this Lease shall be construed as imposing on the Head Landlord or the Superior Landlord any obligation (or indicating that such obligation is imposed on the Head Landlord or the Superior Landlord by virtue of the terms of the Head Lease or the Superior Lease respectively) not unreasonably to refuse any such consent 5.11for the avoidance of doubt any rights reserved by or exercisable under the Superior Lease Head Lease or this Lease shall be exercisable by the Landlord the Head Landlord and the 8 -------------------------------------------------------------------------------- Superior Landlord together with all agents workman servants and contractors employed by the Landlord the Head Landlord or the Superior Landlord 5.12If the Tenant shall in compliance with its obligations under Clause 3.9 of this Lease carry out any works to remedy any Latent Defect or to remedy any want of repair which is attributable to any such Latent Defect provided that the Tenant prior to carrying out such works shall obtain the approval of the Landlord to the nature and extent of the works such approval not to be unreasonably withheld or delayed and complete such works to the reasonable satisfaction of the Landlord the Landlord shall pay or repay to the Tenant the costs and expenses of and incidental to such works following production to the Landlord of all relevant receipts and invoices or other reasonable evidence of such costs and expenses 6  Confidentiality     Neither party shall publish issue or make any announcement press release or circular in relation to the transaction hereby agreed and save to the extent required by law the regulations of the Stock Exchange or other regulatory requirements or for the purposes of accounting and auditing or for the purposes of making returns to or responding to enquiries made by the Inland Revenue neither party (so far as it is within the power of each party) shall make public or issue such matters publicly without the consent of the other and each party shall take every reasonable account of the representations in respect of thereof made by the other party hereto and neither party shall in any event disclose the financial terms of the transaction publicly 7  Guarantee 7.1THE Guarantor HEREBY COVENANTS with and GUARANTEES to the Landlord that the Tenant will at all times during the term and any statutory or other continuation or extension thereof pay the rents and all other sums and payments agreed to be paid by the Tenant at the respective times and in manner herein appointed for payment thereof and will also duly perform and observe the several covenants and obligations on the part of the Tenant contained and that the Guarantor will pay and make good to the Landlord on demand all losses sustained and reasonable costs and reasonable expenses incurred by the Landlord through the default of the Tenant in respect of the before-mentioned matters. 7.2The Guarantor HEREBY FURTHER COVENANTS with the Landlord that if this Lease shall be disclaimed or forfeited or shall for any other reason determine or cease to exist except determination by either the Landlord or the Tenant under clauses 9 or 11 then the Guarantor shall if required by notice in writing from the Landlord within three months thereafter take up a lease of the Demised Premises forthwith for a term equivalent to the residue of the term granted by this Lease (had it not been disclaimed or forfeited or determined or ceased to exist) and at the rents which would have been payable hereunder (with provisions for the review of rent at the times and in manner contained in this Lease) and subject to the like covenants and to the like provisos and conditions as are contained in this Lease with the exception of this Clause AND in such case the Guarantor shall pay the Landlord's reasonable and proper and reasonable costs of and accept such new lease accordingly and will execute and deliver to the Landlord a counterpart thereof 7.3The Guarantor HEREBY FURTHER COVENANTS with the Landlord that if this Lease shall be disclaimed or shall be forfeited under the provisions in that behalf herein contained or shall for any other reason determine or cease to exist except determination by either the Landlord or the Tenant under Clauses 9 or 11 then the Guarantor shall for a period of four months thereafter or (if earlier) until the date upon which a new lease of the Demised Premises is granted pay to the Landlord amounts equal to the rents and other payments which would have been payable by the Tenant under this Lease (had it not been disclaimed or forfeited or determined or ceased to exist) upon the dates when the same would have been payable under this Lease it being 9 -------------------------------------------------------------------------------- agreed however that credit shall be given to the Guarantor if (notwithstanding such disclaimer) such sums have in any event been paid to the Landlord 7.4The Guarantor shall not be released from its obligations under this clause nor shall the liability of the Guarantor be in any way lessened or affected by any neglect or forbearance of the Landlord in endeavouring to obtain payment of the rents and other payments due under this Lease or any delay by the Landlord in enforcing the performance or observance of the covenants and obligations herein on the part of the Tenant or any time which may be given by the Landlord to the Tenant 7.5The guarantee hereby given shall also operate for the benefit of the successors or assigns of the Landlord 8  Exclusion of Security 8.1IT IS HEREBY AGREED AND DECLARED that the provisions of Sections 24 to 28 of Part 2 of the Landlord and Tenant Act 1954 shall not apply in relation to the Lease hereby granted 8.2THE agreement contained in the preceding subclause has been authorised by an Order dated the 20th day of December 2000 and made under Section 38(4) of the said Act of 1954 (as amended by Section 5 of the Law of Property Act 1969) by the Bristol County Court on the joint application of the parties hereto 9  Termination 9.1This Lease and any interests derived out of this Lease shall automatically cease and determine upon the expiration or sooner determination for any reason of the term granted by the Head Lease or the Superior Lease but without prejudice to any claim either party may have in respect of any antecedent breach by the other 10  Contracts (Rights of Third Parties) Act 1994 10.1The parties do not intend that any term of this Lease shall be enforceable by any party as provided by the Contracts (Rights of Third Parties) Act 1999 but any third party right which exists or is available independently of that Act is preserved 11  Determination 11.1.1 The Landlord may determine this Lease on the second, third or fourth anniversary of the Commencement Date by serving on the Tenant not less than six months prior written notice specifying the proposed date of Determination 11.1.2 The Tenant may determine this Lease on the first day of any month after the first anniversary of the Commencement Date by serving on the Landlord not less than six months' prior written notice specifying the proposed date of Determination 11.2This Lease shall only determine as a result of notice served by the Tenant under clause 11.1.2 if: (a)that notice has been served strictly in accordance with that clause and (b)on the intended date of Determination the Tenant gives vacant possession of the Premises to the Landlord and (c)the Tenant has paid all firstly reserved rent by the Tenant under this Lease to the date of Determination 11.3If the Landlord serves notice of Determination under clause 11 then on the expiry of that notice the Tenant shall give vacant possession of the Premises 10 -------------------------------------------------------------------------------- 11.4If the provisions of this clause 11 are complied with then upon the expiry of the relevant notice of Determination this Lease shall determine but without prejudice to any right of action of either party in respect of any previous breach by the other of this Lease and without prejudice also to the continuing operation of this clause 11 and the Tenant shall deliver to the Landlord the original of the Lease and any other title documents to the Premises 11.5Time is of the essence in respect of this clause 11 11.6Any notice of Determination served under this clause 11 shall be irrevocable 12  Agreement for Lease 12.1This Lease is not entered into pursuant to any agreement for Lease IN WITNESS whereof the parties hereto have caused this Lease to be duly executed as a Deed the day and year first before written 11 -------------------------------------------------------------------------------- Systems Union Limited Dogmersfield Park Hartley, Wintney Basingstoke Hants RG27 8TD Corillian International Limited 75 Cannon Street London EC4N 5BN and Corillian Corporation 3400 NW John Olsen Place Hillsboro OR97124 Date: 8th February 2001 Dear Sirs Ground Floor, North Wing, Systems Union House, Farnborough     This letter relates to a Sub-Underlease of the above premises granted by us to you on the date hereof ("the Lease") or any Lease we require Corillian Corporation to take up under clause 7 of the Lease and in consideration of our entering into the Lease notwithstanding the express provision contained in the Lease, it is hereby agreed that the annual rent firstly reserved by the Lease will not be reviewed on 18 July 2001.     In place of the rent review on 18 July 2001, it is hereby agreed that the annual rent firstly reserved by the Lease will be increased in accordance with the provisions of paragraph 1 below. 1.   (a)   In respect of each of the following periods respectively of the said term (hereinafter individually called "a rental period") that is to say         (i)   the period commencing on the 12th day of January Two thousand and Three and ending on the 11th day of January Two thousand and Four and         (ii)   the period of commencing on the 12th day of January Two thousand and Four and ending on the 11th day of January Two thousand and Five         (iii)   the period commencing on the 12th day of January Two Thousand and Five and ending on the 11th day of January Two Thousand and Six             such a sum as shall be equal to £327,015 (the "Basic Rent") by the variable factor (as hereinafter defined) applicable to the rental period in relation to which the calculation is being made     (b)   The Basic Rent multiplied by the variable factor less the Basic Rent shall be paid without any deduction by equal quarterly instalments in advance on the usual quarter days in every year the first proportionate payment of such quarterly payments of the first of the said rents to be made on the commencement of the first of the said rental periods             --------------------------------------------------------------------------------     (c)   The variable factor in relation to a rental period shall be the numerical fraction which shall have as its denominator the figure of 172.2 and as its numerator the average monthly figure to be derived from the monthly Indices of Retail Prices published by the Department of Employment or any other Ministry or Government Department upon which the duties in connection with the Index of Retail Prices shall have devolved) for the last twelve months for which the Indices have been published immediately preceding the year of commencement of that rental period     (d)   If and as often as during the said term the monthly Index of Retail Prices shall be related to some commencing date other than the Thirteenth day of January One thousand nine hundred and eighty seven (which is the date at which for the purposes of the present Index of Retail Prices the Index figure was taken at 100) then any new Index shall for the purposes of this Clause be substituted for the figure of 172.2 hereinbefore mentioned and in any such case the Index figure related to a more recent date shall be substituted in preference to one related to a more remote date and in any such case the expression "Basic Rent" shall be construed as meaning the yearly rent payable hereunder immediately before the commencing date to which the said new Index figure shall be related     (e)   Notwithstanding anything hereinbefore otherwise contained where the rent in relation to a rental period would (apart from this provision) not be greater then the yearly rent payable hereunder immediately before the commencement of such rental period then and in such case the rent payable for such rental period shall be deemed to be the same as the amount of the yearly rent payable for the period immediately preceding such rental period     (f)   If there shall be any bona fide dispute differences or question between the Landlord and the Tenant as to the amount of rent payable hereunder or with respect to the construction or effect of the provisions of this Clause or if Her Majesty's Government shall cease to publish any Index of Retail Prices as aforesaid or if any event shall happen whereby it becomes impossible or impracticable to implement the provisions for calculating rent hereinbefore contained then and in any such case such dispute difference or question or (as the case may be) the question as to the amount of the rent payable for any rental period shall be referred by either party for determination by a single arbitrator in accordance with the provisions of the Arbitration Act 1950 or any statutory enactment in that behalf for the time being in force     Provided always that if the Superior Landlord or Head Landlord as defined in the Lease require the Landlord to review the rent under the Lease and enforce the Landlord to review the same, we shall indemnify you for any increase in rent paid by you under the Lease as a result of the rent review on 18 July 2001 2.   (a)   In this paragraph 5 the "Relevant Room Rate" means in the case of the Presentation Room £30 per hour, in the case of the Board Room £25 per hour; and in the case of Meeting Rooms 1, 2, 3, 4 and 5 it means £15 per hour. All of these rooms (the "Meeting Rooms") are on the ground floor of the building and are identified on the attached plan.     (b)   We agree to let you use the Meeting Rooms from time to time if they happen to be available and always by prior appointment for the purpose for which they are designed provided that you pay us on written demand an amount calculated by multiplying the number of hours that you have used the room by the Relevant Room Rate. If any such payments are outstanding for more than 14 days then interest shall be payable thereon at the rate provided by the Lease.     (c)   At any time after the date one month after the date of this letter, we reserve the right on notice with immediate effect to restrict your use to a maximum of ten room hours per week.     (d)   We will also permit you use of our video conferencing facility whilst you are using any of the Meeting Rooms if it happens to be available as is not being used or required by us. 3   For the avoidance of doubt, all of the agreements, concessions and permissions in your favour contained in all of the above paragraphs are personal to you and cannot be transferred in any way.             -------------------------------------------------------------------------------- 4   Neither party shall publish issue or make any announcement press release or circular in relation to the transaction hereby agreed and save to the extent required by law the regulations of the Stock Exchange or other regulatory requirements neither party (so far as it is within the power of each party) shall make public or issue such matters publicly without the consent of the other and each party shall take every reasonable account of the representations in respect thereof made by the other party hereto and neither party shall in any event disclose the financial terms of the transaction publicly. 5   This letter shall bind our successors in title. Please countersign this letter to confirm that you agree to all of the above. Yours faithfully -------------------------------------------------------------------------------- Signed on behalf of Systems Union Limited               -------------------------------------------------------------------------------- Countersigned on behalf of Corillian International Limited               -------------------------------------------------------------------------------- Countersigned on behalf of Corillian Corporation --------------------------------------------------------------------------------

  Exhibit 10.59 AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT         THIS AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”) is made and entered into effective as of the 21st day of February, 2001 (the “Effective Date”) by and among ACE CASH EXPRESS, INC., a Texas corporation (the “Borrower”), the lenders party to the Credit Agreement (as defined below) (collectively, together with all successors and assigns, the “Lenders”), WELLS FARGO BANK TEXAS, NATIONAL ASSOCIATION, a national banking association, as agent for the Lenders (the “Agent”), BANK OF AMERICA, N.A., a national banking association, as syndication agent for the Lenders (the “Syndication Agent”), FIRST UNION NATIONAL BANK, a national banking association (“FUNB”), and THE CHASE MANHATTAN BANK, a national banking association (“Chase”) both as managing agents for the Lenders (FUNB and Chase, in such capacities, are hereby referred to as the “Managing Agents”) (collectively, the Agent, the Syndication Agent and the Managing Agent are referred to as the “Agents”). PRELIMINARY STATEMENTS         A.     The Borrower, the Lenders, the Agent, the Syndication Agent and the Managing Agents have entered into that certain Amended and Restated Credit Agreement, dated as of November 9, 2000 (as amended, supplemented or otherwise modified and in effect on the date hereof, the “Credit Agreement”).         B.     The Credit Agreement permits the Swingline Lenders to make Swingline Loans in accordance with the provisions of Section 2.17 and certain other provisions of the Credit Agreement.         C.     Subsection (v) of Section 2.17 of the Credit Agreement states that Swingline Loans shall not be outstanding for more than a total of fifteen (15) days during any consecutive twelve (12) month period.         D.     The Borrower has requested that the Lenders amend Subsection (v) of Section 2.17 of the Credit Agreement to permit Swingline Loans to be outstanding for not more than a total of twenty-five (25) days during any consecutive twelve (12) month period.         NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows: 1 --------------------------------------------------------------------------------   AGREEMENT ARTICLE I. DEFINITIONS         SECTION 1.01 Certain Defined Terms. Capitalized terms used in this Amendment are used as defined in the Credit Agreement, as amended hereby, unless otherwise stated. ARTICLE II. AMENDMENT         SECTION 2.01 Amendment to Subsection (v) of Section 2.17 — Swingline Loans. Effective as of the Effective Date, Subsection (v) of Section 2.17 of the Credit Agreement is hereby amended so that the reference in such section to “fifteen (15)” shall read “twenty-five (25)”. ARTICLE III. CONDITIONS PRECEDENT         SECTION 3.01 Conditions to Effectiveness. The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent:           (a) The Lenders shall have received (i) this Amendment, duly executed by the Borrower and the Required Lenders, (ii) a certificate of the Secretary of the Borrower acknowledging (A) that the Borrower’s Board of Directors has adopted, approved, consented to and ratified resolutions which authorize the execution, delivery and performance by the Borrower of this Amendment, and (B) the names of the officers of the Borrower authorized to sign this Amendment together with specimen signatures of such officers, (iii) a Consent and Ratification of the existing Guaranty Agreements, substantially in the form of Exhibit G to the Credit Agreement, executed by each Guarantor, and (iv) such additional documents, instruments and information as the Agents or any Lender may reasonably request;           (b) The representations and warranties contained herein and in the Credit Agreement, as amended hereby, and the other Credit Documents shall be true and correct in all material respects as of the date hereof, as if made on the date hereof (except insofar as such representations and warranties relate expressly to an earlier date);           (c) After giving effect to this Amendment, no Default or Event of Default shall have occurred and be continuing; and           (d) All corporate proceedings taken in connection with the transactions contemplated by this Amendment and all documents, instruments and other legal matters incident thereto shall be satisfactory to the Agents and the Required Lenders and their legal counsel. 2 --------------------------------------------------------------------------------   ARTICLE IV. REPRESENTATIONS AND WARRANTIES         SECTION 4.01 Representations and Warranties. The Borrower hereby represents and warrants to the Agents and the Lenders that (a) the representations and warranties contained in the Credit Agreement, as amended hereby, and in any other Credit Document are true and correct in all material respects on and as of the date hereof as though made on and as of the date hereof (except insofar as such representations and warranties relate expressly to an earlier date); (b) no Default of Event of Default under the Credit Agreement, as amended hereby, or any other Credit Document has occurred and is continuing; and (c) Borrower is in compliance in all material respects with all covenants and agreements contained in the Credit Agreement, as amended hereby, and in the other Credit Documents. ARTICLE V. MISCELLANEOUS PROVISIONS         SECTION 5.01 Ratification of Credit Agreement and Other Credit Documents. Except as expressly provided herein, (i) the Credit Agreement and all other Credit Documents shall remain unmodified and in full force and effect as supplemented and amended hereby, and (ii) the Borrower hereby affirms all the provisions of the Credit Agreement, as amended hereby, and the other Credit Documents.         SECTION 5.02 Confirmation of the Security Documents. The Borrower hereby acknowledges and confirms that the Collateral (as defined in the Security Documents) continues to secure the Liabilities (as defined in the Security Documents), including those arising under the Credit Agreement, as amended hereby.         SECTION 5.03 Counterparts. This Amendment may be executed in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same instrument. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 3 --------------------------------------------------------------------------------           IN WITNESS WHEREOF, this Amendment has been executed as of the date first above written.         BORROWER:     ACE CASH EXPRESS, INC.     By:   --------------------------------------------------------------------------------     Name:   --------------------------------------------------------------------------------     Title:   --------------------------------------------------------------------------------       AGENT:     WELLS FARGO BANK TEXAS, NATIONAL ASSOCIATION     By:   -------------------------------------------------------------------------------- Richard A. Ziegner Vice President     SYNDICATION AGENT:     BANK OF AMERICA, N.A.     By:   --------------------------------------------------------------------------------     Name:   --------------------------------------------------------------------------------     Title:   --------------------------------------------------------------------------------       MANAGING AGENTS:     THE CHASE MANHATTAN BANK     By:   --------------------------------------------------------------------------------     Name:   --------------------------------------------------------------------------------     Title:   --------------------------------------------------------------------------------       FIRST UNION NATIONAL BANK     By:   --------------------------------------------------------------------------------     Name:   --------------------------------------------------------------------------------     Title:   --------------------------------------------------------------------------------     4 --------------------------------------------------------------------------------           LENDERS:     WELLS FARGO BANK TEXAS, NATIONAL ASSOCIATION       By:   -------------------------------------------------------------------------------- Richard A. Ziegner Vice President       BANK OF AMERICA, N.A.     By:   --------------------------------------------------------------------------------     Name:   --------------------------------------------------------------------------------     Title:   --------------------------------------------------------------------------------         THE CHASE MANHATTAN BANK     By:   --------------------------------------------------------------------------------     Name:   --------------------------------------------------------------------------------     Title:   --------------------------------------------------------------------------------         FIRST UNION NATIONAL BANK     By:   --------------------------------------------------------------------------------     Name:   --------------------------------------------------------------------------------     Title:   --------------------------------------------------------------------------------         NATIONAL CITY BANK     By:   --------------------------------------------------------------------------------     Name:   --------------------------------------------------------------------------------     Title:   --------------------------------------------------------------------------------         HIBERNIA NATIONAL BANK     By:   --------------------------------------------------------------------------------     Name:   --------------------------------------------------------------------------------     Title:   --------------------------------------------------------------------------------     --------------------------------------------------------------------------------           TEXAS CAPITAL BANK, NATIONAL ASSOCIATION     By:   --------------------------------------------------------------------------------     Name:   --------------------------------------------------------------------------------     Title:   --------------------------------------------------------------------------------       FIRST AMERICAN BANK, SSB     By:   --------------------------------------------------------------------------------     Name:   --------------------------------------------------------------------------------     Title:   --------------------------------------------------------------------------------    

EXHIBIT 10.7 WOLVERINE WORLD WIDE, INC. STOCK OPTION LOAN PROGRAM (Effective July 11, 2000)           A loan program has been established by the Company to permit current employees, directors and/or officers to assist with the exercise of stock options. This program enables these individuals to borrow up to 95% of the market value of the stock on the date of the loan (but not more than 95% of the option price). The loan is collateralized by 100% of the related shares of optioned stock. The following rules have been established. 1. Only those employees, directors or officers whose cumulative options are 500 shares or more are eligible. Also, you will become eligible under the loan program if you receive a later option grant which, when added to any prior options received, puts you up to the 500 share minimum.     2. Interest Rate -- The interest rate, fixed at the commencement of the loan, will be the greater of 6 1/2% per annum or the rate specified by the Internal Revenue Service which would trigger the imputed interest rules. Interest will be billed and payable quarterly (March, June, September and December).     3. Each loan is repayable over a twelve (12) year period (or until termination of employment, if earlier). During the first five (5) years, payments of interest only are required. After five (5) years, quarterly principal payments of 3 3/4% (15% per year) are required, plus accrued interest, until the loan is repaid. In the event of termination of employment (excluding retirement, death or permanent disability), the unpaid principal and interest is due, in full, within thirty (30) days. Loans may be prepaid without penalty. In the event of retirement, death, or permanent disability, the full-unpaid principal and interest is due within twenty-four (24) months of the date of termination of employment.     4. The principle of any loan and/or accrued interest may be paid at anytime by surrendering shares of Company stock to the Company. The surrendered shares may be shares held as collateral for the loan being repaid or other fully vested shares held by the employee, subject to the requirements in Paragraph 6(c). The surrendered shares will be applied to principal and/or interest at the market value of the shares on the day of such surrender (calculated as the average of the highest and lowest sale prices on the date of surrender or the last preceeding trading day if the date of surrender is not a trading day).     5. Subject to the requirements of Paragraph 6(c), the proceeds of any sale of stock acquired pursuant to a loan must be applied first to the payment of the loan and accrued interest. If any part of the stock is to be sold, a pro-rata portion (shares sold to total pledged) of the loan must be repaid first from the proceeds of the sale. -------------------------------------------------------------------------------- 6. (a) Collateral of 100% of the stock exercised is required to be pledged for each loan. The original stock pledged may relate only to the loan made against that stock purchase and cannot be used as further security for future loans until the original loan is paid off.         (b) If the collateral value of the stock pledged falls below the loan balances for more than three (3) consecutive months, the employee, director or officer must either: (i) repay the loan at a rate equal to 2 1/2% of the difference per quarter until no shortfall exists, or (ii) pledge other stock to secure the loan shortfall. This is in addition to other required payments. Participants may utilize Company stock to pay off all or any portion of an outstanding loan (principal and/or accrued interest) under this program.         (c) The employee is not permitted to sell, withdraw, pledge or otherwise dispose of all or any part of the collateral for a loan until deficiency payments in (b) above have been repaid or until, as a result of the repayments and/or an increase in the market value of the underlying stock, the current loan is equal to or less than the current market value of the stock.       7. Existing stock option loans will, as necessary, convert to the new loan program under the following guidelines.       (a) If required principal payments have not yet commenced under the original loan, repayment (principal and interest) will be governed by the new loan program.   (b) A new note, if such is deemed necessary by the Company, must be executed.     8. Employees will have the right to receive dividends on the stock and to vote the stock.     9. A promissory note, stock pledge agreement, and assignment of stock certificate to sell stock, in the form supplied by the Company, must be executed at the time of the loan.

Exhibit 10.149 AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT This Amended and Restated Executive Employment Agreement ("Agreement") is entered into as of the 28th day of March, 2001 (the "Effective Date"), by and between Michael C. Venuti, Ph.D. ("Executive") and Axys Pharmaceuticals, Inc. (the "Company"). Whereas , the Company desires to continue to employ Executive to provide personal services to the Company, and wishes to provide Executive with certain compensation and benefits in return for Executive's services; and Whereas , Executive wishes to continue to be employed by the Company and provide personal services to the Company in return for certain compensation and benefits; and Whereas, Executive and the Company wish to amend and restate that Employment Agreement entered into between the two parties as of December 14, 1999 (the "Prior Agreement"). Now, Therefore , in consideration of the mutual promises and covenants contained herein, it is hereby agreed by and between the parties hereto as follows: DEFINITIONS For purposes of the Agreement, the following terms are defined as follows: "Board" means the Board of Directors of the Company. "Cause" means: Executive's intentional action or intentional failure to act that was performed in bad faith and to the material detriment of the business of the Company; Executive's intentional refusal or intentional failure to act in accordance with any lawful and proper direction or order of the Board or the appropriate individual to whom Executive reports; Executive's willful and habitual neglect of Executive's duties of employment; Executive's violation of any noncompetition or noninterference agreement that Executive has entered into with the Company; or Executive's conviction of a felony crime involving moral turpitude; provided, however , that if any of the foregoing events under clauses (a), (b), (c) or (d) above is capable of being cured, the Company shall provide written notice to Executive describing the nature of such event and Executive shall thereafter have ten (10) business days to cure such event. "Change in Control" means the occurrence of any of the following events: a dissolution, liquidation or sale of all or substantially all of the assets of the Company; a merger or consolidation in which the Company is not the surviving corporation; a reverse merger in which the Company is the surviving corporation but shares outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise; or the acquisition by any person, entity or group within the meaning of Section 13(d) or 14(d) of the Exchange Act, or any comparable successor provisions (excluding any employee benefit plan, or related trust, sponsored or maintained by the Company or any Affiliate of the Company) of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable successor rule) of securities of the Company representing at least fifty percent (50%) of the combined voting power entitled to vote in the election of directors. "Company" means Axys Pharmaceuticals, Inc. or, following a Change in Control, the surviving entity resulting from such transaction. "Covered Termination" means (i) an Involuntary Termination Without Cause that occurs at any time, without regard to a Change in Control, or (ii) a voluntary termination for Good Reason that occurs on or after the effective date of a Change in Control. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Good Reason" means that any of the following are undertaken without Executive's express written consent: the assignment to Executive of any duties or responsibilities that results in any diminution or adverse change of Executive's position, status, circumstances of employment or scope of responsibilities; a reduction by the Company in Executive's annual base salary as in effect on the effective date of the Change in Control; the taking of any action by the Company that would adversely affect Executive's participation in, or reduce Executive's benefits under, the Company's benefit plans (including equity benefits) as of the effective date of the Change in Control, except to the extent the benefits of all other executives of the Company are similarly reduced; a relocation of Executive's principal office to a location more than forty (40) miles from the location at which Executive was performing Executive's duties as of the effective date of the Change in Control, except for required travel by Executive on the Company's business; any material breach by the Company of any provision of this Agreement; or any failure by the Company to obtain the assumption of this Agreement by any successor or assign of the Company. "Involuntary Termination Without Cause" means Executive's dismissal or discharge other than for Cause. The termination of Executive's employment as a result of Executive's death or disability will not be deemed to be an Involuntary Termination Without Cause. Employment by the Company Position and Duties. Subject to terms set forth herein, the Company agrees to continue to employ Executive in the position of Senior Vice President, Research and Preclinical Development and Chief Technical Officer and Executive hereby accepts such continued employment. Executive shall serve in an executive capacity and shall perform such duties as are customarily associated with the position of Senior Vice President, Research and Preclinical Development and Chief Technical Officer and such other duties as are assigned to Executive by the Company's Chief Executive Officer. Executive will report to the Chief Executive Officer. During the term of Executive's employment with the Company, Executive will devote Executive's best efforts and substantially all of Executive's business time and attention (except for vacation periods as set forth herein and reasonable periods of illness or other incapacities permitted by the Company's general employment policies or as otherwise set forth in this Agreement) to the business of the Company. Employment at Will. Both the Company and Executive shall have the right to terminate Executive's employment with the Company at any time, with or without Cause, and without prior notice. If Executive's employment with the Company is terminated, Executive will be eligible to receive severance benefits to the extent provided in this Agreement. Employment Policies. The employment relationship between the parties shall also be governed by the general employment policies and practices of the Company, including those relating to protection of confidential information and assignment of inventions, except that when the terms of this Agreement differ from or are in conflict with the Company's general employment policies or practices, this Agreement shall control. Compensation Base Salary. Executive shall receive for services to be rendered hereunder an annual base salary of $290,000.00, payable on the regular payroll dates of the Company, subject to increase in the sole discretion of the Board of Directors. Annual Bonus. Executive will be eligible for an annual bonus up to thirty percent (30%) of Executive's then current annual base salary upon achievement of reasonable goals specified by the Board (the "Target Bonus"). Such goals shall be set forth in writing by the Board prior to the close of the first quarter of each fiscal year of the Company, with fifty percent (50%) of such goals to be dependent on Executive's individual performance and fifty percent (50%) of such goals to be dependent on the Company's performance. Standard Company Benefits. Executive shall be entitled to all rights and benefits for which Executive is eligible under the terms and conditions of the standard Company benefits and compensation practices that may be in effect from time to time and are provided by the Company to its executive employees generally. Compensatory Stock Award. The Board has previously granted Executive an option to acquire seventy-five thousand (75,000) shares of the common stock of the Company (the "Option"). The Option has been granted pursuant to the Company's 1997 Equity Incentive Plan. The Option is an incentive stock option for purposes of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), to the extent permitted under the Code. The exercise price per share of the Option is equal to one hundred percent (100%) of the fair market value of the Company's common stock, as determined pursuant to the Company's 1997 Equity Incentive Plan, on the date of grant. Subject to Executive's continued employment by the Company, the Option vests as to one-forty-eighth (1/48) of the shares of common stock subject to the Option each calendar month for forty-eight (48) months, counted from the Option's date of grant. In all other respects, the Option is governed by the terms of the Plan, including the option agreement and grant notice thereunder. 3.5 Debt Forgiveness. The Company and Executive agree that as of August ___, 2000, the Executive was obligated to pay to the Company principal and accrued interest under his $300,000 promissory note (the "Note") in accordance with the terms of such Note, a copy of which is attached hereto. Provided that Executive continues to render services to the Company (or any successor thereto) through each of the respective dates listed in the "Effective Date" column below, a proportionate amount of the principal of the Note, together with interest accrued upon such respective principal amounts through the date thereof, shall be forgiven as follows: Effective Date Debt Forgiveness     8/__/01 $60,000 8/__/02 $60,000 8/__/03 $60,000 8/__/04 $60,000 8/__/05 $60,000     Any amounts under the Note not otherwise forgiven or previously paid by Executive shall be paid by Executive to the Company on August __, 2005 or such earlier date as provided in the Note. SEVERANCE and CHANGE IN CONTROL BENEFITS Severance Benefits. If Executive's employment terminates due to a Covered Termination after the date of execution of this Agreement, Executive shall receive any annual base salary and bonus compensation that has accrued but is unpaid as of the date of such Covered Termination. Within thirty (30) days following the date on which the Release described in Section 4.4 below becomes effective in accordance with its terms, Executive shall also receive a lump sum payment equal to the sum of (i) one hundred percent (100%) of Executive's annual base salary as in effect during the last regularly scheduled payroll period immediately preceding the Covered Termination and (ii) one hundred percent (100%) of Executive's Target Bonus in effect for the year in which Executive's employment terminates, all of the foregoing subject to applicable tax withholding. In addition, following a Covered Termination, Executive and Executive's covered dependents shall be eligible to continue their health care benefit coverage as permitted by COBRA (Internal Revenue Code Section 4980B) at the same cost to Executive as in effect immediately prior to the Covered Termination for the one (1)-year period following the Covered Termination. Executive shall be entitled to maintain coverage for Executive and Executive's eligible dependents at Executive's own expense or the balance of the period that Executive is entitled to coverage under COBRA. Acceleration of Vesting of Outstanding Options/Debt Forgiveness. If Executive's employment with the Company terminates due to a Covered Termination within eighteen (18) months following the effective date of a Change in Control, then (i) any options to purchase the Company's common stock granted to Executive (including without limitation the Option) shall become immediately fully vested and exercisable as of the date of such Covered Termination and (ii) the principal or accrued interest amounts outstanding under the Note as of the date of Executive's termination of employment, if any, shall be forgiven in their entirety. Parachute Payments. If any payment or benefit Executive would receive in connection with a Change in Control from the Company or otherwise ("Payment") would (i) constitute a "parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the "Excise Tax"), then such Payment shall be reduced to the Reduced Amount. The "Reduced Amount" shall be either (x) the largest portion of the Payment that would result in no portion of the Payment being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount, after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in Executive's receipt, on an after-tax basis, of the greater amount of the Payment notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in payments or benefits constituting "parachute payments" is necessary so that the Payment equals the Reduced Amount, reduction shall occur in the following order unless Executive elects in writing a different order (provided, however, that such election shall be subject to Company approval if made on or after the effective date of the Change in Control): reduction of cash payments; cancellation of accelerated vesting of stock awards; reduction of employee benefits. In the event that acceleration of vesting of stock award compensation is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant of Executive's stock awards unless Executive elects in writing a different order for cancellation. The accounting firm engaged by the Company for general audit purposes as of the day prior to the effective date of the Change in Control shall perform the foregoing calculations. If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, the Company shall appoint a nationally recognized accounting firm to make the determinations required hereunder. The Company shall bear all expenses with respect to the determinations by such accounting firm required to be made hereunder. The accounting firm engaged to make the determinations hereunder shall provide its calculations, together with detailed supporting documentation, to the Company and Executive within fifteen (15) calendar days after the date on which Executive's right to a Payment is triggered (if requested at that time by the Company or Executive) or such other time as requested by the Company or Executive. If the accounting firm determines that no Excise Tax is payable with respect to a Payment, either before or after the application of the Reduced Amount, it shall furnish the Company and Executive with an opinion reasonably acceptable to Executive that no Excise Tax will be imposed with respect to such Payment. Any good faith determinations of the accounting firm made hereunder shall be final, binding and conclusive upon the Company and Executive. Release. Upon the occurrence of a Covered Termination, and prior to the receipt of any benefits under Section 4.1 (except pursuant to the first sentence thereof) and Section 4.2 on account of the occurrence of such Covered Termination, Executive shall execute a Release (the "Release") in the form attached hereto as Exhibit A or Exhibit B, as appropriate. Such Release shall specifically relate to all of Executive's rights and claims in existence at the time of such execution and shall confirm Executive's obligations under the Company's standard form of proprietary information agreement. It is understood that Executive has a certain period to consider whether to execute such Release, and Executive may revoke such Release within seven (7) business days after execution. In the event Executive does not execute such Release within the applicable period, or if Executive revokes such Release within the subsequent seven (7) business day period, none of the aforesaid benefits shall be payable under this Agreement and this Agreement shall be null and void. Mitigation. Executive shall not be required to mitigate damages or the amount of any payment provided under this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for under this Agreement be reduced by any compensation earned by Executive as a result of employment by another employer or by any retirement benefits received by Executive after the date of the Covered Termination, or otherwise. Proprietary Information Obligations Agreement. Executive agrees to execute and abide by the Proprietary Information and Inventions Agreement attached hereto as Exhibit C. Remedies. Executive's duties under the Proprietary Information and Inventions Agreement shall survive termination of Executive's employment with the Company and the termination of this Agreement. Executive acknowledges that a remedy at law for any breach or threatened breach by Executive of the provisions of the Proprietary Information and Inventions Agreement would be inadequate, and Executive therefore agrees that the Company shall be entitled to injunctive relief in case of any such breach or threatened breach. Outside Activities Except with the prior written consent of the Board, Executive shall not during the term of this Agreement undertake or engage in any other employment, occupation or business enterprise, other than ones in which Executive is a passive investor. Executive may engage in civic and not-for- profit activities so long as such activities do not materially interfere with the performance of Executive's duties hereunder. During the term of Executive's employment by the Company, except on behalf of the Company, Executive shall not directly or indirectly, whether as an officer, director, stockholder, partner, proprietor, associate, representative, consultant, or in any capacity whatsoever engage in, become financially interested in, be employed by or have any business connection with any other person, corporation, firm, partnership or other entity whatsoever which were known by Executive to compete directly with the Company, throughout the world, in any line of business engaged in (or planned to be engaged in) by the Company; provided, however, that anything above to the contrary notwithstanding, Executive may own, as a passive investor, securities of any competitor corporation, so long as Executive's direct holdings in any one such corporation shall not in the aggregate constitute more than 1% of the voting stock of such corporation. Noninterference While employed by the Company, and for one (1) year immediately following the date on which Executive terminates employment or otherwise ceases providing services to the Company, Executive agrees not to interfere with the business of the Company by soliciting or attempting to solicit any employee of the Company to terminate such employee's employment in order to become an employee, consultant or independent contractor to or for any competitor of the Company. Executive's duties under this Article 7 shall survive termination of Executive's employment with the Company and the termination of this Agreement. General Provisions Notices. Any notices provided hereunder must be in writing and shall be deemed effective upon the earlier of personal delivery (including personal delivery by telex) or the third day after mailing by first class mail, to the Company at its primary office location and to Executive at Executive's address as listed on the Company payroll. Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provisions had never been contained herein. Waiver. If either party should waive any breach of any provisions of this Agreement, they shall not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement. Complete Agreement. This Agreement and its Exhibit A, Exhibit B and Exhibit C constitute the entire agreement between Executive and the Company and are the complete, final, and exclusive embodiment of their agreement with regard to this subject matter. They are entered into without reliance on any promise or representation other than those expressly contained herein or therein, and they cannot be modified or amended except in a writing signed by an officer of the Company. Counterparts. This Agreement may be executed in separate counterparts, any one of which need not contain signatures of more than one party, but all of which taken together will constitute one and the same Agreement. Headings. The headings of the sections hereof are inserted for convenience only and shall not be deemed to constitute a part hereof nor to affect the meaning thereof. Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive and the Company, and their respective successors, assigns, heirs, executors and administrators, except that Executive may not assign any of Executive's duties hereunder and Executive may not assign any of Executive's rights hereunder, without the written consent of the Company, which shall not be withheld unreasonably. Arbitration. Unless otherwise prohibited by law or specified below, all disputes, claims and causes of action, in law or equity, arising from or relating to this Agreement or its enforcement, performance, breach, or interpretation shall be resolved solely and exclusively by final and binding arbitration held in San Francisco County, California through Judicial Arbitration & Mediation Services/Endispute ("JAMS") under the then existing JAMS arbitration rules. However, nothing in this section is intended to prevent either party from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration. Each party in any such arbitration shall be responsible for its own attorneys' fees, costs and necessary disbursement; provided, however, that if one party refuses to arbitrate and the other party seeks to compel arbitration by court order, if such other party prevails, it shall be entitled to recover reasonable attorneys' fees, costs and necessary disbursements. Pursuant to California Civil Code Section 1717, each party warrants that it was represented by counsel in the negotiation and execution of this Agreement, including the attorneys' fees provision herein. Attorneys' Fees . If either party hereto brings any action to enforce rights hereunder, each party in any such action shall be responsible for its own attorneys' fees and costs incurred in connection with such action. Choice of Law. All questions concerning the construction, validity and interpretation of this Agreement will be governed by the law of the State of California. 8.11 Amended and Restated Agreement. This Agreement shall supersede in its entirety the Prior Agreement as of the Effective Date. In Witness Whereof , the parties have executed this Agreement on the day and year first above written. Axys Pharmaceuticals, Inc.     By: /s/ Paul J. Hastings Date: March 27, 2001   Accepted and agreed this 28th day of March, 2001 /s/ Michael C. Venuti Michael C. Venuti, Ph.D. Exhibit A: Release (Individual Termination) Exhibit B: Release (Group Termination) Exhibit C: Proprietary Information and Inventions Agreement -------------------------------------------------------------------------------- Exhibit A RELEASE (Individual Termination) Certain capitalized terms used in this Release are defined in the Executive Employment Agreement (the "Agreement") which I have executed and of which this Release is a part. I hereby confirm my obligations under the Company's proprietary information and inventions agreement. I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." I hereby expressly waive and relinquish all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to my release of any claims I may have against the Company. Except as otherwise set forth in this Release, in consideration of benefits I will receive under the Agreement, I hereby release, acquit and forever discharge the Company, its parents and subsidiaries, and their officers, directors, agents, servants, employees, shareholders, successors, assigns and affiliates, of and from any and all claims, liabilities, demands, causes of action, costs, expenses, attorneys' fees, damages, indemnities and obligations of every kind and nature, in law, equity, or otherwise, known and unknown, suspected and unsuspected, disclosed and undisclosed (other than any claim for indemnification I may have as a result of any third party action against me based on my employment with the Company), arising out of or in any way related to agreements, events, acts or conduct at any time prior to and including the date I execute this Release, including, but not limited to: all such claims and demands directly or indirectly arising out of or in any way connected with my employment with the Company or the termination of that employment, including but not limited to, claims of intentional and negligent infliction of emotional distress, any and all tort claims for personal injury, claims or demands related to salary, bonuses, commissions, stock, stock options, or any other ownership interests in the Company, vacation pay, fringe benefits, expense reimbursements, severance pay, or any other form of compensation; claims pursuant to any federal, state or local law or cause of action including, but not limited to, the federal Civil Rights Act of 1964, as amended; the federal Age Discrimination in Employment Act of 1967, as amended ("ADEA"); the federal Employee Retirement Income Security Act of 1974, as amended; the federal Americans with Disabilities Act of 1990; the California Fair Employment and Housing Act, as amended; tort law; contract law; statutory law; common law; wrongful discharge; discrimination; fraud; defamation; emotional distress; and breach of the implied covenant of good faith and fair dealing; provided, however, that nothing in this paragraph shall be construed in any way to release the Company from its obligation to indemnify me pursuant to the Company's indemnification obligation pursuant to agreement or applicable law.   I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under ADEA. I also acknowledge that the consideration given under the Agreement for the waiver and release in the preceding paragraph hereof is in addition to anything of value to which I was already entitled. I further acknowledge that I have been advised by this writing, as required by the ADEA, that: (A) my waiver and release do not apply to any rights or claims that may arise on or after the date I execute this Release; (B) I have the right to consult with an attorney prior to executing this Release; (C) I have twenty-one (21) days to consider this Release (although I may choose to voluntarily execute this Release earlier); (D) I have seven (7) days following the execution of this Release by the parties to revoke the Release; and (E) this Release shall not be effective until the date upon which the revocation period has expired, which shall be the eighth (8th) day after this Release is executed by me. Michael C. Venuti, Ph.D.   Date:____________________ -------------------------------------------------------------------------------- Exhibit B RELEASE (Group Termination) Certain capitalized terms used in this Release are defined in the Executive Employment Agreement (the "Agreement") which I have executed and of which this Release is a part. I hereby confirm my obligations under the Company's proprietary information and inventions agreement. I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor." I hereby expressly waive and relinquish all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to my release of any claims I may have against the Company. Except as otherwise set forth in this Release, in consideration of benefits I will receive under the Agreement, I hereby release, acquit and forever discharge the Company, its parents and subsidiaries, and their officers, directors, agents, servants, employees, shareholders, successors, assigns and affiliates, of and from any and all claims, liabilities, demands, causes of action, costs, expenses, attorneys' fees, damages, indemnities and obligations of every kind and nature, in law, equity, or otherwise, known and unknown, suspected and unsuspected, disclosed and undisclosed (other than any claim for indemnification I may have as a result of any third party action against me based on my employment with the Company), arising out of or in any way related to agreements, events, acts or conduct at any time prior to and including the date I execute this Release, including, but not limited to: all such claims and demands directly or indirectly arising out of or in any way connected with my employment with the Company or the termination of that employment, including but not limited to, claims of intentional and negligent infliction of emotional distress, any and all tort claims for personal injury, claims or demands related to salary, bonuses, commissions, stock, stock options, or any other ownership interests in the Company, vacation pay, fringe benefits, expense reimbursements, severance pay, or any other form of compensation; claims pursuant to any federal, state or local law or cause of action including, but not limited to, the federal Civil Rights Act of 1964, as amended; the federal Age Discrimination in Employment Act of 1967, as amended ("ADEA"); the federal Employee Retirement Income Security Act of 1974, as amended; the federal Americans with Disabilities Act of 1990; the California Fair Employment and Housing Act, as amended; tort law; contract law; statutory law; common law; wrongful discharge; discrimination; fraud; defamation; emotional distress; and breach of the implied covenant of good faith and fair dealing; provided, however, that nothing in this paragraph shall be construed in any way to release the Company from its obligation to indemnify me pursuant to the Company's indemnification obligation pursuant to agreement or applicable law.   I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under ADEA. I also acknowledge that the consideration given under the Agreement for the waiver and release in the preceding paragraph hereof is in addition to anything of value to which I was already entitled. I further acknowledge that I have been advised by this writing, as required by the ADEA, that: (A) my waiver and release do not apply to any rights or claims that may arise on or after the date I execute this Release; (B) I have the right to consult with an attorney prior to executing this Release; (C) I have forty-five (45) days to consider this Release (although I may choose to voluntarily execute this Release earlier); (D) I have seven (7) days following the execution of this Release by the parties to revoke the Release; (E) this Release shall not be effective until the date upon which the revocation period has expired, which shall be the eighth day (8th) after this Release is executed by me; and (F) I have received with this Release a detailed list of the job titles and ages of all employees who were terminated in this group termination and the ages of all employees of the Company in the same job classification or organizational unit who were not terminated. Michael C. Venuti, Ph.D.   Date:________________________ -------------------------------------------------------------------------------- Exhibit C Proprietary Information and Inventions Agreement --------------------------------------------------------------------------------

Exhibit 10.14 AMENDMENT NO. 4 TO THE OKLAHOMA GAS AND ELECTRIC COMPANY RESTORATION OF RETIREMENT INCOME PLAN (As Amended and Restated Effective January 1, 1994)           OGE Energy Corp., an Oklahoma corporation (the "Company"), in accordance with the authority reserved to the Company under Section 9 of the OGE Energy Corp. Restoration of Retirement Income Plan (the "Plan"), hereby amends the Plan, effective as of January 1, 2000, in the following particulars:           1.           By deleting the first paragraph of Section 2 of the Plan and substituting the following new paragraph therefore:           ““ Compensation” shall mean, during an applicable period, the participant’s Compensation under the Retirement Plan, except that (i) such Compensation shall not be limited by Code Section 401(a)(17) as in effect during such applicable period, (ii) such Compensation shall include amounts, if any, deferred by the participant for the calendar year in question under the OGE Energy Corp. Deferred Compensation Plan (the “Deferred Compensation Plan”), and (iii) Compensation under this Plan shall include bonuses payable pursuant to the OGE Energy Corp. Annual Incentive Plan. Such bonuses shall be included as Compensation for purposes of the Plan in the year in which the services to which the bonuses relate are preformed, notwithstanding the fact that the bonuses are not actually declared and paid to participants until the following year.”           2.           By deleting Section 4 of the Plan and substituting the following therefore:                         4.           Eligibility           Participants in the Retirement Plan whose pension or pension-related benefits under the Retirement Plan are limited by (i) the provisions thereof relating to the maximum benefit limitations of Section 415 of the Code (the “415 Limit”), (ii) the limitation on includible Compensation under the Code 401(a)(17), as in effect on and after January 1, 1989, and as adjusted and/or amended from time to time (the “401(a)(17) Limit”), or (iii) by reason of deferrals under the Deferred Compensation Plan shall be eligible for benefits under this Plan. In no event shall a participant who is not entitled to benefits under the Retirement Plan be eligible for a benefit under this Plan.”           3.           By deleting the second paragraph of subsection 5(b) of the Plan and substituting the following therefore:           “In making this computation, it is intended that the recipient should receive an amount from this Plan which, if expressed as an actuarial equivalent lump-sum amount, would enable him to purchase an individual annuity that would produce a monthly benefit, after payment of applicable Federal, State and local income taxes on such lump-sum amount at the maximum rates in effect in the year of commencement of Plan benefits, equal to the monthly benefit, after payment of such income taxes, that the recipient would have received under the Retirement Plan had Sections 401 (a)(17) and 415 of the Code not been applicable thereto and if the participant’s deferrals under the Deferred Compensation Plan were treated as compensation under the Retirement Plan, less the benefits which are payable under the Retirement Plan.”           4.           By deleting the first sentence of the third paragraph of subsection 5(b) of the Plan and substituting the following therefore:           “Benefits payable under this Plan shall be computed in accordance with the foregoing and with the objective that such recipient should receive under this Plan and the Retirement Plan that total amount which would have been payable to that recipient solely under the Retirement Plan had the 415 and the 401(a)(17) Limit not been applicable thereto and the participant’s deferrals under the Deferred Compensation Plan were treated as compensation under the Retirement Plan.”

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10I CONFORMED COPY PRECISION CASTPARTS CORP. SUPPLEMENTAL EXECUTIVE RETIREMENT PROGRAM— LEVEL ONE PLAN 1998 Restatement January 1, 1998     (As Amended by Amendment No. 1) Precision Castparts Corp. an Oregon corporation 4650 SW Macadam, Suite 240 Portland, Oregon 97201   Company -------------------------------------------------------------------------------- PRECISION CASTPARTS CORP. SUPPLEMENTAL EXECUTIVE RETIREMENT PROGRAM— LEVEL ONE PLAN 1998 Restatement January 1, 1998     Precision Castparts Corp., an Oregon corporation (the Company) adopted this Program effective February 1, 1989 to provide supplemental retirement benefits for certain key employees as an incentive for them to develop careers with the Company and to perform with a degree of excellence that will promote the best interests of the Company. The Program is divided into two plans, the Level One Plan, which this Restatement constitutes, and a second plan called the Precision Castparts Corp. Supplemental Executive Retirement Program—Level Two Plan (SERP—Level Two). The Company adopts the following Restatement of the Supplemental Executive Retirement Program—Level One Plan (the Plan) effective as of January 1, 1998 to enhance benefits and to make technical, administrative and editorial changes.     1.  Eligibility and Participation       1.1    Eligible Employees.  Participation shall be limited to a select group of designated key employees of the Company and of its United States Subsidiaries. "Subsidiary" means a corporation more than 50 percent of the outstanding voting stock of which is owned by the Company.     1.2  Selection of Participants.       1.2-1    Participants shall be selected initially by the Compensation Committee of the Board of Directors of the Company (the Committee). The chief executive officer of the Company may recommend additional participants for approval by the Compensation Committee. A key employee may be selected for participation at any time. The Committee may also remove a participant from the Plan on a prospective basis, with or without cause. The Administrator shall notify the participant in writing within 30 days after Committee action establishing the removal. The effective date of removal shall be the date of adoption of the Committee action.     1.2-2    Subject to 1.4, following any removal under 1.2-1, the following shall apply:     (a)  The removal, in itself, shall not cause an immediate forfeiture of benefits.     (b)  No further Years of Benefit Service shall be counted following the date of removal.     (c)  The amounts described in 2.1-5(a) and (b) shall not change after removal, but the amounts described in 2.1-5(c) may change due to further accruals or other increases in the Retirement Plan Benefit and Primary Social Security Benefit.     (d)  A removed participant who continues to be employed by the Company or a Subsidiary shall not earn additional Years of Eligibility Service needed to qualify for retirement under Section 2 below and shall not qualify for accelerated vesting under 2.4 on change of control occurring after removal from participation.     (e)  The pre-retirement spousal death benefit if applicable under 4.3 shall end 30 days after notice of removal is given under 1.2-1.     (f)  If the participant is married at removal and remains married until the benefit start date, the Company-paid survivor annuity under 2.1-2, as well as any election under 3.2-2 to increase the survivor annuity from 50% to 100%, shall continue to apply. If the participant is married at removal and is unmarried or married to a different spouse at the -------------------------------------------------------------------------------- benefit start date, the Company-paid survivor annuity under 2.1-2 shall not apply. If the participant is unmarried at removal but becomes married prior to the benefit start date, the Company-paid survivor annuity under 2.1-2 shall not apply, but the participant may elect within 30 days after marriage an actuarially equivalent spousal survivor annuity at 50% or 100% determined with reference to the otherwise payable normal benefit for the participant's life only.     1.3  Enrollment.  When selected, the key employee shall be notified and given a Statement of Participation signed by the Company. The key employee shall enroll for participation by completing the Statement of Participation, including all required benefit elections, signing it and returning it to the Administrator of the Plan appointed by the Committee (the Administrator). The Statement of Participation shall be effective on the date signed by the key employee.     1.4  Transfer to Level Two.       1.4-1    If a participant in this Plan becomes a participant under SERP—Level Two, the benefit obligations under this Plan shall be transferred to SERP—Level Two as follows:     (a)  The monthly benefit shall be calculated as described in 1.4-2.     (b)  If the participant is married upon transfer and remains married until the benefit start date, an election under 3.2-2 to provide for a surviving spouse 100% contingent annuity shall continue to apply to the transferred benefit obligations.     (c)  The Company-paid survivor annuity under 2.1-2 shall continue to apply only if the participant is married on the transfer date and remains married until the benefit start date. If the participant is not married on the transfer date and is married on the benefit start date, or if the participant is married on the transfer date and is married to a different spouse on the benefit start date, the Company-paid survivor annuity under 2.1-2 shall not apply.     1.4-2    The benefit following the transfer will be the greater of the following:     (a)  The benefit determined under the SERP—Level Two formula counting covered service and pay for the periods of coverage under SERP—Level One and SERP—Level Two.     (b)  The grandfathered SERP—Level One benefit, calculated as follows:     (1)  The benefit target shall be determined under 2.1-5(a) and (b) based on covered service and pay as of the date of transfer.     (2)  The offset portion under 2.1-5(c) may change after the date of transfer due to further accruals or other increases in the Retirement Plan Benefit and Primary Social Security Benefit. In determining the offset for the Retirement Plan Benefit, the monthly benefit shall be calculated based on the following form of benefit:     —  If the participant is unmarried on the transfer date, or if the participant is married on the transfer date but is married to a different spouse on the benefit start date, in a straight life annuity.     —  If the participant is married upon transfer and remains married until the benefit start date, in a contingent annuity with half payments continued to the spouse for the period of coverage under SERP—Level One and in a straight life annuity for the period of coverage under SERP—Level Two. 2 --------------------------------------------------------------------------------     2.  Supplemental Benefits       2.1  Normal Retirement Benefit       2.1-1    Subject to 2.1-2, 2.1-3 and 2.1-6, the basic supplemental benefit on normal retirement with 20 Years of Benefit Service (YBS) shall be a monthly pension for life equal to 60 percent of Final Average Pay (FAP) minus the Retirement Plan Benefit (RPB) and the Primary Social Security Benefit (PSSB).     2.1-2    For a participant who is married at the time retirement benefit payments start, the benefit shall include a survivor annuity for the participant's spouse under which after the participant's death, ongoing benefits shall be paid to the participant's surviving spouse for life at a monthly rate equal to half the monthly rate paid to the participant. The married participant's normal retirement benefit shall not be reduced to provide for this survivor annuity. As provided in 3.2-2, a married participant may elect to have the surviving spouse's survivor annuity increased to provide for continuation of benefits in full after the participant's death, in which case the participant's normal retirement benefit shall be reduced on an actuarially equivalent basis to provide for the increase in the survivor annuity amount. The survivor annuity, if applicable, shall only be payable to the spouse to whom the participant is married on the benefit starting date.     2.1-3    The basic supplemental benefit for any participant who is a Five Percent Shareholder of the Company shall be half the amount otherwise provided under 2.1-1 and related provisions. If a participant stops being a Five Percent Shareholder, the foregoing restriction shall not apply to additional benefits for Benefit Service after the Five Percent Shareholder status ends. A participant shall be considered a Five Percent Shareholder if:     (a)  The person owns, directly or indirectly, securities of the Company representing 5 percent or more of the combined voting power of the Company's then outstanding securities, and     (b)  The person has owned securities meeting the requirements of (a) for 20 or more years while an employee of the Company.     2.1-4    For a participant with less than 20 Years of Benefit Service at normal retirement, the 60 percent factor in 2.1-1 shall be reduced by 1/20th for each year less than 20. The benefit for each Year of Benefit Service over 20 shall be one-half of one percent (.5 percent) of Final Average Pay, minus any portion of the Retirement Plan Benefit and Primary Social Security Benefit that exceeds the basic benefit under 2.1-1 for the first 20 Years of Benefit Service. The benefit for a partial year at the end of a participant's period of service shall be prorated based on the number of months in which the participant performs services during the year.     2.1-5    The basic supplemental benefit can be expressed as follows:     (a)  (60% of FAP) ((YBS up to 20)/20)     PLUS     (b)  (.5% of FAP) (YBS over 20)     MINUS     (c)  (RPB + PSSB)     2.1-6    If a participant has a period of Benefit Service transferred to this Plan from SERP—Level Two, an election under 3.2-2 of SERP—Level Two shall continue to apply to the transferred benefit obligations as provided in this Plan. 3 --------------------------------------------------------------------------------     2.2  Definitions       2.2-1    "Final Average Pay" means the participant's average monthly compensation in the highest three calendar years of compensation out of five consecutive calendar years of employment during a period of Eligibility Service by the Company or a Subsidiary. Years separated by a period of one or more calendar years when the participant has no such employment shall be treated as consecutive. Additional compensation paid at retirement or other termination of employment, such as for periods of unused vacation or sick leave, shall be attributed to calendar years by assuming that employment continued during the period based on which the compensation is measured. Severance pay shall be disregarded, except severance pay in lieu of service.     2.2-2    "Compensation" shall be determined as follows:     (a)  Total direct pay reportable on Form W-2 under Internal Revenue Code section 3401(a), disregarding limitations based on the nature or location of employment, shall be counted, subject to the following provisions:     (1)  Bonuses shall be included in full.     (2)  Commissions and cost-of-living allowances shall be excluded.     (3)  Any reimbursements or other expense allowances, fringe benefits, moving expenses, severance or disability pay and other deferred compensation (other than as specified in (b) below) and welfare benefits shall be excluded.     (4)  Gains realized from the exercise of nonqualified stock options shall be excluded.     (b)  Total direct pay shall be determined without reduction by elective deferral of otherwise currently taxable compensation under any qualified cash or deferred arrangement under Internal Revenue Code section 401(k), any elective welfare benefit arrangement under Internal Revenue Code section 125 or a non-qualified deferred compensation plan.     (c)  During periods of reduced compensation because of such causes as illness, disability or leave of absence, compensation shall be figured at the last regular rate before the start of the period.     2.2-3    "Primary Social Security Benefit" means the primary insurance amount estimated for the participant on retirement at or after age 65 under the federal Social Security Act determined as follows:     (a)  The amount may be estimated from the regular pay rate under rules established by the Administrator assuming a standard pay progression over a full working career.     (b)  The amount shall not be changed by amendments to the Social Security Act or cost-of-living index adjustments after the participant's actual termination date or age 65, whichever is first.     (c)  If a participant retires early, the Primary Social Security Benefit shall be the amount that would be received at age 65 assuming level earnings at the participant's final rate of pay and no change in the Social Security Act. 4 --------------------------------------------------------------------------------     2.2-4    "Retirement Plan Benefit" means the sum of the following amounts:     (a)  The monthly benefit (excluding any Prior Profit Sharing Plan Benefit) under the Precision Castparts Corp. Retirement Plan (the Retirement Plan) for the participant upon normal retirement at age 65 in the form determined under 2.2-5.     (b)  The monthly benefit for the participant under any defined benefit pension plan other than the Retirement Plan from service counted for benefits under this Plan as well as any service following removal from participation, and disregarding any benefit derived from rollovers to such plan derived from a source other than employer contributions relating to the period of service counted for benefits under this Plan. The benefit shall be expressed as a normal retirement benefit at age 65 in the form determined under 2.2-5 using the actuarial equivalency factors applicable under that plan. If benefits are provided for a participant under the foregoing sentences with respect to more than one plan, all such benefits shall be combined.     (c)  The monthly benefit for the participant under a defined contribution retirement plan relating to service counted for benefits under this Plan as well as any service following removal from participation, and disregarding any benefit derived from employee pre-tax or employee after-tax contributions to such plan or rollovers to such plan derived from a source other than employer contributions relating to the period of service counted for benefits under this Plan. The amount of the benefit shall be based on each employer contribution for the participant with respect to the relevant period of service, with the contributions carried forward at an interest rate of eight percent. The actual rate of return in the plan and any interim distributions or withdrawals shall be disregarded. The resulting benefit shall be expressed as a normal retirement benefit at age 65 in the form determined under 2.2-5 using the actuarial equivalency factors applicable to the Retirement Plan for determining equivalent benefits other than a lump sum. If benefits are provided for a participant under the foregoing sentences with respect to more than one plan, all such benefits shall be combined. If the defined contribution plan is a plan under which employer contributions are made to match, wholly or partly, employee pre-tax or after-tax contributions under the plan, then the offset for the defined contribution plan shall be calculated assuming the employee's account has been credited with the maximum matching contributions the employee could have had credited by making employee contributions (without regard to any operational limitations imposed by discrimination testing), carried forward at an interest rate of eight percent.     2.2-5    In determining the Retirement Plan Benefit under 2.2-4, the monthly benefit shall be calculated based on the following form of benefit:     (a)  For a participant who is married when benefit payments start under this Plan, in a contingent annuity with half payments continued to the spouse.     (b)  For a participant who is unmarried when benefit payments start under this Plan, in a straight life annuity.     2.2-6  "Normal Retirement" means retirement under the Retirement Plan at or after age 65 with 10 Years of Eligibility Service.     2.2-7    Subject to 1.2, "Year of Benefit Service" means a period of 12 months based on the anniversary of the date the employee first performs an hour of service as an employee of the Company or a Subsidiary. No service for a business before the date it becomes a Subsidiary shall be counted as Benefit Service. Except for periods of disability as described below, periods of employment other than as a regular full-time employee shall be disregarded and service credit shall be reduced accordingly. If a person becomes totally and permanently 5 -------------------------------------------------------------------------------- disabled while a participant accruing Benefit Service and qualifies for disability income payments under Social Security, the participant shall continue to accrue Years of Benefit Service during disability up to age 65 or earlier retirement if:     (a)  The disability was directly related to and arose from the participant's employment, or     (b)  The participant had 10 Years of Eligibility Service before the disability occurred.     2.2-8    "Years of Eligibility Service" means Years of Benefit Service as defined in 2.2-7 plus Years of Service (as defined in the Retirement Plan), if any, approved by the Committee performed for a business before the date it became a Subsidiary.     2.3  Early Retirement Benefit       2.3-1    An early retirement supplemental benefit shall be payable for a participant who terminates employment before normal retirement but after age 55 with at least 10 Years of Eligibility Service. The benefit shall be the normal retirement basic supplemental benefit, as adjusted under 2.1-4, if applicable, and reduced as described in 2.3-2 by 6 percent for each year by which the early retirement date precedes the date the participant would have first qualified for normal retirement as defined in 2.2. The reduction for partial years shall be prorated monthly, based on calendar months with a partial month at the beginning or end of the period disregarded if the affected portion of the month is less than 15 days.     2.3-2    The early retirement reduction described in 2.3-1 shall be applied after calculating a participant's benefit as for normal retirement, based on service and compensation to actual retirement, as follows: (a)(60% of FAP) ((YBS up to 20)/20) + (.5% of FAP) (YBS over 20) - (RPB + PSSB)     TIMES (b)(1 - .06(65 - age at actual retirement))     2.3-3    No benefit shall be paid with respect to a participant whose employment terminates before early retirement except under 2.4 or 4.     2.3-4    A participant may not elect to defer the start of early retirement benefits.     2.4  Accelerated Vested Benefit.  Subject to 2.5, an accelerated vested benefit shall be payable for a participant whose employment is terminated by the Company if the termination occurs both within two years following a Change in Control of the Company as defined in 10 and before the participant qualifies for normal or early retirement. The benefit shall be a lump sum payment as of the first day of the month after termination of employment. The amount shall be the actuarially determined present value of the participant's basic supplemental benefit on normal retirement, based on Final Average Pay and Years of Benefit Service as of the date of termination, an assumed interest rate of eight percent and the mortality table used for equivalent benefits payable as lump sum payments under the Retirement Plan. No cash-out value shall be attributed to any spousal survivor benefit for a participant. If a participant qualifies for payment of a benefit under this provision, but dies before payment of the benefit, the benefit shall be paid to the participant's spouse under 4.4 if applicable, or to the participant's estate if 4.4 is not applicable. A change in ownership of an affiliate of the Company that does not occur as part of a Change in Control of the Company, shall not trigger this section 2.4. 6 --------------------------------------------------------------------------------     2.5  Forfeiture of Benefit       2.5-1    No benefit (other than a spouse's death benefit under 4, if applicable) shall be payable with respect to a participant who terminates employment, regardless of cause, before qualifying for a normal retirement benefit, an early retirement benefit or an accelerated vested benefit or to any participant whose employment is terminated for misconduct during employment. Moreover, no normal or early retirement benefit or spouse's death benefit shall be payable with respect to any participant who, after termination, engages in competition with the Company or a Subsidiary, as determined by the Committee in accordance with 2.5-3.     2.5-2    "Misconduct during employment" means:     (a)  Committing a fraudulent or otherwise dishonest act related to employment;     (b)  Making an unauthorized disclosure of confidential information related to the Company or Subsidiary if the information was obtained during employment; or     (c)  Engaging in competition while employed. Competition is defined in 2.5-3(a) and (b).     2.5-3    "Competition" means doing either of the following within three years after termination of employment:     (a)  Making an unauthorized disclosure of confidential information related to the Company or any Subsidiary if the information was obtained during employment; or     (b)  Engaging either as an employee, partner, proprietor or otherwise, in a business in competition with the Company or any Subsidiary in the manufacture or sale of investment castings or any other business conducted by the Company or a Subsidiary at any time during the participant's period of employment.     2.5-4    No forfeiture or absence of a forfeiture shall constitute a waiver of or bar any other remedy that may be available to the Company or a Subsidiary under applicable law on account of the misconduct or competition.     2.6  Deferred Retirement Benefit.  If a participant's employment with the Company or a Subsidiary continues past age 65, Years of Benefit Service shall continue to accrue and Final Average Pay shall be adjusted to actual retirement. The benefit shall be based on the regular formula for normal retirement, and no actuarial adjustment shall be made for starting benefits after age 65.     2.7  Accruals During Disability.       2.7-1    "Disability" means a condition that makes a person eligible for disability income payments under Social Security for total, permanent disability.     2.7-2    A participant who terminates covered employment on account of disability shall continue to accrue Service for Eligibility and Benefits while disabled until retirement or earlier recovery from disability if either of the following applies:     (a)  The disability was directly related to the participant's employment.     (b)  The participant had at least 10 Years of Eligibility Service before the disability occurred.     2.7-3    A disabled participant shall be retired at normal retirement date and may retire at early retirement date if eligible. Benefits shall be determined on the basis of Benefit Years, Final Average Pay (calculated as if pay rate was frozen at the date of disability), Primary Social Security Benefit and Retirement Plan Benefit at retirement. 7 --------------------------------------------------------------------------------     3.  Payment of Benefits       3.1  Start of Benefits.  Benefits shall start with the month that begins after termination of employment, in the case of normal, deferred, accelerated vested or early retirement benefits, and with the month that begins after the participant's death in the case of a spouse's death benefit under 4.1 through 4.3. The benefit starting date shall be as of the first day of the first month for which benefits are paid under this provision. Benefit payments shall be made by the end of the month to which they apply in accordance with the Company's regular payroll processing schedule.     3.2  Form of Benefit       3.2-1    Subject to 2.1-2, the normal form for payment of benefits shall be a monthly annuity for the life of the participant.     3.2-2    A married participant may elect under 3.2-4 to receive a reduced monthly benefit for life in order to have payments continued to the participant's surviving spouse in full (rather than at one-half as provided in 2.1-2).     3.2-3    The reduction under 3.2-2 in the participant's monthly benefit shall be the actuarial equivalent of the increase selected for the spouse's survivor benefit. Actuarial equivalency shall be determined with reference to the otherwise payable normal benefit and shall be based on the assumptions applicable to determining comparable benefits under the Retirement Plan.     3.2-4    A benefit election under 3.2-2 may be made upon enrollment in this Plan or within 30 days following the marriage of a participant that occurs before the participant's benefit starting date under 3.1. The election shall be by written notice mailed or delivered to the Administrator. An election under 3.2-2 shall be void if the participant and spouse do not stay married throughout the period from the election date to the benefit starting date.     3.2-5    Accelerated vested benefits under 2.4 shall be paid in a lump sum.     4.  Death Benefits for Spouse       4.1  Subject to 2.5, if a participant dies after starting to receive benefits, or dies after retiring under 2.2-6 or 2.3-1 but before starting benefits under 3.1, a death benefit shall be paid only as provided under the spouse's survivor benefit form. A spouse's post-retirement death benefit shall only be paid to the spouse to whom the participant was married on the participant's benefit starting date, even if the participant is married to another spouse on the date of death.     4.2  Except as provided in 4.3 and 4.4, if a participant dies before starting to receive benefits or qualifying under 4.1, no benefit shall be paid. The surviving spouse benefits under 4.3 and 4.4 shall only be payable if the participant and spouse are legally married on the date of death.     4.3  Subject to 1.2-2(e) and 4.2, the surviving spouse of a participant who dies while employed in covered employment after accruing 10 Years of Eligibility Service, or whose death while so employed is directly related to the participant's employment, shall receive a death benefit as follows:     (a)  The benefit shall be a monthly payment for the surviving spouse's life, starting on the first day of the month after the participant's death.     (b)  Subject to (c), the benefit shall be one-half of the amount determined as though the participant had retired on the date of death with benefits payable to the surviving spouse under the survivor annuity in Plan Section 2.1-2. In determining the amount of the benefit, the participant's actual Years of Benefit Service, Final Average Pay, and Primary Social Security Benefit shall be used. The Retirement Plan Benefit described in Plan Section 2.2-4(a) 8 -------------------------------------------------------------------------------- will include the actuarial value of any subsidy provided to actual preretirement death benefits that commence prior to age 55. Early retirement adjustment factors as described in Section 2.3-2(b) shall apply. On death before age 55, the participant shall be assumed to be age 55 in determining the early retirement adjustment factor.     (c)  If a participant elected under 3.2-2 to have payments continued to the surviving spouse in full, then the amount under (b) shall be determined using that benefit form.     4.4  If a participant dies after qualifying for an accelerated vested benefit under 2.4 but before the date under 3.1 for payment of the benefit, the surviving spouse shall receive the participant's accelerated vested benefit in a lump sum on the date the payment otherwise would have been made to the participant. If actual payment is delayed until after the date under 3.1 for payment of the benefit to the surviving spouse under this provision, the benefit shall be paid to the spouse as soon as practicable, or to the surviving spouse's estate if the surviving spouse has died before the actual payment date. If a participant dies after qualifying for an accelerated vested benefit under 2.4 but before the date under 3.1 for payment of the benefit, and there is no surviving spouse, no benefit shall be paid under this provision.     5.  No Advance Funding       Benefits shall be paid from the general assets of the Company. The Company may, but shall not be required to set aside funds in advance for payment of benefits under the Plan. Even if funds are set aside, that shall not cause this to be a funded employee benefit plan. Participants' rights under this Plan shall be only as general creditors of the Company.     6.  Amendment and Termination       6.1  Regular Procedure.  Subject to 6.3, the Board of Directors of the Company may amend or terminate this Plan on the first day of any month by notice to the participants, but may not revoke any participant's benefits (a) without adequate compensation or (b) after the occurrence of a Change in Control of the Company. If the Board of Directors decides to revoke benefits for some or all participants, the benefits of all affected participants shall be revoked in exchange for adequate compensation, and such participants shall have no right to defer receipt of such compensation. "Adequate compensation" shall be determined based upon the actuarially equivalent present value of the accrued straight life normal retirement (age 65) benefit as of the plan termination date, using an eight percent interest assumption and the mortality table then applicable under the Retirement Plan to benefits payable as lump sum distributions. No cashout value shall be attributed to any spousal survivor benefit for a participant who has not already retired and commenced benefits. Subject to 6.2, the value of an unvested benefit shall be zero.     6.2  Total Plan Termination or Reduction in Benefit Accrual Rate.  In the event of a total termination, the benefits of all participants shall be fully vested immediately to the extent then accrued, and the participant shall receive adequate compensation as described in 6.1 above. If ongoing benefit accruals are slowed or stopped, the following shall apply:     (a)  Automatic vesting shall not apply.     (b)  Participants who remain employed by the Company or a Subsidiary shall continue to accrue Eligibility Service and shall become vested upon reaching age 55 and 10 Years of Eligibility Service.     (c)  The amounts described in 2.1-5(a) and (b) shall be adjusted under the new accrual rate, or shall be frozen if accruals are stopped, but shall not be reduced. The amounts described in 2.1-5(c) may change as described in 1.2-2(c). 9 --------------------------------------------------------------------------------     6.3  Technical, Editorial or Operational Changes.  The chief executive officer of the Company may amend the Plan to make technical, editorial or operational changes on advice of counsel to comply with applicable law or to simplify or clarify the Plan. The chief executive officer may delegate this amendment authority.     7.  Not Contract of Employment       This Plan shall not be a contract of employment between the Company or a Subsidiary and any participant. No participant may object to termination of the Plan under paragraph 6 above. The Plan shall not prevent the Company or a Subsidiary from discharging any participant from employment at any time.     8.  Claims Procedure       8.1  Filing Procedure.  Any person claiming a benefit, requesting an interpretation or ruling under the Plan, or requesting information under the Plan shall present the request to the Administrator who shall respond in writing as soon as practicable. Verbal claims must be confirmed in writing by the claimant within a reasonable time. If no written confirmation is received within two weeks of a verbal claim, the Administrator may state the claim in writing communicated to the claimant and then proceed on that basis.     8.2  Notice of Denial.  If the claim or request is denied, the written notice of denial shall state:     (a)  The reasons for the denial, with specific reference to the Plan provisions on which the denial is based;     (b)  A description of any additional material or information required and an explanation of why it is necessary; and     (c)  An explanation of the Plan's claim review procedure.     8.3  Review Procedure.  Any person whose claim or request is denied or who has not received a response within 30 days may request review by notice in writing to the Administrator, who shall inform the Committee. The original decision shall be reviewed by the Committee, which may, but shall not be required to, grant the claimant a hearing. On review, whether or not there is a hearing, the claimant may have representation, examine pertinent documents and submit issues and comments in writing.     8.4  Decision on Review.  The decision on review shall ordinarily be made within 60 days. If an extension of time is required for a hearing or other special circumstance, the claimant shall be so notified and the time shall be 120 days. The decision shall be expressed in writing and shall state the reasons and the relevant Plan provisions. All decisions on review shall be final and bind all parties concerned.     9.  General Provisions       9.1  If suit or action is instituted to enforce any rights under the Plan, the prevailing party may recover from the other party reasonable attorneys' fees at trial and on any appeal.     9.2  Any notice under this Plan shall be in writing and shall be effective when actually delivered or, if mailed, when deposited as registered or certified mail directed to the Company at the address stated in the Statement of Participation or to such other address as either party may specify by notice to the other party. Unless otherwise designated, notices to the Committee or the Administrator shall be sent to the address specified for the Company.     9.3  The rights of a participant under this agreement are personal. Except for amounts owing to or claimed by the Company or a Subsidiary and except for the limited provisions of 3.2 above, 10 -------------------------------------------------------------------------------- no interest of a participant or spouse or representative of a participant may be directly or indirectly transferred, encumbered, seized by legal process or in any other way subjected to the claims of any creditor.     9.4  Following termination of employment, a participant shall not be an employee of the Company or a Subsidiary for any purpose and payments under Section 3 shall not constitute salary or wages. A participant shall receive such payments as retirement benefits, not as compensation for performance of any substantial services.     9.5  Except as provided in 9.3 above, this Plan shall be binding upon and inure to the benefit of the parties, their successors and assigns. If the Company or a Subsidiary merges, consolidates or otherwise reorganizes, or its assets or business are acquired by another company, this Plan shall be binding upon the successor company and shall apply to any employment of participants by the successor company.     9.6  This Plan shall be construed according to the laws of Oregon except as preempted by federal law.     10.  Definition of Change in Control       For purposes of this Plan, a "change in control of the Company" shall be deemed to have occurred if:     (a)  Any "person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20 percent or more of the combined voting power of the Company's then outstanding securities;     (b)  During any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board of Directors of the Company (the Board), and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (a), (c) or (d) of this Section) whose election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof;     (c)  The stockholders of the Company approve a merger or consolidation of the Company with any other company, other than (1) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50 percent of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (2) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined) acquires more than 20 percent of the combined voting power of the Company's then outstanding securities; or     (d)  The stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. 11 --------------------------------------------------------------------------------     11.  Effective Date       This Restatement shall be effective January 1, 1998, except that the changes in 2.2-4 shall be effective as of January 1, 1989, the Plan's initial effective date. The Company-provided spouse's survivor benefit under 2.1-2 shall be provided as follows:     (a)  For a participant who had previously elected to receive benefits in a straight life annuity, the 50% spouse's survivor benefit is provided with no reduction of the participant's monthly benefit amount. If the participant was not married upon making the election, but is married on August 5, 1997, the participant may elect promptly after receiving written announcement of this Restatement to have the Company-provided spouse's survivor benefit supplemented with an additional 50% spouse's survivor benefit (with a related actuarial reduction in the participant's benefit), resulting in a 100% spouse's survivor benefit. Actuarial equivalency shall be determined in a manner consistent with 3.2-3.     (b)  For a participant who had previously elected to reduce the monthly retirement benefit in order to provide the 50% spouse's survivor benefit, the participant may elect within 30 days of receiving written announcement of this Restatement either to receive the Company-provided spouse's survivor benefit to increase the spouse's survivor benefit to 100%, or to have the originally-selected 50% spouse's survivor benefit provided with no actuarial reduction. Actuarial equivalency shall be determined in a manner consistent with 3.2-3.     (c)  For a participant who had previously elected to reduce the monthly retirement benefit in order to provide the 100% spouse's survivor benefit, the actuarial reduction of the participant's monthly benefit shall be based on the difference between the Company-provided spouse's survivor benefit and the 100% spouse's survivor benefit as selected. Actuarial equivalency shall be determined in a manner consistent with 3.2-3. 1998 RESTATEMENT EXECUTED AS FOLLOWS EFFECTIVE JANUARY 1, 1998: Adopted: August 5, 1997       Company   PRECISION CASTPARTS CORP.     By W. C. McCORMICK --------------------------------------------------------------------------------     Executed: December 3, 1997 AMENDMENT NO. 1 EXECUTED AS FOLLOWS EFFECTIVE NOVEMBER 4, 1998: Adopted: November 4, 1998       Company   PRECISION CASTPARTS CORP.     By WILLIAM D. LARSSON --------------------------------------------------------------------------------     Executed: November 11, 1998 12 -------------------------------------------------------------------------------- QuickLinks PRECISION CASTPARTS CORP. SUPPLEMENTAL EXECUTIVE RETIREMENT PROGRAM— LEVEL ONE PLAN 1998 Restatement January 1, 1998

--------------------------------------------------------------------------------     Exhibit 10.43   NEW LEASE AGREEMENT THIS NEW LEASE AGREEMENT dated, for reference purposes only, November 15, 2000, is entered into by and between BURLINGAME SHORE INVESTMENTS, a California general partnership (“Landlord”) and THE GYMBOREE CORPORATION, a Delaware corporation (“Tenant”). RECITALS WHEREAS, on or about October 11, 1996, Landlord and Tenant entered into that certain “Office Lease” (the “Original Lease”) for certain Premises known and described as 770 Airport Boulevard, in the City of Burlingame, County of San Mateo, State of California (the “Premises”); and WHEREAS the Original Lease provided for a term expiring on November 30, 1999; and WHEREAS subsequently the Original Lease has been amended, and as amended, its term shall expire on November 30, 2000; and WHEREAS, Tenant has vacated the Premises, and the parties hereto agree that the Original Lease expires, and shall be of no further force or effect, on November 30, 2000; and WHEREAS, Tenant desires to lease the Premises under a new Lease and for a new Term commencing on December 1, 2000, on substantially similar terms as those expressed in the Original Lease; NOW, THEREFORE, the parties have agreed to enter into this lease agreement (the “New Lease”) for the Premises, on the following terms and conditions: NEW LEASE 1.   Letting. Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, the Premises, for the Term, and on the terms and conditions, as set forth herein. 2.   Premises. The Premises shall consist of the entire building known by the street address of 770 Airport Boulevard, in the City of Burlingame, consisting of approximately 25,578 rentable square feet, plus the surrounding parking and landscaped areas. The Premises are being let in their current “AS IS” condition without warranty of any kind. 3.   Term. The Term of the New Lease shall be for a period of six (6) years, which shall commence on December 1, 2000 (the “Commencement Date”), and which shall expire on November 30, 2006 (the “Expiration Date”). -------------------------------------------------------------------------------- 4.   Initial Monthly Base Rent. The initial monthly Base Rent for the Premises, for each month during the first New Lease Year (12/1/00-11/30/01) shall be Eighty-three Thousand One Hundred Twenty-eight and 50/100 ($83,128.50) Dollars per month. 5.   Base Rent Adjustments. Beginning on the first anniversary of the New Lease Commencement Date and on each successive anniversary thereafter during the New Lease Term (each, an “Adjustment Date”), the Base Rent shall be increased with the CPI, with a minimum increase of three (3%) percent annually, and a maximum increase of five (5%) percent annually. 6.   Deferment and Recoupment of Rent. As an accommodation to Tenant, Landlord shall defer payment of the sum of Two Hundred Fifty Thousand and no/100 ($250,000.00) (the “Deferred Rent”) from the Base Rent due for the first twelve months of the New Lease Term, on the following terms and conditions:   (a)   The Deferred Rent shall be deferred in twelve (12) equal monthly installments from the Base Rent otherwise due and owing from Tenant, thereby reducing Tenant’s monthly payments to the sum of Sixty-two Thousand Two Hundred Ninety Five ($62,295.00) Dollars per month, in each of the first twelve (12) months of the New Lease Term.   (b)   Commencing on the first day of the 13th month of the New Lease Term, the Deferred Rent shall be repaid to Landlord in monthly installments of Ten Thousand ($10,000.00) Dollars from Tenant (in addition to the Base Rent which would otherwise be due from Tenant), due each and every month until the total amount of $250,000.00 in Deferred Rent has been wholly recouped. By way of example only, and not by way of limitation, in the event that the Base Rent Adjustment commencing at the beginning of the second lease year is 4%, then the Rent payable for months 13-24 shall be $96,453.64 per month, consisting of Base Rent (as adjusted) in the amount of $86,453.64. per month, plus repayment of Deferred Rent in the amount of $10,000 per month.   (c)   All sums due and payable hereunder, including but not limited to Base Rent and Deferred Rent, shall be deemed to be “rent.” 7.   Base Rent Due Upon Execution. Base Rent for the period from 12/1/00 to 12/31/00, in the amount of $82,295.00, less Deferred Rent of $10,000.00, shall be due upon New Lease execution, for a net payment due from Tenant in the amount of $62,295.00. -------------------------------------------------------------------------------- 8.   Security Deposit Due Upon Execution. Tenant shall deposit with Landlord upon execution the sum of Eighty-two Thousand Two Hundred Ninety-five and no/100 ($82,295.00) Dollars, as and for security for Tenant’s timely performance of each and every of its obligations hereunder. 9.   Option to Extend.   (a)  Tenant shall have the option to extend the term hereof for one (1) additional six (6) year period (the “Option Term”) following the expiration of the initial term, by delivering to Landlord written notice of exercise of such option not later than November 30, 2005.   (b)  The Base Rent for the Option Term shall be fixed at the commencement of the Option Term and shall be the fair market rental (“Fair Market Rental” as hereinafter defined) of the Premises at the commencement date of the Option Term. Under no circumstances shall the rent for the Option Term be less than the last month’s rent payable in the Initial Term.   (c)  “Fair Market Rental” shall mean the rate being charged to similarly situated tenants for comparable space in similar buildings in, and in the immediate vicinity of the mid- Peninsula/Burlingame area, with similar amenities. Fair Market Rental as of the Adjustment Date shall be determined by Landlord with written notice (the “Notice of Option Term Rent”) given to Tenant not earlier than eight (8) months, and not later than (6) six months, before the commencement of the Option Term, subject to Tenant’s right to arbitration as hereinafter provided.   (d)  If Tenant disputes the amount claimed by Landlord as Fair Market Rental, Tenant may require that Landlord submit the dispute to arbitration. Tenant shall notify Landlord of its demand for arbitration in writing within fifteen (15) days after service of the Notice of Option Term Rent. Tenant’s demand for arbitration shall include the designation by Tenant of its appointed arbitrator, who shall be a commercial real estate agent or broker with at least five (5) years full-time experience who is familiar with the Fair Market Rental of similar space in comparable buildings in the above-specified area.   (e)  Within ten (10) days of receipt of Tenant’s demand for arbitration, Landlord shall designate in writing its appointed arbitrator, who shall be similarly qualified. Within ten (10) days thereafter, the two arbitrators shall select a third, neutral arbitrator, who shall be similarly qualified. --------------------------------------------------------------------------------   (f)  Within thirty (30) days after the appointment of the neutral arbitrator, each party arbitrator shall simultaneously submit to the neutral arbitrator its proposed Fair Market Rental. The neutral arbitrator shall select the one proposal which most closely approximates the neutral arbitrator’s independent assessment of the Fair Market Rental of the Premises. The arbitrator’s authority is limited to selecting one of the parties’proposed Fair Market Rental figures, and s/he shall have no authority to set a compromise rental figure. The decision of the arbitrator shall be final and binding on the parties. Each party shall pay the costs and fees of its arbitrator, and shall share equally in the costs and fees of the neutral arbitrator.   (g) Failure on the part of Tenant to demand arbitration within fifteen (15) days following receipt of the Notice of Option Term Rent from Landlord shall bind Tenant to the Fair Market Rental as determined by Landlord. Should Tenant elect to arbitrate and should the arbitration not have been concluded prior to the Adjustment Date, Tenant shall pay the monthly rent to Landlord after the Adjustment Date, adjusted to reflect the Fair Market Rental as Landlord has so determined. If the amount of the Fair Market Rental as determined by arbitration is greater than or less than Landlord’s determination, then any adjustment required to adjust the amount previoulsy paid shall be made by the appropriate party within ten (10) days after such determination of Fair Market Rental. 10.   Additional Terms and Conditions. To the extent not contradicted hereby, the terms and conditions, and definitions of defined terms, of the Original Lease shall be incorporated herein as if set forth in full, and shall be the terms and conditions of the New Lease, with the following exceptions: a. The “Term” of the New Lease shall be as stated herein. b. There shall be no “early occupancy” under the New Lease, and Section 1 of the Addendum shall not be incorporated herein. c. The Base Rent under the New Lease shall be in the amount as set forth herein, and otherwise subject to the terms and conditions of the Original Lease. d. Tenant shall pay triple net charges as set forth in the Original Lease, in such sums as are currently incurred for insurance and taxes for the Premises. e. The Security Deposit shall be in the amount set forth herein, and otherwise subject to the terms and conditions of the Original Lease. f. There shall be no option rights other than as set forth in this New Lease, and no tenant improvement reimbursement under the New Lease and Exhibit B shall not be incorporated herein. -------------------------------------------------------------------------------- g. There shall be no “Due Diligence” period following execution of the New Lease and Section 6 of the Original Lease shall not be incorporated herein. h. There shall be no brokerage commissions due or payable in connection with the New Lease and Section 24 of the Original Lease shall not be incorporated herein. i. There shall be no tenant improvements included in the New Lease and Exhibit C to the Original Lease shall not be incorporated herein. j. Exhibit D of the Original Lease shall not be incorporated herein. k. Any and all Amendments to the Original Lease shall not be incorporated herein. IN WITNESS WHEREOF, the parties hereto have executed this New Lease on the dates immediately following their respective signatures below: LANDLORD:   TENANT:   BURLINGAME SHORE INVESTMENTS, a  THE GYMBOREE CORPORATION, a  California General Partnership  Delaware Corporation    By /s/ Martin Lin  By /s/ L. H. Meyer  Martin Lin  L. H. Meyer  Its General Partner  CFO & Sr. Vice President  Dated: November 16, 2000     By /s/ Stuart G. Moldaw     Stuart G. Moldaw     CEO & Chairman     Dated: November 16, 2000 

EXHIBIT 10.2   As of February 14, 2001                      [Name and Address of Executive Officer]   Dear [Executive Officer]: This letter agreement shall serve to clarify the terms of the agreement (the "Agreement"), dated as of [Date of Original Agreement], by and between you and Overseas Shipholding Group, Inc. a corporation incorporated under the laws of Delaware with its principal office at 511 Fifth Avenue, New York, New York 10017, by amending clause (A) in the first sentence of Section 4 to read as follows: "(A) in a lump sum within five (5) days after such termination (or, if such termination occurred prior to a Change in Control, within five (5) days after the Change of Control) (i) two (2) times Executive's highest rate of annual base salary plus target annual incentive compensation in effect within one hundred twenty-one (121) days prior to, or at any time after, the Change of Control (it being understood that the target annual incentive compensation for 2001 is 371/2 percent of annual base salary), (ii) subject to submission of documentation, any incurred but unreimbursed business expenses for the period prior to termination payable in accordance with the Company's policies, and (iii) any base salary, bonus, vacation pay or other compensation accrued or earned under law or in accordance with the Company's policies applicable to the Executive but not yet paid;" All other terms and conditions contained in the referenced Agreement shall remain in full force and effect.   Very truly yours,                                                OVERSEAS SHIPHOLDING GROUP, INC. By:                                                                   Title:                                                                  I agree and accept the above terms:                                                          [Name of Executive Officer]

EXHIBIT 10.1                                             May 11, 2001 Equity Office Properties Trust EOP Operating Limited Partnership Senior Term Loan Facility Commitment Letter Equity Office Properties Trust Two North Riverside Plaza Suite 2100 Chicago, Illinois 60606 Attention: Richard Kincaid Ladies and Gentlemen:       EOP Operating Limited Partnership, a Delaware limited partnership (the “Borrower”) and Equity Office Properties Trust (the “Guarantor”) have requested that Banc of America Securities, LLC, J.P. Morgan Securities Inc. and Salomon Smith Barney Inc. (collectively, the “Arrangers”) jointly agree to structure and arrange a senior term loan facility in an aggregate amount of up to $1,000,000,000 (the “Facility”). The Arrangers are pleased to advise you that they are willing to act as joint and exclusive co-advisors, co-lead arrangers and co-book runners for the Facility. In addition, The Chase Manhattan Bank has agreed to serve as exclusive syndication agent for the Facility (in such capacity, the “Syndication Agent”), Bank of America, N.A. has agreed to serve as exclusive administrative agent for the Facility (in such capacity, the “Administrative Agent”) and Salomon Smith Barney Inc. has agreed to serve as exclusive documentation agent for the Facility (in such capacity, the “Documentation Agent”, and together with the Syndication Agent and the Administrative Agent, the “Agents”).       Furthermore, the Syndication Agent, the Administrative Agent and Citicorp Real Estate, Inc. (“CRE”, and together with the Syndication Agent and the Administrative Agent, the “Lead Lenders”) and Dresdner Bank AG, New York and Cayman Branches (“Dresdner”), Deutsche Bank AG (“Deutsche Bank”) and PNC Bank, NA (“PNC”, and together with Dresdner and Deutsche Bank the “Co-Lenders”) are pleased to advise you of the several commitment of each of the Lead Lenders and Co-Lenders to provide up to the following amounts of the Facility upon the terms and subject to the conditions set forth in this commitment letter (the “Commitment   -------------------------------------------------------------------------------- Letter”) and in the Summary of Terms and Conditions attached hereto as Exhibit A (the “Term Sheet”)(each, an “Initial Commitment”):           Syndication Agent $ 271,666,666.67 Administrative Agent $ 271,666,666.67 CRE $ 271,666,666.66 Dresdner Bank $ 75,000,000.00 Deutsche Bank $ 75,000,000.00 PNC $ 35,000,000.00       In the event funds are advanced under the Facility and remain outstanding for more than 120 days, the Arrangers shall have the right to syndicate the Facility to financial institutions (collectively, with the Lead Lenders and the Co-Lenders, the “Lenders”) as further described below, in each case upon the terms and subject to the conditions set forth or referred to in this Commitment Letter, the Term Sheet or the Fee Letter referred to below.       It is agreed that the Administrative Agent will act as the sole and exclusive administrative agent, that the Documentation Agent will act as sole and exclusive documentation agent, that the Syndication Agent will act as sole and exclusive syndication agent and that the Arrangers will act jointly as the arrangers for the Facility, and each will, in such capacities, perform the duties and exercise the authority customarily performed and exercised by it in such roles. The Borrower and the Guarantor agree that no other agents, co-agents or arrangers will be appointed, no other titles will be awarded and no compensation (other than that expressly contemplated by the Term Sheet and the Fee Letter referred to below) will be paid in connection with the Facility unless the Borrower, the Arrangers, the Agents and the Lead Lenders shall so agree.       In the event the Arrangers commence syndication efforts the Borrower and the Guarantor agree to actively assist the Arrangers in completing such syndication as reasonably requested by the Arrangers. Such assistance shall include (a) the Borrower and the Guarantor using commercially reasonable efforts to ensure that the syndication efforts benefit materially from the Borrower’s and the Guarantor’s existing lending relationships; (b) the Borrower and the Guarantor assisting in the preparation of a confidential information memorandum and other marketing materials to be used in connection with the syndication by providing the information described in the following paragraph; and (c) the Borrower and the Guarantor making their senior management and advisors available to participate, upon reason- 2 -------------------------------------------------------------------------------- able notice, in information meetings for potential syndicate members at such times and places as the Arrangers may reasonably request.       The Arrangers will jointly manage all aspects of the syndication, provided that decisions as to the selection of institutions to be approached and when they will be approached, when their commitments will be accepted and which institutions will participate, will be made by mutual agreement of the Arrangers and the Borrower and the allocations of the commitments among the Lenders and the amount and distribution of fees among the Lenders will be determined by the Arrangers, the Agents and the Lead Lenders. The Arrangers will have no responsibility other than to arrange the syndication. To assist the Arrangers in their syndication efforts, the Borrower and the Guarantor agree promptly to prepare and provide to the Arrangers all information with respect to the Borrower and the Guarantor and the transactions contemplated hereby, including all financial information and projections (the “Projections”), as the Arrangers may reasonably request in connection with the arrangement and syndication of the Facility, so long as disclosure by the Borrower, the Guarantor or any of their subsidiaries, of such information would not result in a violation of, or expose the Borrower, the Guarantor or their subsidiaries to any material liability under, any applicable law, ordinance or regulation or any agreements with unaffiliated third parties which are binding on the Borrower, the Guarantor or any of their subsidiaries or on any property of any of them. The Borrower and the Guarantor agree to use commercially reasonable efforts to obtain any necessary consents or waivers under any such agreements to disclose such information to the Arrangers, the Agents and the Lenders. The Borrower and the Guarantor hereby represent and covenant that (a) all information other than the Projections (the “Information”) that has been or will be made available to the Arrangers by the Borrower, the Guarantor or any of their respective representatives is or will be, when furnished, complete and correct in all material respects and does not or will not, when furnished, contain any material misstatement or omission of fact and (b) the Projections that have been or will be made available to the Arrangers by the Borrower, the Guarantor or any of their representatives have been or will be prepared in good faith based upon assumptions believed to be reasonable at the time of preparation thereof. The Borrower and the Guarantor agree to supplement the Information and Projections on the 120th day following the funding of the Facility and from time to time upon request of the Arrangers or the Agents from the date hereof until the completion of any syndication of the Facility as contemplated by this Commitment Letter so all Information are complete and correct in all material respects and do not contain any material misstatements or omissions of fact. The Borrower and the Guarantor understand that in arranging and syndicating the Facility we may use and rely on the Information and Projections without independent verification thereof. 3 --------------------------------------------------------------------------------       As consideration for the Lenders’ commitment hereunder and the respective agreements of the Arrangers and the Agents to perform the services described herein, the Borrower and the Guarantor agree, jointly and severally, to pay to each of the Lenders the nonrefundable fees set forth in the Term Sheet and in the Fee Letter dated the date hereof and delivered herewith (the “Fee Letter”).       The commitment of the Lead Lenders and the Co-Lenders hereunder and the respective agreements of the Arrangers and the Agents to perform the services described herein are subject to (a) there not occurring or becoming known to us any material adverse condition or material adverse change in or affecting the business, operations, property, condition (financial or otherwise) or prospects of the Borrower, the Guarantor and their respective subsidiaries, taken as a whole since the latest audited financial statements delivered to the Arrangers, (b) our completion of and satisfaction in all respects with a due diligence investigation up until the execution of definitive documentation with respect to the Facility with respect to the business, operations, property, condition (financial or otherwise) or prospects of the Borrower, the Guarantor and their respective subsidiaries, (c) our not becoming aware after the date hereof of any information or other matter affecting the Borrower, the Guarantor or the transactions contemplated hereby which is inconsistent in a material and adverse manner with any such information or other matter disclosed to us prior to the date hereof which inconsistency would have a material adverse effect on the business, operations, property, condition (financial or otherwise) or prospects of the Borrower, the Guarantor and their respective subsidiaries, taken as a whole as shown in the latest audited financial statements delivered to the Arrangers, (d) our satisfaction that prior to and during the syndication of the Facility there shall be no competing offering, placement or arrangement of any bank financing other than property-specific mortgage debt and property-specific mezzanine debt not prohibited by the Existing Credit Agreement (as defined in the Term Sheet) by or on behalf of the Borrower, the Guarantor or any affiliate thereof and other than the assumption of (or advances under) that certain $171,000,000.00 Master Construction Funding Facility with Mountain Ventures Golden State, LLC, and other single-member limited liability companies, as Borrower, First Union National Bank, as Senior Lender and Administrative Agent, Spieker Properties #183, as Junior Lender, First Union Development Corporation, as Equity Investor, and Spieker Properties, L.P., as Purchaser, unless otherwise agreed by the Arrangers and the Agents, (e) the negotiation, execution and delivery on or before June 15, 2001 of definitive documentation with respect to the Facility satisfactory to the Lenders and their counsel and (f) the other conditions set forth or referred to in the Term Sheet. 4 --------------------------------------------------------------------------------       The Term Sheet attached hereto is intended as an outline only and does not purport to summarize all of the terms, conditions, covenants, representations, warranties and other provisions which will be contained in definitive financing agreements for the Facility. The commitment of each of the Lenders is subject to the satisfaction of the conditions set forth in this Commitment Letter and the Term Sheet and customary conditions for transactions of this type. Subject to the provisions of this Commitment Letter, the definitive financing agreements shall contain terms, conditions, representations and warranties, financial and other covenants, events of default and remedies consistent with the Term Sheet and otherwise satisfactory to the Arrangers, the Agents and the Lenders.       The Borrower and the Guarantor agree, jointly and severally to indemnify the Arrangers, the Agents, the Lenders and the respective affiliates and the respective directors, officers, agents, advisors and employees of the foregoing (each an “Indemnitee”) and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, which may be incurred by such Indemnitee in connection with any investigative, administrative or judicial proceeding that may at any time (including, without limitation, at any time following termination or expiration of this Commitment Letter) be asserted against any Indemnitee, as a result of, or arising out of, or in any way related to or by reason of this Commitment Letter, or any of the transactions contemplated by this Commitment Letter or the execution, delivery or performance of this Commitment Letter, but excluding those liabilities, losses, damages, costs and expenses (a) for which such Indemnitee has been compensated pursuant to the terms of this Commitment Letter or the Fee Letter or (b) incurred solely by reason of the gross negligence, willful misconduct, bad faith or fraud of any Indemnitee as finally determined by a court of competent jurisdiction or (c) owing by such Indemnitee to any third party based upon contractual obligations of such Indemnitee owing to such third party which are not expressly set forth in this Commitment Letter. In addition, the indemnification set forth in this paragraph in favor of any director, officer, agent, advisor or employee of any Arranger, Agent or Lender shall be solely in their respective capacities as such director, officer, agent, advisor or employee. The Borrower’s and the Guarantor’s obligations under this paragraph shall survive the termination or expiration of this Commitment Letter.       Except for liability of each Lender for damages incurred by the Borrower or the Guarantor to Spieker Properties, Inc. or Spieker Properties, L.P. (collectively, “Spieker Properties”) in connection with a default by the Borrower or the Guarantor under the Borrower’s agreement with Spieker Properties that results 5 -------------------------------------------------------------------------------- solely and directly from a breach of the obligations of such Lender under this Commitment Letter (or directly in combination with such Lender’s breach and a breach of the obligations of another Lender under this Commitment Letter), no Arranger, Agent or Lender shall be liable for any special, indirect, consequential or punitive damages in connection with its activities related to the Facility or for any special, indirect, consequential or punitive damages in connection with this Commitment Letter.       This Commitment Letter shall not be assignable by the Borrower or the Guarantor without the prior written consent of the Arrangers, the Agents and the Lead Lenders (and any purported assignment without such consent shall be null and void). The commitments of the Lenders and the obligations of the Arrangers and the Agents set forth in this Commitment Letter are intended to be solely for the benefit of the Borrower and the Guarantor and are not intended to confer any benefits upon, or create any rights in favor of, any person other than the Borrower and the Guarantor. This Commitment Letter may not be amended or waived except by an instrument in writing signed by the Borrower, the Guarantor, the Arrangers, the Agents and the Lenders. This Commitment Letter may be executed in any number of counter-parts, each of which shall be an original, and all of which, when taken together, shall constitute one agreement. Delivery of an executed signature page of this Commitment Letter by facsimile transmission shall be effective as delivery of manually executed counterpart hereof. This Commitment Letter and the Fee Letter are the only agreements that have been entered into among the Borrower, the Guarantor, the Arrangers, the Agents and the Lenders with respect to the Facility and set forth the entire understanding of the parties with respect thereto. This Commitment Letter shall be governed by, and construed in accordance with, the laws of the State of New York.       Neither this Commitment Letter, the Term Sheet, the Fee Letter nor any of the terms or substance thereof shall be disclosed, directly or indirectly, by the Borrower, the Guarantor or their respective affiliates to any other person, other than (i) to the respective directors, offices, employees, attorneys and auditors of the Borrower and the Guarantor on a confidential, “need-to-know” basis, (ii) such disclosure as may be compelled in a judicial or administrative proceeding or as otherwise required by applicable law, (iii) to the rating agencies, (iv) as may be required pursuant to the provisions of any agreement to which Borrower, Guarantor or such affiliate is a party, (v) as may be required in connection with Borrower’s, Guarantor’s or such affiliate’s financial statements, and (vi) in response to a query with respect to this Commitment Letter, the Fee Letter or the terms or substance thereof. 6 --------------------------------------------------------------------------------       The Borrower and the Guarantor each acknowledge that the Arrangers, the Agents and the Lenders may be providing debt financing, equity capital or other services (including financial advisory services) to other companies in respect of which the Borrower or the Guarantor may have conflicting interests regarding the transactions described herein and otherwise. None of the Arrangers, the Agents, the Lead Lenders or the Co-Lenders will use confidential information obtained from the Borrower or the Guarantor by virtue of the transactions contemplated by this Commitment Letter or their other relationships with the Borrower or the Guarantor in connection with the performance by the Arrangers, the Agents, the Lead Lenders or the Co-Lenders of services for other companies, and none of the Arrangers, the Agents, the Lead Lenders or the Co-Lenders will furnish any such information to other companies. The Borrower and the Guarantor also acknowledge that the Arrangers, the Agents, the Lead Lenders and the Co-Lenders have no obligation to use in connection with the transactions contemplated by this Commitment Letter, or to furnish to the Borrower or the Guarantor, confidential information obtained from other companies.       The compensation, reimbursement, indemnification, confidentiality, syndication and “market flex” provisions contained herein and in the Fee Letter shall remain in full force and effect regardless of whether definitive financing documentation shall be executed and delivered and, with respect to reimbursement, indemnification and confidentiality, notwithstanding the termination of this Commitment Letter or commitments and respective agreements of the Arrangers, the Agents and the Lenders hereunder.       If the foregoing correctly sets forth our agreement, please indicate the Borrower and the Guarantor’s acceptance of the terms hereof and of the Term Sheet and the Fee Letter by returning to us executed counterparts hereof and of the Fee Letter not later than 5:00 p.m., New York City time, on May 15, 2001. The commitments and respective agreements of the Arrangers, the Agents, the Lead Lenders and the Co-Lenders herein will expire at such time in the event the Administrative Agent has not received such executed counterparts in accordance with the immediately preceding sentence. 7 --------------------------------------------------------------------------------       The Arrangers, the Agents, the Lead Lenders and the Co-Lenders are pleased to have been given the opportunity to assist you in connection with this important financing.   Very truly yours,   Arrangers   BANC OF AMERICA SECURITIES, LLC   By:  /s/ PATRICK TROWBRIDGE       Name: Patrick Trowbridge      Title: Vice President   J.P. MORGAN SECURITIES INC.   By:  /s/ JOHN PERKINS       Name: John Perkins      Title: Vice President   SALOMON SMITH BARNEY INC.   By:  /s/ KENT E. JEWETT       Name: Kent E. Jewett      Title: Managing Director   --------------------------------------------------------------------------------   Agents   BANK OF AMERICA, N.A.   By:  /s/ PATRICK TROWBRIDGE       Name: Patrick Trowbridge      Title: Vice President   THE CHASE MANHATTAN BANK   By:  /s/ MARC E. COSTANTINO       Name: Marc E. Costantino      Title: Vice President   SALOMON SMITH BARNEY INC.   By:  /s/ KENT E. JEWETT       Name: Kent E. Jewett      Title: Managing Director   --------------------------------------------------------------------------------   Lead Lenders   BANK OF AMERICA, N.A.   By:  /s/ PATRICK TROWBRIDGE       Name: Patrick Trowbridge      Title: Vice President   THE CHASE MANHATTAN BANK   By:  /s/ MARC E. COSTANTINO       Name: Marc E. Costantino      Title: Vice President   CITICORP REAL ESTATE, INC.   By:  /s/ DAVID BOUTON       Name: David Bouton      Title: Director   --------------------------------------------------------------------------------   Co-Lenders   DRESDNER BANK AG, NEW YORK AND CAYMAN BRANCHES   By:_______________________________      Name:      Title:   DEUTSCHE BANK AG   By:_______________________________      Name:      Title:   PNC BANK, NA   By:_______________________________      Name:      Title:   -------------------------------------------------------------------------------- Accepted and agreed to as of the date first written above by: EQUITY OFFICE PROPERTIES TRUST By:  /s/ MAUREEN FEAR       Name: Maureen Fear      Title: Senior Vice President, Treasurer EOP OPERATING LIMITED PARTNERSHIP By:     Equity Office Properties Trust,           its general partner   By:  /s/ MAUREEN FEAR       Name: Maureen Fear      Title: Senior Vice President, Treasurer  

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.22.3 FIRST AMENDMENT TO EMPLOYMENT AGREEMENT     This First Amendment to the Employment Agreement, dated as of July 15, 1998, by and between Russell Goldsmith ("Goldsmith"), on the one hand, and City National Bank ("CNB") and City National Corporation (the "Parent Corporation"), on the other hand (the "Employment Agreement"), is entered into as of March 5, 2001.     WHEREAS, the Parent Corporation previously adopted its 1999 Variable Bonus Plan which was intended, among other things, to supplant CNB's Executive Management Bonus Plan for individual's selected to participate in the Parent Corporation's 1999 Variable Bonus Plan;     WHEREAS, the Employment Agreement refers to Goldsmith's participation in CNB's Executive Management Bonus Plan;     WHEREAS, in conjunction with the adoption of the Corporation's 1999 Variable Bonus Plan, the Employment Agreement should have been modified to address Goldsmith's participation in that plan;     NOW, THEREFORE, the parties agree that, retroactive to the initial adoption of the Corporation's 1999 Variable Bonus Plan, the Employment Agreement is amended by revising Section 6 thereof to read in its entirety as follows: 6.BONUS COMPENSATION. Goldsmith shall participate in the Parent Corporation's 1999 Variable Bonus Plan, CNB's Executive Management Bonus Plan and any other cash bonus or incentive compensation plan of Employer established for corporate executive officers of Employer, including corporate officers who are members of the Executive Committee and the Strategy and Planning Committee, in each case as determined by the Compensation and Directors Nominating Committees of the Parent Corporation and CNB, as applicable (or, in the absence of a Compensation and Directors Nominating Committee, the Board of Directors or another committee of directors designated by the Board of Directors as responsible for matters relating to executive compensation). The aggregate amount of annual bonus or incentive compensation (the "Annual Bonus") paid to Goldsmith pursuant to all such bonus plans for any year (including the fiscal year ending December 31, 1998 and the fiscal year during which his employment is terminated) shall not be less than one hundred twenty-five percent (125%) of his Annual Base Compensation as of December 31 of the year for which the bonus is being paid if plan goals for the year are achieved, scaled up ratably to two hundred percent (200%) if one hundred thirty percent (130%) of plan goals are achieved and scaled down ratably to thirty five percent (35%) if eighty-five percent (85%) of plan goals are achieved. In determining the Annual Bonus payable to Goldsmith for any year in which he was not employed by Employer for the entire year, the Annual Bonus for the portion of such fiscal year preceding the termination of his employment shall be an amount equal to (i) the amount which the Annual Bonus would have been had the plan goals achieved through the month ending immediately following the date of termination of his employment been the plan goals for the entire fiscal year, the fiscal year had ended at the end of such month and Goldsmith's Annual Base Compensation had been the Annual Base Compensation payable to him as of the following December 31 had his employment continued through the following December 31, (ii) multiplied by a fraction, the numerator of which is the number of months in the fiscal year through the end of the month immediately following the date of termination of Goldsmith's employment and the denominator of which is 12. Unless Goldsmith elects to defer receipt thereof, each Annual Bonus shall be paid no later than the end of the third month of the fiscal year –1– -------------------------------------------------------------------------------- following the fiscal year for which the bonus is being paid; provided, however, that if the employment of Goldsmith is terminated prior to the end of the fiscal year for which the bonus is being paid, the Annual Bonus for the partial year preceding the termination of his employment shall be paid no later than the end of the third month following the termination of his employment and any amounts payable under any subparagraphs of Paragraph 10 as an Annual Bonus applicable to any portion of a fiscal year of less than twelve months shall be paid no later than the end of the third month following the end of the period for which such amount is payable.     IN WITNESS WHEREOF, the parties hereto have executed this First Amendment to Employment Agreement as of March 5, 2001.               CITY NATIONAL BANK           /s/ RUSSELL GOLDSMITH   By:   /s/ FRANK P. PEKNY --------------------------------------------------------------------------------       -------------------------------------------------------------------------------- Russell Goldsmith       Frank P. Pekny         Vice Chairman and Chief     Financial Officer               CITY NATIONAL CORPORATION               By:   /s/ FRANK P. PEKNY         --------------------------------------------------------------------------------         Frank P. Pekny         Executive Vice President and     Chief Financial Officer /     Treasurer –2– -------------------------------------------------------------------------------- QuickLinks FIRST AMENDMENT TO EMPLOYMENT AGREEMENT

QuickLinks -- Click here to rapidly navigate through this document LOGO [g806241.jpg] PROMISSORY NOTE     Dot Hill Systems, Corp., agrees to loan you, Dana Kammersgard $25,000. You agree to repay such amount plus 5% interest. Full payment for this loan plus interest shall be made by June 21, 2002.     If employment with Dot Hill Systems is terminated for any reason before the total amount has been repaid, the balance of monies owed will be due and payable in full, and will be deducted from your final paycheck or stock owned by you.     Collateral for such loan shall be by ownership of Dot Hill Systems stock valued by the number of shares at 2x the value of the principal of the loan.     I waive all notices, demands for payment, presentations for payment, protest and notice of protest, as to this Note. It is understood that any forbearances or extensions under the Note by the holder shall not waive or effect the obligations hereunder.     If default is made in the payment of this Note when due then the whole sum will accrue interest at the then maximum legal interest rate and the principal and interest shall immediately become due and payable at the option of the holder of this Note, without notice.     In the event of commencement of suit to enforce payment of this Note, I agree to pay attorney's fees and such additional sums as the court may adjudge reasonable.       /s/ PRESTON ROMM    -------------------------------------------------------------------------------- Dot Hill Systems, Corp.   /s/ DANA KAMMERSGARD    -------------------------------------------------------------------------------- Dana Kammersgard 6/21/01 -------------------------------------------------------------------------------- Date   6/21/01 -------------------------------------------------------------------------------- Date -------------------------------------------------------------------------------- QuickLinks PROMISSORY NOTE

AMENDMENT NO. 4 TO AMENDED AND RESTATED GENERAL CREDIT AND SECURITY AGREEMENT AND WAIVER   THIS AMENDMENT NO. 4 TO AMENDED AND RESTATED GENERAL CREDIT AND SECURITY AGREEMENT AND WAIVER, dated as of September 28, 2001 (the “Amendment”), by and between MBC Holding Company, a Minnesota corporation (“Borrower”), and Bremer Business Finance Corporation, a Minnesota corporation (the “Lender”).   WITNESSETH:   WHEREAS, Borrower and Lender are the parties to that certain Amended and Restated General Credit and Security Agreement dated as of March 29, 2001, as amended by an Amendment No. 1 to Amended and Restated General Credit and Security Agreement dated as of May 22, 2001, an Amendment No. 2 to Amended and Restated General Credit and Security Agreement dated as of June 25, 2001 and an Amendment No. 3 to Amended and Restated General Credit and Security Agreement dated as of August 31, 2001 (as so amended, the “Original Agreement”); and   WHEREAS, Borrower has requested that the Lender waive the Borrower’s compliance with certain Paragraphs of the Original Agreement and to further amend the Original Agreement; and   WHEREAS, subject to the terms and conditions of this Amendment, the Lender will agree to the foregoing requests of the Borrower.   NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged by the parties hereto, it is agreed as follows:   1.             Defined Terms.  All capitalized terms used in this Amendment shall, except where the context otherwise requires, have the meanings set forth in the Original Agreement, as amended hereby.   2.             Amendments.  The definition of “Maturity” appearing in Paragraph 1 of the Original Agreement is amended by extending the date “September 30, 2001”appearing in subparagraph (b)(i) thereof to the date “September 30, 2002.”   3.             Effective Date.     This Amendment shall become effective as of the date hereof on the date (the ‘Effective Date’) when, and only when, the Lender shall have received:   (a)           Counterparts of this Amendment executed by the Borrower;   (b)           An Certificate by the Borrower’s Secretary or any Assistant Secretary in form and substance satisfactory to the Lender;   (c)           Certificates of good standing for the Borrower in the jurisdiction of its organization;   (d)           An Acknowledgment and Agreement in the form provided by the Lender appropriately completed and duly executed by Key Officer who has executed and delivered a Support Agreement;   (e)           An Acknowledgment and Agreement in the form provided by the Lender appropriately completed and duly executed by each holder of Subordinated Debt including, without limitation,  MBLP and Stearns Bank National Association;   (f)            A waiver fee of $5,000.00  in immediately available funds; and   (g)           Such other approvals, opinions or documents as Lender may require.   4.             Representations and Warranties.  To induce the Lender to enter into this Amendment, the Borrower represents and warrants to the Lender as follows:   (a)           The execution, delivery and performance by the Borrower of this Amendment and any other documents to which the Borrower is a party have been duly authorized by all necessary corporate action, do not require any approval or consent of, or any registration, qualification or filing with, any governmental agency or authority or any approval or consent of any other Person (including, without limitation, any stockholder or member), do not and will not conflict with, result in any violation of or constitute any default under, any provision of the Borrower’s articles of incorporation or by-laws, any agreement binding on or applicable to the Borrower or any of its property, or any law or governmental regulation or court decree or order, binding upon or applicable to the Borrower or of any of its property and will not result in the creation or imposition of any Security Interest or other lien or encumbrance in or on any of its property pursuant to the provisions of any agreement applicable to Borrower or any of its property;   (b)           The representations and warranties contained in Paragraph 16 of the Original Agreement are true and correct as of the date hereof as though made on that date after giving effect to the Amendment;   (c)           (i) No events have taken place and no circumstances exist at the date hereof which would give Borrower the right to assert a defense, offset or counterclaim to any claim by the Lender for payment of the Obligations; and (ii) Borrower hereby releases and forever discharges the Lender and its successors, assigns, directors, officers, agents, employees and participants from any and all actions, causes of action, suits, proceedings, debts, sums of money, covenants, contracts, controversies, claims and demands, at law or in equity, which Borrower ever had or now has against the Lender or its successors, assigns, directors, officers, agents, employees or participants by virtue of their relationship to Borrower in connection with the Loan Documents and the transactions related thereto;   (d)           The Original Agreement as amended by this Amendment is  the legal, valid and binding obligation of the Borrower and is enforceable in accordance with its terms, subject only to bankruptcy, insolvency, reorganization, moratorium or similar laws, rulings or decisions at the time in effect affecting the enforceability of rights of creditors generally and to general equitable principles which may limit the right to obtain equitable remedies; and   (e)           Other than the existing Defaults and Events of Default described in Paragraph 9 of this Amendment, no Default or Event of Default and no Material Adverse Occurrence has occurred and is continuing as of the date hereof after giving effect to this Amendment.   5.             Reference to and Effect on the Loan Documents.   (a)           From and after the effective date of this Amendment, each reference in the Original Agreement to “this Agreement,” “herein,” “hereof,” “hereby” or words of like import referring to the Agreement and each reference in any other Loan Document to the “Credit Agreement,” the “Loan Agreement,” “therein,” “thereof,” “thereby” or words of like import referring to the Original Agreement shall mean and be a reference to the Original Agreement as amended by this Amendment.   (b)           Except as specifically set forth above, the Original Agreement remains in full force and effect and is hereby ratified and confirmed.   (c)           The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of Lender under the Original Agreement or any other Loan Document, nor constitute a waiver of any provision of the Original Agreement or any such Loan Document.   6.             Costs and Expenses.  Borrower agrees to pay on demand all costs and expenses of Lender in connection with the preparation, reproduction, execution and delivery of this Amendment and the other documents to be delivered hereunder or thereunder, including its reasonable attorneys’ fees and legal expenses.   7.             Governing Law.  This Amendment shall be governed by and construed in accordance with the laws of the State of Minnesota.   8.             Headings.  Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.   9.             Non-Waiver.         By executing this Amendment, the Lender does not waive any existing Default or Event of Default, including without limitation, any Default or Event of Default arising under the Original Agreement through July 31, 2001 because of the Borrower’s failure to comply with any of Paragraphs 17(i), (j), (k), (l) or (m) of the Original Agreement.  The Lender specifically reserves all of its rights with respect to such existing Defaults and Events of Default.       IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by the respective officers thereunto duly authorized as of the date first above written.   MBC Holding Company   By:_______________________________________ Its:_______________________________________   Subscribed and sworn to before me this 28th day of September, 2001.                                                                   Notary Public   Bremer Business Finance Corporation   By: ______________________________________ Its:_______________________________________     REPLACEMENT REVOLVING CREDIT NOTE     $3,500,000.00   ST. PAUL , MINNESOTA     SEPTEMBER 28, 2001   FOR VALUE RECEIVED, on the Revolving Credit Termination Date (as defined in the Credit Agreement hereinafter defined) the undersigned, MBC HOLDING COMPANY, a Minnesota corporation (the “Borrower”), promises to pay to the order of BREMER BUSINESS FINANCE CORPORATION, a Minnesota corporation (the “Lender”),  the principal sum of Three Million Five Hundred Thousand and No/100ths Dollars ($3,500,000.00) or, if less, the then aggregate unpaid principal amount of the Advances as may be borrowed by the Borrower under the Credit Agreement and are outstanding on the Revolving Credit Termination Date.  All Advances and all payments of principal shall be recorded by the Lender in its records which records shall be conclusive evidence of the subject matter thereof, absent manifest error.   The Borrower further promises to pay to the order of the Lender interest on each Advance from time to time outstanding from the date hereof until paid in full at a fluctuating annual rate equal to the sum of the Reference Rate plus 2.0% per annum; provided, however, that, notwithstanding anything to the contrary contained herein, upon the occurrence and during the continuance of any Event of Default, the rate of interest hereunder shall be the Default Rate. Interest accrued through a calendar month shall be due and payable on the first day of the following calendar month, commencing on October  1, 2001, and at maturity.  Interest payable after maturity shall be payable on demand.  Each change in the fluctuating interest rate shall take effect simultaneously with the corresponding change in the Reference Rate.   All payments of principal and interest under this Note shall be made in lawful money of the United States of America in immediately available funds to the Lender at the Lender’s office at 445 Minnesota Street, St, Paul, MN 55101, or at such other place as may be designated by the Lender to the Borrower in writing.   This Note is the Revolving Credit Note referred to in, and evidences indebtedness incurred under, an Amended and Restated  General Credit and Security Agreement dated as of March 29, 2001 (herein, as it may be amended, modified or supplemented from time to time, called the “Credit Agreement;” capitalized terms not otherwise defined herein being used herein as therein defined) between the Borrower and the Lender, to which Credit Agreement reference is made for a statement of the terms and provisions thereof, including those under which the Borrower is permitted and required to make prepayments and repayments of principal of such indebtedness and under which such indebtedness may be declared to be immediately due and payable.   All parties hereto, whether as makers, endorsers or otherwise, severally waive presentment, demand, protest and notice of dishonor in connection with this Note.   This Note is made under and governed by the internal laws of the State of Minnesota.   This Note is being executed and delivered in replacement of, but not in payment of, that certain Revolving Credit Note dated March 29, 2001 made by the Borrower payable to the order of the Lender in the original principal amount of $3,500,000.00; provided, however, that interest accrued on such replaced note through the date hereof shall be due and payable in accordance with the Credit Agreement.       MBC Holding Company           By:________________________________   Its:________________________________  

Exhibit 10.13 Effective as of May 15, 2001 Ms. Tara Clark 26 Hearthstone Place Andover, MA  01810 Dear Tara: I am writing to confirm our offer to you for a position as Vice President, Marketing, reporting to Walter Ogier, President and COO.  We are pleased to offer you a starting salary of $10,903.75 per month (equivalent to $130,845.00 per year), to be paid semi-monthly and reviewed annually.  The monthly salary includes an allowance to help offset contributions to certain benefits should you elect them.  You are also eligible for an annual cash bonus of 20% of base salary and to participate in our annual merit-based stock option program, provided that any award of options will be subject to the approval of our Board of Directors. You are also entitled to receive shares of BTI common stock in accordance with the terms and conditions of the Eligix, Inc. Management Equity Incentive Plan. In addition, you will receive medical and dental insurance, 15% of the cost of which is contributed by the employee.  Term life insurance, equivalent to one times your annual salary, and parking will be provided by the company without employee contribution. Long-term disability insurance is provided, 100% of the cost is contributed by the employee (your annual premium would be approximately $767.00).  You will also be entitled to three weeks paid vacation accrued on an annual basis and 11 paid holidays per year.  In the event your employment is terminated by Biotransplant without cause, you would receive up to 6 months base salary, payable in 12 equal semi-monthly installments which would be discontinued upon your securing other employment. Your employment is subject to your signing an Invention, Non-Disclosure and Non-Compete Agreement with BioTransplant, in the form previously provided to you, and review of any agreement you may have with others to insure that your employment with BioTransplant is not in conflict with any such agreements. Also, this offer is contingent upon your ability to provide proof of your legal right to work in the United States, as defined by Federal regulations. By signing this letter below, you acknowledge that the foregoing offered terms of your employment with BioTransplant do not constitute (i) a significant diminution of your duties, responsibilities, power, title or office in effect at Eligix, Inc. immediately prior to your acceptance of this offer or (ii) a material reduction in your compensation (including without limitation, salary, bonuses, options and benefits) or material change in your manner of compensation (including without limitation, the timing of any salary or bonus payments) in effect for you at Eligix, Inc. immediately prior to your acceptance of this offer. If you agree to the terms outlined above, please sign both copies of this letter and return one copy using the enclosed, stamped envelope. We look forward to your joining BioTransplant. We are confident that you will make a significant contribution to BioTransplant's future success. Sincerely, /s/ Elliot Lebowitz Elliot Lebowitz, Ph.D. President and CEO Accepted and Agreed to: /s/ Tara Clark     --------------------------------------------------------------------------------     Name:  Tara Clark   Date:  May 15, 2001  

Exhibit 10.2 PG&E Corporation Management Retention Program 1.         Purpose and Term This Management Retention Program (the "Program"), effective as of April 6, 2001 (the "Filing Date"), is intended to enable PG&E Corporation (the "Company") to retain quality employees who are critical to the Company's efforts to achieve a successful reorganization of Pacific Gas and Electric Company following the commencement of a case under Chapter 11 of Title 11 of the United States Code. The Program will provide financial incentives to eligible employees of the Company to continue their employment with the Company through the Payment Dates (defined below). 2.          Administration The Plan Administrator shall be the Senior Vice President of Human Resources for PG&E Corporation or his designee who shall manage, operate, and administer the Program for all participants. The Plan Administrator may, in his sole discretion, delegate responsibility to an individual or individuals to handle the day-to-day affairs of the Program. The Plan Administrator is empowered to effectuate the purposes and terms of the Program as set forth herein and is authorized to perform certain duties, including, but not limited to:            (a)      the establishment and implementation of rules for the management, operation                      and administration of the Program;            (b)      the determination of the eligibility of employees of the Company for benefits                      under the Program;            (c)      the correction of any defect or omission and the reconciliation of any                       inconsistency in the Program in such manner and to such extent as it shall                      deem appropriate, in its sole discretion; and            (d)      the interpretation of the Program in good faith to the fullest extent permitted                      by law, which interpretation shall be final and conclusive upon all persons. 3.        Eligible Employees The employees who are eligible to participate in the Program are set forth on Schedule A hereto. The employees who are eligible to participate in the Program shall be designated by the Plan Administrator (each employee eligible to participate in the Program is hereinafter referred to as a "Participant"). -------------------------------------------------------------------------------- 4.         Notice of Participation Each Participant shall be notified in writing of his or her eligibility to participate in the Program, subject to all of the conditions specified in the Program and such notice being satisfied. Such notice shall indicate the amount of award for which the Participant is eligible and any additional terms and conditions as the Nominating and Compensation Committee, in its sole and absolute discretion, may determine. 5.         Retention Award The amount of the retention award (the "Retention Award") shall vary from 25% to 100% of a Participant's base salary as of the Filing Date as set forth on Schedule A hereto. 6.        Vesting and Payment of Retention Award Subject to satisfying the terms of the Program, a Participant's Retention Award shall vest, and be payable, in two installments. For Tier I Participants, the first installment of one-third of the Retention Award shall be payable as soon as reasonably practicable following the filing of a Chapter 11 plan filed by the Company, provided such filing is made prior to January 1, 2002. The second installment of the remaining two-thirds of the Retention Award shall be payable as soon as reasonably practicable following the confirmation of a Chapter 11 plan. For Tier II Participants with less than two years of credited service with the Company as of the Filing Date, the first installment of one-third of the Retention Award shall be payable on the earlier of the next business day after the one-year anniversary of the Filing Date or as soon as reasonably practicable following the filing of a Chapter 11 Plan filed by the Company. The second installment of the remaining two-thirds of the Retention Award shall be payable on earlier of the next business day after the two-year anniversary of the Filing Date or as soon as reasonably practicable following the confirmation of a Chapter 11 plan. For all other Participants, the first installment of one-half of the Retention Award shall be payable on the earlier of next business day after the one-year anniversary of the Filing Date or as soon as reasonably practicable following the filing of a Chapter 11 Plan filed by the Company. The second installment of the remaining one-half of the Retention Award shall be payable on the earlier of the next business day after the two-year anniversary of the Filing Date or as soon as reasonably practicable following the confirmation of a Chapter 11 plan. Notwithstanding the foregoing, if the bankruptcy court confirms a Chapter 11 plan filed by the Company prior to the payment of any installment, that installment as well as any remaining installments shall be payable as soon as reasonably practicable following such confirmation. -------------------------------------------------------------------------------- 7.         Termination of Participation A Participant's participation in the Program shall automatically terminate, without notice to or consent of such Participant, upon the first to occur of any one of the following events with respect to such Participant:            (a)       voluntary termination, or termination of employment and ineligible for                        rehire; and            (b)        the Participant's retirement (as determined under the applicable Company                        retirement program in which the Participant participates). 8.         Proration of Participation A Participant's participation in the Program will be prorated to the date of termination for any terminating event other than those identified in Section 7 (for example, a Participant's death). However, if the termination occurs prior to the payment of the first installment, only that installment will be used as basis for the prorated Retention Award. 9.         Binding Authority The decisions of the Plan Administrator or his duly authorized delegate shall be final and conclusive for all purposes of the Program, and shall not be subject to any appeal or review. 10.       No Property Interest The Program is unfunded and all liabilities hereunder shall be unsecured obligations of the Company. 11.      Other Rights The Program shall not affect or impair the rights or obligations of the Company or its subsidiaries or a Participant under any other written contract, arrangement, or pension, profit sharing or other compensation program, and all amounts payable under the Program shall be characterized as special bonuses and not as additional salary for purposes of such other contracts, arrangements or programs. 12.       Amendment or Termination The Company may amend, alter, suspend or terminate the Program at any time, retroactively or otherwise; provided, however, unless otherwise required by law or specifically provided herein, no such amendment, alteration, suspension or termination shall be made that would materially impair the previously vested rights of any Participant without his or her written consent. -------------------------------------------------------------------------------- 13.       Severability If any term or condition of the Program shall be invalid, illegal or unenforceable, the remainder of the Program, with the exception of such invalid, illegal or unenforceable provision, shall not be affected thereby and shall continue in effect and application to its fullest extent. 14.      No Employment Rights Neither the establishment nor the terms of the Program shall be held or construed to confer upon any Participant the right to a continuation of employment by the Company. Subject to any applicable employment agreement, the Company reserves the right to dismiss any Participant, or otherwise deal with any Participant to the same extent as though the Program had not been adopted. 15.      Transferability of Rights The Company shall have the unrestricted right to transfer its obligations under the Program with respect to one or more Participants to any person, including any purchaser of all or any part of the Company's business. No Participant or spouse of a Participant shall have any right to commute, encumber, transfer or otherwise dispose of or alienate any present or future right or expectancy which the Participant may have at any time to receive payments of benefits hereunder, except to the extent required by law. Any attempt to transfer or assign a benefit, or any rights granted hereunder, by a Participant shall (after consideration of such facts as it deems pertinent), be grounds for terminating any rights of the Participant to any portion of the Retention Award not previously paid. 16.      Withholding The payment of the Retention Award shall be subject to all applicable withholding taxes and deductions. 17.      Governing Law The Program shall be construed, administered, and enforced according to the laws of the State of California, without regard to conflict of law principals. Adopted pursuant to the delegation contained in the Minutes of the Nominating and Compensation Committee of PG&E Corporation and the Board of Directors of Pacific Gas and Electric Company dated December 20, 2000.        Robert D. Glynn, Jr. By: _________________________________        Robert D. Glynn, Jr.        Chairman of the Board        PG&E Corporation --------------------------------------------------------------------------------   Schedule A Participants and Retention Awards Participant Grouping Types of Employees Total Number of Employees Total Number of Partipants Retention Award (percent of base salary) Tier I Senior Officers in Bands 1-3 4 4 (100% of employees) 100% Tier II Officers in Bands 4-6 9 9 (100% of employees) 100% Tier III Directors and Key Attorneys 40 21 (50% of employees) 50-75% Tier IV Managers and Other Attorneys 45 11 (25% of employees) 25-50% Total Participants: 44 Total Awards: $6.2M Average Award: $140K

Exhibit 10.5 PROMISSORY NOTE     $275,000.00   Phoenix, Arizona     October 9, 2001     Note Doc.100901275       FOR VALUED RECEIVED, and legally bound hereby, RRF LIMITED PARTNERSHIP (“Maker”), a Delaware partnership, InnSuites Hospitality Trust, General Partner, an Ohio real estate investment trust, having an office at 1615 East Northern Avenue, Suite 102, Phoenix, Arizona 85020 hereby promises to pay to the order of Rare Earth Development Company (“Payee”), an Arizona corporation, 1615 East Northern Avenue, Suite 102, Phoenix, Arizona 85020 or a such other place as the holder hereof may from time to time designate in writing, the principal sum of TWO HUNDRED SEVENTY FIVE THOUSAND AND 00/100 DOLLARS ($275,000.00), with interest on the unpaid principal balance thereon from time to time outstanding, at the rate of seven percent (7.00%) per annum, computed on a three hundred sixty (360)-day year, to be due and payable in installments of principal and interest as follows:   (A)                              Commencing on July 15, 2002, one annual payment of accrued but unpaid interest on the outstanding principal balance hereunder; and on July 15, 2002 (the “Maturity date”), one payment in the amount of the then unpaid principal balance hereunder and all sums and charges due and unpaid by Maker (collectively, the “Note”).   (B)                                Upon sale or refinance of hotel/s, half of net proceeds shall be made available at option of hotel to prepay on this note.   Payments shall be applied first to any charges or sums (other than principal and interest) due and payable by Maker, second to accrued and unpaid interest on the principal balance hereof, and then to further reduce the principal balance of this Note.   Maker shall gave the right any time during the term of this Note to repay all or part of the unpaid principal amount of the Note, together with any accrued and unpaid interest thereon any other sums or charges due hereunder without any prepayment premium or penalty.   Maker hereby waives for itself and, to the fullest extent not prohibited by applicable law, for any subsequent lienor, any right Maker may now or hereafter have under the doctrine of marshaling of assets or otherwise which would require Payee to proceed against certain property before proceeding against any other property. Maker hereby agrees that in the event part of principal or interest is not paid when due or the entire Note is not paid when due, then the rate of interest on this Note shall, at the election of Payee upon ten (10) days prior written notice, each of which is hereby expressly waived, be increased to nine and 00/100 percent (9.00%) per annum or the highest rate for which the parties may agree under applicable law, whichever is less (the “Default Rate”). Maker shall be obligated thereafter to pay interest on the then unpaid principal balance of the Note at the Default Rate, both before and after judgment, to be computed from the due date through and including the date of actual receipt of the overdue payment, whether a payment of interest or the entire Note.  Nothing herein shall be construed as an agreement or privilege to extend the date of the payment or any installment or the entire Note, or as a wavier of any other right or remedy accruing to Payee.   In the event that any regular payment of interest herein provided shall not be received by Payee on the date such payment is due, Payee shall have the right to assess Maker a late payment charge in the amount of two percent (2.0%) of such overdue quarterly installment, which shall become immediately due to Payee for the additional cost agreed compensation to Payee for the additional costs and expenses reasonable expected to be incurred by Payee by reason of such nonpayment.  Maker acknowledges that the exact amount of such cost and expenses may be difficult, if not impossible, to determine with certainty, and further acknowledges and confesses the amount of such charge to be a consciously considered, good faith estimate of the actual damage to Payee by reason of such default.  The Default Rate will only accrue for periods of delinquent installments except for such when Payee accepts late payments of installments accompanied by a late payment charge as specified above.   Upon any of the following Events of Default, at the election of Payee, the entire unpaid principle balance of the Note, together with all accrued but unpaid interest thereon at the Default Rate and all other sums or changes due hereunder, shall become due and payable:   (a)                                  Maker’s failure to pay when due any installment required to be paid hereunder, on or before the tenth (10th) day following the applicable due date;     (b)                                 Maker’s failure to pay when due any other payment required to be under this Note, subject to any notice and applicable grace period, if any;     (c)                                  Maker’s breach of any other covenant or agreement herein and such breach remains uncorrected at the expiration of any applicable grace period expressly provided for herein;     (d)                                 Any creditor’s proceeding in which Maker consents to the appointment or a receiver or trustee for any of its property;   (e)                                  if any order, judgment or decree shall be entered, without the consent of Maker, upon an application of a creditor approving the appointment of a receiver or trustee for any of its property, and such order, judgment, decree, or appointment is not dismissed or stayed with an appropriate appeal bond within sixty (60) days following the entry or rendition thereof; or     (f)                                    if Maker (i) makes a general assignment for the benefit of creditors, (ii) fails to pay its debts generally as such debts become due, (iii) is found to be insolvent by a court of competent jurisdiction, (iv) voluntarily files a petition in bankruptcy or a petition or answer seeking readjustment of debts under any state or federal bankruptcy or like law, or (v) any such petition is filed against Maker and is not vacated or dismissed within sixty (60) days after filling thereof.   Notice of such election by Payee is hereby expressly waived as part of the consideration for this loan.  Nothing contained herein shall be construed to restrict the exercise of any other rights or remedies granted to Payee hereunder upon the failure of Maker to perform any provision hereof.   If this Note is not paid when due, whether at maturity or by acceleration, Maker promises to pay all costs incurred by Payee, including without limitation reasonable attorney’s fees to the fullest extent not prohibited by law, and all expenses incurred in connection with the protection or realization of any collateral, whether or not suit is filed hereon or on any instrument granted a security interest.   Maker hereby expressly acknowledges and represents that the indebtedness is for a business purpose and not consumer or household purposes.   Maker hereby waves demand, presentment for payment, protest, notice of protest, notice of non-payments and any and all lack of diligence or delays in collection or enforcement of this Note, and expressly consents to any extension of time of payment hereof, release of any party primarily or secondarily liable hereunder or any of the security for this Note, acceptance of other parties to be liable for any of the Note or of other security therefore, or any other indulgence or forbearance which may be made, without notice to any party and without in any way affecting the liability of any party.   No failure by Payee to exercise any right hereunder shall be construed as a waiver of the right to exercise the same or any other right any time or from time to time thereafter. This Note shall be construed and enforced according to, and governed by the laws of the State of Arizona.   Any notice required hereunder shall be in writing, and shall be given to the receiving party the notice by personal delivery or be certified mail, postage prepaid, return receipt requested, as follows:                   if to Payee, then addressed to Payee at 1615 East Northern Avenue Suite 102, Phoenix, Arizona 85020, (Tel.(602) 944-1500, Fax (602) 678-0281, with a copy to James W. Reynolds, Esq., Dillingham Cross, P.L.C., 5080 North 40th Street, Suite 335, Phoenix, Arizona 85018, (Tel.(602) 468-1811, Fax (602) 468-0442);                   if to Maker, then addressed to maker at 1615 East Northern Avenue, Suite 102, Phoenix, Arizona 85020, Attn: President (Tel.(602) 944-1500, Fax (602) 678-0281), with a copy to James B. Aronoff, Esq., Thompson Hine & Flory, LLP, 3900 Key center, 127 Public Square, Cleveland, Ohio 44114 (Tel.(216) 566-5500, Fax (216) 566-5800).   Any party may, be given notice in writing to designate another address as a place for service of notice. Such notices shall be deemed to be received when delivered, if delivered in person, or seven (7) business days after deposited in the United States mails, if mailed as herein above provided.    By acceptance of this Note, Payee agrees that, upon payment in full of the then unpaid principal balance of this Note, together with all unpaid interest and other sums payable to Payee under this Note, (a) Note shall be fully satisfied, (b) Payee shall promptly mark this Note as being paid in full, satisfied and discharged and shall return the same to Maker.         RRF LIMITED PARTNERSHIP, a     Delaware limited partnership,     InnSuites Hospitality Trust, General Partner, an Ohio real estate investment trust                             By: /s/ Marc E. Berg         Name: Marc E. Berg       Title:  Executive Vice-President  

EXHIBIT 10.19 NOTE $6,000,000.00   April 15, 2001 Chicago, Illinois        FOR VALUE RECEIVED, Horizon Farms, Inc.(“Borrower”) promises to pay to the order of Methode Electronics, Inc., a Delaware corporation (“Lender”) the principal sum of Six Million and no/100 Dollars ($6,000,000.00) (“Loan”), at the place and in the manner hereinafter provided, together with interest from the date hereof on the balance of the principal remaining from time-to-time unpaid at the rates described below.      During the period commencing as of the date hereof (“Loan Opening Date”) and continuing thereafter through June 30, 2003 (“Maturity Date”), interest shall accrue on the outstanding principal balance of the Loan remaining from time-to-time unpaid under this Note prior to the Maturity Date at a rate of 5.25% per annum (“Loan Rate”).      Interest accruing on the principal outstanding shall be: (a) computed on the basis of a year consisting of 365 days, (b) compounded semi-annually on the anniversary hereof, and (c) charged for the actual number of days within each monthly period in which any amounts remain outstanding under the Loan.      The Loan shall be repaid on the Maturity Date with all accrued interest.      This Note may be prepaid in whole or in part at any time and any prepayments shall be applied first against any interest then unpaid, and next against the next installments of principal coming due.      After the Maturity Date, or the earlier acceleration of the indebtedness evidenced by this Note, or if said indebtedness has not been accelerated, during any period in which an Event of Default (as hereinafter defined) exists under this Note or any of the Loan Documents, Maker shall pay interest on the balance of principal remaining unpaid during any such period at an annual rate equal to two percent (2%) plus the applicable Loan Rate then in effect under this Note. The interest accruing under this paragraph shall be immediately due and payable by Maker to the holder of this Note on demand and shall be additional indebtedness evidenced by this Note.      All payments of principal and interest hereunder shall be paid in coin or currency which, at the time or times of payment, is the legal tender for public and private debts in the United States of America and shall be made at such place as Lender or the legal holder or holders of this Note may from time to time appoint, and in the absence of such appointment, then at the offices of Lender at 7401 West Wilson Avenue, Chicago, Illinois 60706-4548. Payment submitted in funds not available until collected shall continue to bear interest until collected. If payment hereunder becomes due and payable on a Saturday, Sunday or legal holiday under the laws of the State of Illinois, the due date thereof shall be extended to the next succeeding business day, and interest shall be payable thereon at the then applicable interest rate during such extension.      Notwithstanding any provisions of this Note or any instrument securing payment of the indebtedness evidenced by this Note to the contrary, it is the intent of Maker and Lender that Lender shall never be entitled to receive, collect or apply as interest on principal of the indebtedness, any amount in excess of the maximum rate of interest permitted to be charged by applicable law; and if under any circumstance whatsoever, fulfillment of any provision of this Note, at the time performance of such provision shall be due, shall involve transcending the limit of validity prescribed by applicable law, then, ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity; and in the event Lender ever receives, collects or applies as interest any such excess, such amount which would be excess interest shall be deemed a permitted partial prepayment of principal and treated hereunder as such; and if the principal of the indebtedness secured hereby is paid in full, any remaining excess funds shall forthwith be paid to Maker. In determining whether or not interest of any kind payable hereunder, under any specific contingency, exceeds the highest lawful rate, Maker and Lender shall, to the maximum extent permitted under applicable law, (1) characterize any non-principal payment as an expense, fee or premium rather than as interest and (2) amortize, prorate, allocate and spread, to the end that the interest on account of such indebtedness does not exceed the maximum amount permitted by applicable law; provided that if the amount of interest received for the actual period of existence thereof exceeds the maximum lawful rate, Lender shall refund to Maker the amount of such excess. Lender shall not be subject to any penalties provided by any laws for contracting for, charging or receiving interest in excess of the maximum lawful rate. 38 --------------------------------------------------------------------------------      This Note and any and all other liabilities and obligations and indebtedness of Maker to Lender, whether such liabilities, obligation or indebtedness are now existing or hereafter created, direct or indirect, absolute or contingent, joint or several, due or to become due, howsoever created, arising or evidenced, and howsoever acquired by Lender, are secured, inter alia, by the Mortgage and Security Agreement (the “Mortgage”) of even date herewith made by Maker to Lender creating a mortgage lien on certain real property (the “Premises”) legally described in Exhibit 1 attached to the Mortgage (the Mortgage and any other document or instrument securing this Note or delivered to induce Lender to disburse the proceeds evidenced hereby are hereinafter collectively referred to as the “Loan Documents”). Reference is hereby made to the Loan Documents (which are incorporated herein by reference as fully and with the same effect as if set forth herein at length) for a legal description of the Premises, a statement of the covenants and agreements contained therein, a statement of the rights, remedies, and security afforded thereby, and all matters therein contained.      The occurrence of any one or more of the following events shall constitute an “Event of Default” under this Note:        (a)   the failure by Maker to make payment of principal or interest as same becomes due and payable or payment of any other amount due to Lender under this Note, within ten (10) days after the date when any such payment is due in accordance with the terms hereof, or the failure of Maker to make payment of any amounts due to Lender under the Mortgage or any of the other Loan Documents within ten (10) days after written notice from Lender that any such payment is due in accordance with the terms thereof; or        (b) the occurrence of any one or more of the “Events of Default” under paragraph 14 of the Mortgage.      At the election of the holder hereof, and without notice, the principal balance remaining unpaid under this Note, and all unpaid interest accrued thereon, shall be and become immediately due and payable in full in the case of the occurrence of any Event of Default. Failure to exercise this option shall not constitute a waiver of the right to exercise same in the event of any subsequent Event of Default. No holder hereof shall, by any act of omission or commission, be deemed to waive any of its rights, remedies or powers hereunder or otherwise unless such waiver is in writing and signed by the holder hereof, and then only to the extent specifically set forth therein. The rights, remedies and powers of the holder hereof, as provided in this Note, the Mortgage and in all of the other Loan Documents are cumulative and concurrent, and may be pursued against the Premises and any other security given at any time to secure the repayment hereof, all at the sole discretion of the holder hereof. If any suit or action is instituted or attorneys are employed to collect this Note or any part thereof, or for the protection or enforcement of any or all of the security for this Note, whether or not any lawsuit is filed with respect thereto, Maker promises and agrees to pay all costs and expenses of every kind and nature of collection, protection and enforcement including reasonable attorneys’ fees and court costs. 39 --------------------------------------------------------------------------------      Maker, any guarantor, and all others who now or may at any time become liable for all or any part of the obligations evidenced hereby, expressly agree hereby to be jointly and severally bound, and jointly and severally: (i) waive and renounce any and all homestead, redemption and exemption rights and the benefit of all valuation and appraisement privileges against the indebtedness evidenced by this Note or by any extension or renewal hereof; (ii) waive presentment and demand for payment, notices of nonpayment and of dishonor, protest of dishonor, and notice of protest; (iii) waive any and all notices in connection with the delivery and acceptance hereof and all other notices in connection with the performance, default, or enforcement of the payment hereof or hereunder, except as otherwise expressly provided in the Loan Documents; (iv) waive any and all lack of diligence and delays in the enforcement of the payment hereof; (v) agree that the liability of each Maker, guarantor, endorser or obligor shall be unconditional and without regard to the liability of any other person or entity for the payment hereof, and shall not in any manner be affected by any indulgence or forbearance granted or consented to by Lender to any of them with respect hereto; (vi) consent to any and all extensions of time, renewals, waivers, or modifications that may be granted by Lender with respect to the payment or other provisions hereof, and to the release of any security at any time given for the payment hereof, or any part thereof, with or without substitution, and to the release of any person or entity liable for the payment hereof; and (vii) consent to the addition of any and all other makers, endorsers, guarantors, and other obligers for the payment hereof, and to the acceptance of any and all other security for the payment hereof, and agree that the addition of any such makers, endorsers, guarantors or other obligers, or security shall not affect the liability of Maker.      The proceeds of the loan evidenced by this Note will be used solely for the purposes specified in 815 ILCS 205/4 (1993), as amended, and the principal sum advanced is for a business loan which comes within the purview of such section. Maker agrees that the obligation evidenced by this Note is an exempted transaction under the Truth-In-Lending Act, 15 U.S.C., Section 1601, et seq.      Time is of the essence hereof.      This Note is governed and controlled as to validity, enforcement, interpretation, construction, effect and in all other respects by the statutes, substantive laws and decisions of the State of Illinois. This Note may not be changed or amended orally but only by an instrument in writing signed by the party against whom enforcement of the change or amendment is sought.      Lender shall in no event be construed for any purpose to be a partner, joint venturer, agent or associate of Maker or any beneficiary thereof or of any lessee, operator, concessionaire or licensee of Maker or any beneficiary thereof in the conduct of their respective businesses, and by the execution of this Note, Maker agrees to indemnify, defend, and hold Lender harmless from and against any and all damages, costs, expenses and liability that may be incurred by Lender as a result of a claim that Lender is such partner, joint venturer, agent or associate.      This Note has been made and delivered at Chicago, Illinois and all funds disbursed to or for the benefit of Maker will be disbursed in Chicago, Illinois.      In the event one or more of the provisions contained in this Note shall for any reason be held to be invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision of this Note, and this Note shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein or therein. 40 --------------------------------------------------------------------------------      This Note and any and all other liabilities and obligations and indebtedness of Maker to Lender, whether such liabilities, obligation or indebtedness are now existing or hereafter created, direct or indirect, absolute or contingent, joint or several, due or to become due, howsoever created, arising or evidenced, and howsoever acquired by Lender, are secured, inter alia, by the Mortgage and Security Agreement (the “Mortgage”) of even date herewith made by Maker to Lender creating a junior mortgage lien on certain real property (the “Premises”) legally described in Exhibit 1 attached to the Mortgage (the Mortgage and any other document or instrument securing this Note or delivered to induce Lender to disburse the proceeds evidenced hereby are hereinafter collectively referred to as the “Loan Documents”). Reference is hereby made to the Loan Documents (which are incorporated herein by reference as fully and with the same effect as if set forth herein at length) for a legal description of the Premises, a statement of the covenants and agreements contained therein, a statement of the rights, remedies, and security afforded thereby, and all matters therein contained.      Maker has executed this Note as of the day and year first written above. MAKER: Horizon Farms, Inc., an Illinois corporation   By: /s/ Robert R. McGinley —————————————— Its: President Attest: /s/ James W. McGinley —————————————— Its: Secretary

Exhibit D SHAREHOLDER AGREEMENT SHAREHOLDER AGREEMENT dated as of March __, 2001, among the person(s) identified as Shareholder on the signature page hereof ("Shareholder"), Infonautics, Inc., a Pennsylvania corporation (the "Company"), and Tucows Inc., a Delaware corporation ("Tucows"). WHEREAS, on or about the date of the execution and delivery of this Agreement, certain parties are entering into an Agreement and Plan of Merger (the "Merger Agreement"), which contemplates a business combination between Tucows and the Company in a merger transaction to be accomplished through, as currently contemplated and as may be modified by the parties thereto, (i) the formation of TAC Acquisition Corporation ("TAC") and (ii) the merger of Tucows with and into TAC (the "Merger"); WHEREAS, Shareholder is the beneficial owner of record of approximately 1,456,154 shares of Class A Common Stock of the Company (the "Class A Shares," and any other shares of common stock or other voting equity securities of the Company held of record from time to time by the Shareholder, collectively the "Subject Securities"); WHEREAS, as a condition to Tucows' willingness to enter into the Merger Agreement, the Company and Tucows are obtaining this Agreement; WHEREAS, the Shareholder deems it in the best interest of the Company for the Company to enter into the Merger Agreement; and WHEREAS, in order to induce Tucows to enter into the Merger Agreement and to agree to the covenants and agreements set forth therein, Shareholder has agreed to enter into this Agreement. NOW, THEREFORE, to induce Tucows to enter into, and in consideration of its entering into, the Merger Agreement, and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged by the parties, and in consideration of the premises and the representations, warranties and agreements herein contained, and intending to be legally bound, the parties agree as follows: Restriction on Transfer or Acquisition of Subject Securities . Except as otherwise specified in Exhibit A hereto, Shareholder shall not (a) sell, transfer, pledge, assign or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to the direct or indirect sale, transfer, pledge, assignment or other disposition of, any of the Subject Securities to any person other than to Tucows, Company or any designee of Company, (b) deposit any of the Subject Securities into escrow, a voting trust or a voting agreement or grant a proxy with respect to any such Subject Securities, except as provided in this Agreement, or (c) acquire any additional securities of the Company without the prior written consent of Company. Voting Agreement . Shareholder agrees that, at any annual or special meeting of the shareholders of the Company and in any action by written consent of the shareholders of the Company, Shareholder shall vote the Subject Securities (a) in favor of the Merger, the approval and adoption of the Merger Agreement and all agreements related to the transactions contemplated by the Merger Agreement, and any actions related thereto, and (b) against any action or agreement which would result in a breach of any representation, warranty or covenant of the Company in the Merger Agreement or which would otherwise frustrate the purposes of, impede, interfere with or attempt to discourage the Merger, including without limitation any other merger, consolidation, sale of assets, reorganization, recapitalization, liquidation or winding up of the Company or any other extraordinary transaction involving the Company or any matters related to or in connection therewith. On the date hereof, the Shareholder shall sign and deliver to Company the proxy in the form set forth in Exhibit B hereto (the " Irrevocable Proxy ") to permit the Company to implement the voting agreement set forth in this Section 2. The Shareholder shall, upon request, execute and deliver any additional documents deemed by Company to be necessary or desirable to complete and effectuate the Irrevocable Proxy and the provisions of this Agreement. No Dissenters Rights . The Shareholder agrees not to exercise any rights (including without limitation any rights that may exist under the Pennsylvania Business Corporation Law of 1988, as amended) to demand appraisal or dissenter's rights of any Subject Securities owned by the Shareholder with respect to the Merger or the other transactions contemplated by the Merger Agreement. Representations and Warranties of the Shareholder . Shareholder hereby represents and warrants to Company as follows: (a) Authority. This Agreement and the Irrevocable Proxy are valid and binding agreements of the Shareholder. If the Shareholder is married and the Class A Shares constitute community property under applicable laws, this Agreement and the Irrevocable Proxy have been duly authorized, executed and delivered by and constitute valid and binding agreements of, such Shareholder's spouse. If this Agreement is being executed in a representative or fiduciary capacity the person signing this Agreement has full power and authority to enter into and perform this Agreement and the Irrevocable Proxy. (b) Shareholder owns beneficially all of the Class A Shares and has good and marketable title thereto, free and clear of any claims, liens, encumbrances or security interests whatsoever (other than any created hereby or made to Sovereign Bank prior to the date hereof). Shareholder does not beneficially own, or have any existing right to acquire, any securities of the Company other than the Class A Shares. (c) Shareholder has the full and unrestricted legal power, authority and right to enter into, execute and deliver this Agreement and the Irrevocable Proxy without the consent or approval of any other person and has not entered into any voting agreement or granted any person any proxy (revocable or irrevocable) with respect to the Class A Shares (other than this Agreement and the Irrevocable Proxy). Representations and Warranties of the Company. The Company hereby represents and warrants to Shareholder that the Company has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby and thereby, that this Agreement has been duly executed and delivered by the Company and this Agreement constitutes the valid and binding obligation of the Company. Termination . This Agreement and the Irrevocable Proxy shall terminate upon the earlier to occur of (a) the effective time of the Merger or (b) the termination of the Merger Agreement; provided, however , that the term applicable to the transfer of Subject Securities specified on Exhibit A hereto shall terminate as specified in Exhibit A. No Brokers . Except for Company's fairness opinion and related services fee payable to Janney Montgomery Scott, the Shareholder and the Company represent, as to themselves and their affiliates, that to the best of their knowledge no agent, broker, investment banker or other firm or person is or will be entitled to any broker's or finder's fees or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement and respectively agree to indemnify and hold the others harmless from and against any and all claims, liabilities or obligations with respect to any such fees, commissions or expenses asserted by any person on the basis of any act or statement alleged to have occurred or been made by such party or any of its affiliates. Assignment . Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by either of the parties without the prior written consent of the other party. This Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. General Provisions . (a) Specific Performance. The parties hereto agree that if for any reason any party hereto shall have failed to perform its obligations under this Agreement or the Irrevocable Proxy, then the party seeking to enforce this Agreement or the Irrevocable Proxy shall be entitled to specific performance and injunctive and other equitable relief, and the parties hereto further agree to waive any requirement for the securing or posting of any bond in connection with the obtaining of any such injunctive or other equitable relief. This provision is without prejudice to any other rights or remedies, whether at law or in equity, that any party hereto may have against any other party hereto for any failure to perform its obligations under this Agreement or the Irrevocable Proxy. (b) Expenses. All costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses. (c) Amendments. This Agreement may not be amended except by an instrument in writing signed by each of the parties hereto. (d) Notices. All notices, requests, claims, demands and other communications hereunder shall be deemed to have been duly given when delivered in person, by facsimile, telegram or telex, or by registered or certified mail (postage prepaid, return receipt requested), if to the Company, to its address as set forth on the signature page hereof and, if to Shareholder, to the address set forth on the signature page hereof. (e) Descriptive Headings; Definitions. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All capitalized terms used herein but not defined herein shall have the meaning ascribed to them in the Merger Agreement. (f) Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more of the counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. (g) Entire Agreement. This Agreement (including the exhibits hereto) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. This Agreement (including the documents and instruments referred to herein) is not intended to and shall not be deemed to confer upon any person other than the parties hereto any rights or remedies hereunder. If any provision of this Agreement or the Irrevocable Proxy shall be invalid or unenforceable under applicable law, such provision shall be ineffective to the extent of such invalidity or unenforceability only, without in any way affecting the remaining provisions of this Agreement or the Irrevocable Proxy. (h) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, applicable to contracts made and to be performed in that Commonwealth. IN WITNESS WHEREOF, the Company has caused this Agreement to be signed by its respective officer thereunto duly authorized, and Shareholder has signed this Agreement, all as of the date first written above.   INFONAUTICS, INC.   By: _____________________________ Title: VP & General Counsel, Secretary Address: 590 N. Gulph Road King of Prussia, PA 19406-2800 USA 610-971-8859 (fax)   TUCOWS INC.   By: _______________________________________ Title: President, CEO Address: 96 Mowat Avenue Toronto, Ontario M6K 3M1 Canada 416-531-5584 (fax)   SHAREHOLDER: ______________________________ _______________________________________ Witness Name: Marvin I. Weinberger     ______________________________ _______________________________________ Witness Name: Fran Solow Weinberger Address: 630 Penfield Avenue Havertown, PA 19083-4120 --------------------------------------------------------------------------------   EXHIBIT A TRANSFERS OF SUBJECT SECURITIES The Company agrees that the restrictions on transfer or acquisition of Subject Securities set forth in Section 1 of this Agreement shall not apply with respect to the following: 1. The sale of that number of shares of Class A Common Stock of the Company equal to fifty percent (50%) of the number of shares of Class A Common Stock of the Company eligible to be sold by the Shareholder pursuant to Rule 144 under the Securities Act of 1933 during the period commencing two business days following the public announcement by the Company (the "Release Date") of the execution of the Merger Agreement and terminating three months following the Release Date. 2. The sale of that number of shares of Class A Common Stock of the Company equal to seventy five percent (75%) of the number of shares of Class A Common Stock of the Company eligible to be sold by the Shareholder pursuant to Rule 144 under the Securities Act of 1933 during the period commencing three months following the Release Date and terminating six months following the Release Date. The Shareholder agrees that any sale of shares of Class A Common Stock pursuant to Paragraphs 1 and 2 above shall be in compliance with Rule 144 and the Company's policy regarding insider trading. The Company agrees to use its best efforts to have all necessary clearances in order for the Shareholder to sell his shares of Class A Common Stock under Rule 144 made as soon as reasonably practicable after receipt by the Company, attention Vice President & General Counsel, Gerard J. Lewis, Jr., of duly executed and completed paperwork as may be required in order to complete such sale. In addition, the Company agrees to use its best efforts to file a registration statement on Form S-3 with the Securities and Exchange Commission as soon as reasonably practicable upon Shareholder's written request after (a) consummation of the Merger or (b) any earlier termination of the Merger in accordance with Paragraph 7(b). Such registration statement shall provide for the registration of all shares of the Company owned by the Shareholder as a result of the Merger less any shares previously sold by the Shareholder ("Merger Shares"). If the Merger is terminated in accordance with Paragraph 7(b), such registration statement shall provide for the registration of all shares of Company owned by the Shareholder at the time of registration, less any shares previously sold by the Shareholder ("Company Shares"). The registration rights granted under this paragraph shall terminate when the Shareholder is eligible to sell all of the Merger Shares or Company Shares, as the case may be, pursuant to Rule 144(k).   -------------------------------------------------------------------------------- EXHIBIT B   IRREVOCABLE PROXY EXECUTED March ___, 2001   Marvin I. Weinberger ("Shareholder"), being a holder of shares of Class A Common Stock of Infonautics, Inc. (the "Company") (the "Class A Shares"), does hereby constitute and appoint such person or persons as the Company shall designate from time to time (the "Proxy") the true and lawful attorney and proxy of Shareholder for him and in his name, place and stead, with full power of substitution, for a term (the "Term") of one year from the date of execution hereof, to attend and to vote as the proxy of Shareholder, at any and all meetings of shareholders of the Company or any adjournments thereof, all of the Class A Shares eligible to vote which are held of record or beneficially, by Shareholder, on any and all matters, proposals and questions, whether benefiting the Proxy or Company or not, that may be lawfully considered there, and to execute any written consents of Shareholder which may be solicited during the Term, as fully and with the same number of votes and with the same effect as Shareholder could do if personally present thereat or if personally solicited to execute such written consents. Shareholder hereby revokes all proxies heretofore made by him. Shareholder hereby ratifies all that the Proxy may or shall lawfully do in voting the Class A Shares in accordance herewith at any such meeting or adjournment in respect of all matters, proposals and questions that may properly come before the shareholders for consideration and action. Shareholder acknowledges that this proxy is coupled with an interest and is irrevocable. _______________________________________ Marvin I. Weinberger   _______________________________________ Fran Solow Weinberger

EXHIBIT 10.0 EMPLOYMENT AGREEMENT       This EMPLOYMENT AGREEMENT (the “Agreement”) is entered into by and between Washington Gas Light Company (the “Company” or the “Utility”) and James H. DeGraffenreidt, Jr. (the “Executive”), as of the 1st day of November, 2000. RECITALS       The Board of Directors of the Company (the “Board”) has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company or its parent company, WGL Holdings, Inc. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control of the Company or WGL Holdings, Inc., to encourage the Executive’s full attention and dedication to the interests of the Company currently and in the event of any threatened or pending Change of Control of the Company or WGL Holdings, Inc. and to provide the Executive with compensation and benefits arrangements upon such a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. AGREEMENT       NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:       1. Certain Definitions. (a) The “Effective Date” shall mean the first date during the Change of Control Period (as defined in Section l(b)) on which a Change of Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive’s employment with the Company is terminated within twelve months prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement the “Effective Date” shall mean the date immediately prior to the date of such termination of employment. 1 --------------------------------------------------------------------------------       (b) The “Change of Control Period” shall mean the period commencing on the date hereof and ending on the second anniversary of the Effective Date.         2. Change of Control. For the purpose of this Agreement, a “Change of Control” shall mean:         (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either (i) the then-outstanding shares of common stock of WGL Holdings, Inc. or (ii) the combined voting power of the then-outstanding voting securities of WGL Holdings, Inc. entitled to vote generally in the election of directors; provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from WGL Holdings, Inc., (ii) any acquisition by WGL Holdings, Inc. or any corporation controlled by or otherwise affiliated with WGL Holdings, Inc., (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by WGL Holdings, Inc. or any corporation controlled by or otherwise affiliated with WGL Holdings, Inc.; or (iv) any transaction described in clauses (i), (ii), and (iii) of subsection (d) of this Section 2; or         (b) Individuals who, as of the close of business on November 1, 2000, constituted the Board of Directors of WGL Holdings, Inc. (the “Incumbent WGL Holdings, Inc. Board”) cease for any reason to constitute at least a majority of the Board of Directors of WGL Holdings, Inc.; provided, however, that any individual becoming a director subsequent to November 1, 2000 whose election, or nomination for election by WGL Holdings, Inc.’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent WGL Holdings, Inc. Board shall be considered as though such individual were a member of the Incumbent WGL Holdings, Inc. Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Incumbent WGL Holdings, Inc. Board; or         (c) The acquisition by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either (i) the then-outstanding shares of common stock 2 --------------------------------------------------------------------------------   of the Utility or (ii) the combined voting power of the then-outstanding voting securities of the Utility entitled to vote generally in the election of directors, provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Utility, (ii) any acquisition by the Utility or any corporation controlled by or otherwise affiliated with the Utility, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Utility or any corporation controlled by or otherwise affiliated with the Utility; or (iv) any transaction described in clauses (i) and (ii) of subsection (e) of this Section 2; or         (d) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the WGL Holdings, Inc. (a “Business Combination”), in each case unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the outstanding WGL Holdings, Inc. common stock and outstanding WGL Holdings, Inc. voting securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the outstanding WGL Holdings, Inc. common stock and outstanding WGL Holdings, Inc. voting securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of WGL Holdings, Inc. or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 30% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination, or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent WGL Holdings, Inc. Board at the time of the execution of the initial agreement, or of such Incumbent WGL Holdings, Inc. Board, providing for such Business Combination; or         (e) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Utility (a “Utility Business Combination”), in each case 3 --------------------------------------------------------------------------------   unless, following such Utility Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, directly or indirectly, respectively, of the outstanding Utility common stock and the outstanding Utility voting securities immediately prior to such Utility Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Utility Business Combination in substantially the same proportions as their ownership, immediately prior to such Utility Business Combination, of the outstanding Utility common stock and outstanding Utility voting securities, as the case may be, and (ii) no Person (excluding any corporation resulting from such Utility Business Combination or any employee benefit plan (or related trust) of the Utility or such corporation resulting from such Utility Business Combination) beneficially owns, directly or indirectly, 30% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Utility Business Combination, or the combined voting power of the then-outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Utility Business Combination; or         (f) Approval by the shareholders of WGL Holdings, Inc. of a complete liquidation or dissolution of WGL Holdings, Inc.             3. Employment Period. The Company hereby agrees to continue the Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the second anniversary of such date (the “Employment Period”).             4. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, (A) the Executive’s position, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive’s services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location less than 35 miles from such location; and             (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge 4 -------------------------------------------------------------------------------- the responsibilities assigned to the Executive hereunder, to use the Executive’s reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions, and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive’s responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of the activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive’s responsibilities to the Company.       (b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary (“Annual Base Salary”), which shall be paid at a monthly rate, at least equal to twelve times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Company and its affiliated companies in respect of the 12-month period immediately preceding the month in which the Effective Date occurs. As used herein, “Annual Base Salary” will include all wages or salary paid to the Executive and will be calculated before any salary reduction or deferrals, including but not limited to reductions made pursuant to Sections 125 and 401(k) of the Internal Revenue Code of 1986, as amended. During the Employment Period, the Annual Base Salary shall be reviewed no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date and thereafter at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term “affiliated companies” shall include any company controlled by, controlling or under common control with the Company.       (ii) Annual Incentive. In addition to Annual Base Salary, the Executive shall earn annual incentive compensation (the “Annual Incentive”) for each fiscal year ending during the Employment Period, at least equal to that available to other peer executives of the Company and its affiliated companies. Each such Annual Incentive shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Incentive is awarded, unless the Executive shall elect to defer the receipt of such Annual Incentive. In the event the Executive is terminated during the 5 -------------------------------------------------------------------------------- Employment Period, the Executive’s Annual Incentive for the most recent year shall be prorated for the portion of that year that the Executive worked in the manner set forth in Section 6(a)(i)(A)(2).       (iii) Incentive, Savings and Retirement Plans. During the Employment Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies.       (iv) Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive’s beneficiaries, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies.       (v) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. 6 --------------------------------------------------------------------------------       (vi) Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe benefits, including, without limitation, payment of club dues, and, if applicable, use of an automobile and payment of related expenses, in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.       (vii) Office. During the Employment Period, the Executive shall be entitled to an office at least equal to that of other peer executives of the Company and its affiliated companies.       (viii) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies.       5. Termination of Employment. (a) Death or Disability. The Executive’s employment shall terminate automatically upon the Executive’s death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to terminate the Executive’s employment. In such event, the Executive’s employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the “Disability Effective Date”), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive’s duties. For purposes of this Agreement, “Disability” shall mean the absence of the Executive from the Executive’s duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive’s legal representative.       (b) Cause. The Company may terminate the Executive’s employment during the Employment Period for Cause. For purposes of this Agreement, “Cause” shall mean: 7 --------------------------------------------------------------------------------                (i)   the willful and continued failure of the Executive to perform substantially the Executive’s duties with the Company or one of its affiliates (other than any such failure from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board which specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive’s duties, or                 (ii)   the willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company. For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail.                             (c)   Good Reason. The Executive’s employment may be terminated by the Executive for Good Reason. For purposes of this Agreement, “Good Reason” shall mean:               (i)   the assignment to the Executive of any duties inconsistent in any material respect with the Executive’s position as contemplated by Section 4(a) of this Agreement, excluding for this purpose an isolated, insubstantial and inadvertent action which is remedied by the Company promptly after receipt of notice thereof given by the Executive;               (ii)   any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure which is remedied by the Company promptly after receipt of notice thereof given by the Executive; 8 --------------------------------------------------------------------------------         (iii) if there is a Change of Control, merger, acquisition or other similar affiliation with another entity and Executive does not continue as the Chief Executive Officer of the most senior resulting entity;         (iv) failure by the Company to reimburse the Executive for expenses related to a required relocation;         (v) any required relocation of the Executive more than thirty five miles from Washington, D.C., other than on a temporary basis (less than two months);         (vi) any purported termination by the Company of the Executive’s employment otherwise than as expressly permitted by this Agreement; or         (vii) any failure by the Company to comply with and satisfy Section 11 (c) of this Agreement.                         (d) Notice of Termination. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.                         (e) Date of Termination. “Date of Termination” means (i) if the Executive’s employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive’s employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive’s employment is terminated by reason of death or Disability, the Date of Termination shall be 9 -------------------------------------------------------------------------------- the date of death of the Executive or the Disability Effective Date, as the case may be.       6. Obligations of the Company upon Termination During Employment Period. (a) Good Reason, Other Than for Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the Executive’s employment other than for Cause or Disability or the Executive shall terminate employment for Good Reason:         (i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts:                             A. the sum of (1) the Executive’s Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2) the product of (x) the Target Annual Incentive (as defined in the Executive Compensation Plan of the Company) in the fiscal year of the Executive’s Termination and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365 and (3) any compensation previously deferred by the Executive (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not therefore paid (the sum of the amounts described in clauses (1), (2), and (3) shall be hereinafter referred to as the “Accrued Obligations”); and                             B. Subject to the provisions of Section 9, the amount equal to three times the Executive’s Highest Pay. For purposes of this Agreement, Highest Pay shall mean the sum of (1) the Executive’s Annual Base Salary, plus (2) the highest of the Executive’s Annual Incentive actually earned for the last three full fiscal years.         (ii) for three years after the Executive’s Date of Termination, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive’s beneficiaries at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(iv) of this Agreement if the Executive’s employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families, provided, however, that if the Executive becomes reemployed with another employer and is eligible to 10 --------------------------------------------------------------------------------   receive medical or other welfare benefits under another employer-provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. After this three-year term, the Executive shall immediately be eligible for COBRA benefits. For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until three years after the Date of Termination and to have retired on the last day of such period;         (iii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the “Other Benefits”);         (iv) the Company shall credit the Executive with up to an additional three years of benefit service under the Company’s Supplemental Executive Retirement Plan (the “SERP”), but in no event shall such additional years of benefit service result in total years of benefit service exceeding the maximum under the SERP;         (v) the Company shall, at its sole expense as incurred, provide the Executive with reasonable outplacement services the scope and provider of which shall be selected by the Executive in the Executive’s sole discretion; and         (vi) immediately prior to termination of the Executive’s employment, all restricted stock grants made to the Executive which are outstanding at the time of such event shall be accelerated and vest.                         (b) Death. If the Executive’s employment is terminated by reason of the Executive’s death during the Employment Period, this Agreement shall terminate without further obligations to the Executive’s legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive’s estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall include, without limitation, and the Executive’s estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most 11 -------------------------------------------------------------------------------- favorable benefits provided by the Company and affiliated companies to the estates and beneficiaries of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peers and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive’s estate and/or the Executive’s beneficiaries, as in effect on the date of the Executive’s death with respect to other peer executives of the Company and its affiliated companies and their beneficiaries.       (c) Disability. If the Executive’s employment is terminated by reason of the Executive’s Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term “Other Benefits” as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive’s beneficiaries, as in effect at any time thereafter generally with respect to other peer executives of the Company and its affiliated companies and their families.       (d) Cause: Other than for Good Reason. If the Executive’s employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (x) the Executive’s Annual Base Salary through the Date of Termination, (y) the amount of any compensation previously deferred by the Executive, and (z) Other Benefits, in each case to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination.       7. Nonexclusivity of Rights. Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated 12 -------------------------------------------------------------------------------- companies and for which the Executive may qualify, nor, subject to Section 12(f), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement.       8. Full Settlement. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment.       9. Certain Additional Payments by the Company. (a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 9) (a “Payment”) would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then the Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.       (b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by such certified public accounting firm as may be designated by the Company (the “Accounting Firm”) which shall provide detailed supporting calculations 13 -------------------------------------------------------------------------------- both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Company shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm’s determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (“Underpayment”), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive.       (c) In the event the Internal Revenue Service (“IRS”) subsequently challenges the Excise Tax computation herein described, then the Executive shall notify the Company in writing of any claim by the IRS that, if successful, would require the payment by the Executive of additional Excise Taxes. Such notification shall be given no later than ten days after the Executive receives written notice of such claim. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim and that it will bear the costs and provide the indemnification as required by this sentence, the Executive shall cooperate with the Company in good faith in order effectively to contest such claim and permit the Company to participate in any proceedings relating to such claim. In the event a final determination is made with respect to the IRS claim, or in the event the Company chooses not to further challenge such claim, then the Company shall reimburse the Executive for the additional Excise Tax owed to the IRS in excess of the Excise Tax calculated by the Accounting Firm. The Company shall also reimburse the Executive for all interest and penalties related to the underpayment of such Excise Tax. The Company will also reimburse the Executive for all federal and state income tax and employment taxes thereon. 14 --------------------------------------------------------------------------------       10. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive’s employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive’s employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement.       11. Successors & Assigns. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives.       (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.       (c) The Company will require any successor or any party that acquires control of the Company (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company or any party that acquires control of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.       12. Miscellaneous. (a) Governing Law; Headings; Amendment. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. 15 --------------------------------------------------------------------------------       (b) Notices. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:   If to the Executive: at the address for Executive that is on file with the Company     If to the Company: Washington Gas Light Company 1100 H Street, N.W. Washington, D.C. 20080 ATTN: General Counsel       or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.       (c) Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.       (d) Withholding. The Company may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.       (e) Waiver. The Executive’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right under this Agreement.       (f) At Will Employment. The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is “at will” and, subject to Section l(a) hereof, prior to the Effective Date, the Executive’s employment and/or this Agreement may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date this Agreement shall 16 -------------------------------------------------------------------------------- supersede any other agreement between the parties with respect to the subject matter hereof.       (g) Arbitration. In the event of any dispute between the parties regarding this Agreement, the parties shall submit to binding arbitration, conducted in Washington, DC or in Virginia within 25 miles of Washington, DC. The arbitration shall be conducted pursuant to the rules of the American Arbitration Association. Each of the parties shall select one arbitrator, who shall not be related to, affiliated with or employed by that party. The two arbitrators shall, in turn, select a third arbitrator. The decision of any two of the arbitrators shall be binding upon the parties, and may, if necessary, be reduced to judgment in any court of competent jurisdiction. Notwithstanding the foregoing, the parties expressly agree that nothing herein in any way precludes Company from seeking injunctive relief or declaratory judgment through a court of competent jurisdiction with respect to a breach (or an alleged breach) of any covenant not to compete or of any confidentiality covenant contained in this Agreement. In the event the Executive pursues arbitration pursuant to this Section herein, the Executive shall be compensated up to $150,000 in legal costs.       (h) Pooling of Interests Accounting. In the event any provision of this Agreement would prevent the use of pooling of interests accounting in a corporate transaction involving the Company and such transaction is contingent upon pooling of interests accounting, then that provision shall be deemed amended or revoked to the extent required to preserve such pooling of interests. The Executive will, upon advice from the Company, take (or refrain from taking, as appropriate) all actions necessary or desirable to ensure that pooling of interests accounting is available.       (i) Effect of Prior Agreements. This Agreement contains the entire understanding between the parties hereto and supersedes the Employment Agreement dated July 19, 1999 between the Company and the Executive. 17 --------------------------------------------------------------------------------       IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.   ________________________________________   Name: James H. DeGraffenreidt, Jr.   WASHINGTON GAS LIGHT COMPANY   ________________________________________   By: Daniel J. Callahan, III Title: Chairman        Human Resources Committee   18

NONQUALIFIED STOCK OPTION AGREEMENT         THIS AGREEMENT is entered into as of December 15, 2000 by and between New Horizons Worldwide, Inc., a Delaware corporation (the "Company"), and David A.Goldfinger (the "Optionee"). WITNESSETH:         WHEREAS, the Company maintains the New Horizons Worldwide, Inc. Omnibus Equity Plan (the "Plan") for the benefit of eligible participants therein; and         WHEREAS, the Board of Directors of the Company is currently charged with administering the Plan with respect to awards to members of the Board who are not employees ofthe Company; and         WHEREAS, the Board and its disinterested members have determined that the Optionee, as a person eligible to receive awards under the Plan, should be granted nonqualified stock options to acquire Shares under the Plan upon the terms and conditions set forth in this Agreement as part of Optionee’s compensation for services as a member of the Board during 2001.         NOW, THEREFORE, the Company and the Optionee hereby agree as follows:         1. Definitions.         (a) The following terms shall have the meanings set forth below whenever used in this instrument:         (i) The word "Act" shall mean the federal Securities Act of 1933, as amended.         (ii) The word "Agreement" shall mean this instrument as originally executed and as it may later be amended.         (iii) The word "Company" shall mean New Horizons Worldwide, Inc., a Delaware corporation, and any successor thereto which shall maintain the Plan.         (iv) The words "Fair Market Value" means, in respect of a Share, its fair market value as determined in the reasonable judgment of the Committee at any time.         (v) The word "Option" shall mean the right and option to purchase Shares pursuant to the terms of this Agreement.         (vi) The words "Option Exercise Date" shall mean the date the Optionee exercises the Option by performing the acts described in Section 7 hereof.         (vii) The word "Optionee" shall mean the person to whom the Option has been granted pursuant to this Agreement.         (viii) The words "Personal Representative" shall mean, following the Optionee's death, the person who shall have acquired, by will or by the laws of descent and distribution, the right to exercise the Option.         (ix) The word "Plan" shall mean the New Horizons Worldwide, Inc. Omnibus Equity Plan, as it was originally adopted and as it may later be amended.         (x) The word "Spread" shall mean, as of the Option Exercise Dare, an amount equal to the excess, if any, of the Fair Market Value of a Share in respect of which the Option is exercised over the Option Exercise Price.         (xi) The word “Transferee” shall mean the person or entity to whom rights to acquire Shares pursuant to the exercise of the Option shall have been transferred pursuant to Section 9 hereof.         (b) The following terms when used in the Agreement shall have the meanings given them in the Plan: "Affiliate;" "Board;" "Change in Control;" "Code;" "Committee;" "Consent;" "Family Members;" "Option Exercise Price;" "Shares."         2. Grant of Nonqualified Option. Effective as of the date of this Agreement, the Company grants to the Optionee, upon the terms and conditions set forth hereinafter, the right and option to purchase all or any lesser whole number of an aggregate of Fifteen Thousand (15,000) Shares at an Option Exercise Price of $ 14.44 per Share. The Option shall for all purposes be a nonqualified stock option subject to the federal income tax treatment described in Section 1.83-7 of the Federal Income Tax Regulations. Both the Company and the Optionee shall, on their respective federal income tax returns, report any transaction relating to the Option in a manner consistent with the preceding sentence.         3. Term of Option. Except as otherwise provided herein, the Optionee shall be entitled to exercise the Option at any time on or after January 1, 2001 and on or before the close of business on December 31, 2005 at the Company’s principal executive office (currently located at 1231 East Dyer Road, Suite 140, Santa Ana, California 92705-5605).         4. Cancellation of Option. If Optionee ceases to be a Director of the Company before or during the calendar year 2001 then the Option shall be cancelled with respect to a number of Shares equal to (A) multiplied by (B) below where:         (A) equals the number of Shares which are the subject of the Option; and         (B) equals a fraction, the numerator of which equals the number of full calendar quarters during the year 2001 during which the Optionee was not a Director and the denominator of which equals four; provided, however, that the Committee may in its absolute discretion determine (but shall not be under any obligation to determine) that such purchase rights shall be deemed to include additional Shares which are subject to the Option.         5. Change in Control. Notwithstanding the provisions of Sections 3 and 4 hereof, in connection with a Change in Control, the Optionee shall have the immediate and nonforfeitable right to exercise the Option with respect to all Shares covered by the Option. The Optionee shall be entitled to exercise the Option as provided in the immediately preceding sentence regardless of whether the surviving corporation in any merger or consolidation shall adopt and maintain the Plan. In the event the Option becomes exercisable pursuant to this Section 5, the Company shall notify the Optionee of his right to exercise the Option. Upon a Change in Control described in Section 1.6(b)(iii) of the Plan, the Option, to the extent not exercised, shall terminate unless the surviving corporation assumes the Option. In the event of a Change in Control described in Section 1.6(b)(iv) of the Plan, the Option, to the extent not exercised, shall terminate upon consummation of the Change in Control.         6. Adjustment Upon Changes in Capitalization. The number of Shares which may be purchased upon exercise of an Option and the Option Exercise Price shall be appropriately adjusted as the Committee may determine for any change after the date of the Agreement in the number of issued Shares resulting from the subdivision or combination of Shares or other capital adjustments, or the payment of a stock dividend, or other change in the Shares effected without receipt of consideration by the Company; provided, that any fractional Shares resulting from any such adjustment shall be eliminated. Adjustments under this Section 6 shall be made by the Committee, whose determination as to the adjustments to be made, and the extent thereof, shall be final, binding and conclusive.         7. Exercise of Option. The Option may be exercised by delivering to the Chairman, Vice Chairman, President or Chief Financial Officer of the Company at the then principal office address of the recipient officer, a completed Notice of Exercise of Option (obtainable from the Chief Financial Officer of the Company) setting forth the number of Shares with respect to which the Option is being exercised. Such Notice shall be accompanied by payment in full for the Shares, unless other arrangements satisfactory to the Committee for prompt payment of such amount are made. Payment of the Option Exercise Price may be made in any manner permitted by the Plan, subject to the consent of the Committee as applicable. With the consent of the Committee, the Optionee may effect a cashless exercise of the Option as described in the Plan. With the consent of the Committee in its sole discretion, payment for Shares acquired upon exercise of the Option may be made by delivery to the Company of an assignment of a sufficient amount of the proceeds from the sale of Shares acquired upon exercise of the Option to pay for all or some of the Shares acquired upon exercise of the Option and an authorization to the broker or selling agent to pay that amount to the Company, which sale shall be made at the Optionee’s direction on the Option Exercise Date; provided, that the Committee may require the Optionee to furnish an opinion of counsel acceptable to the Committee to the effect that such delivery would not result in the Optionee incurring any liability under Section 16 of the Act and does not require any Consent.         8. Issuance of Share Certificates. Subject to the last sentence of this Section 8, upon receipt by the Company prior to expiration of the Option of a duly completed Notice of Exercise of Option accompanied by payment for the Shares being purchased pursuant to such Notice (and, with respect to any Option exercised pursuant to Section 9 hereof by someone other than the Optionee, accompanied in addition by proof satisfactory to the Committee of the right of such person to exercise the Option), the Company shall deliver to the Optionee, within thirty (30) days of such receipt, a certificate for the number of Shares so purchased. The Optionee shall not have any of the rights of a stockholder with respect to the Shares which are subject to the Option unless and until a certificate representing such Shares is issued to the Optionee. The Company shall not be required to issue any certificates for Shares upon the exercise of the Option prior to (i) obtaining any Consents which the Committee shall, in its sole discretion, determine to be necessary or advisable, or (ii) the determination by the Committee, in its sole discretion, that no Consents need be obtained.         9. Successors in Interest, Etc. This Agreement shall be binding upon and inure to the benefit of any successor of the Company and the heirs, estate, and Personal Representative of the Optionee. A deceased Optionee’s Personal Representative shall act in the place and stead of the deceased Optionee with respect to exercising an Option or taking any other action pursuant to this Agreement. The Option shall not be transferable other than by will or the laws of descent and distribution, and the Option may be exercised during the lifetime of the Optionee only by the Optionee; provided, that a guardian or other legal representative who has been duly appointed for such Optionee may exercise the Option on behalf of the Optionee. Notwithstanding the preceding sentence, with the consent of the Committee in its sole discretion, the Optionee may transfer the rights under the Option in respect of some or all of the Shares which are subject to the Option to a Family Member or a trust for the exclusive benefit of the Optionee and/or Family Members, or a partnership or other entity affiliated with the Optionee that may be approved by the Committee. All terms and conditions of any Option, including provisions relating to the termination of the Optionee’s employment with the Company and its Affiliates, shall continue to apply following a transfer made in accordance with this Section 10 and the Transferee shall have no greater right to exercise the Option than the Optionee would have in the absence of the transfer. The Option may be exercised by the Transferee only in accordance with the terms of this Agreement and the Transferee’s exercise of the Option shall be subject to the Transferee and/or the Optionee satisfying all of the conditions relating to the exercise of the Option including, without limitation, provisions concerning payment of the Option Exercise Price and tax withholding.         10. Provisions of Plan Control. This Agreement is subject to all of the terms, conditions, and provisions of the Plan and to such rules, regulations, and interpretations relating to the Plan as may be adopted by the Committee and as may be in effect from time to time. In the event and to the extent that this Agreement conflicts or is inconsistent with the terms, conditions, and provisions of the Plan, the Plan shall control, and this Agreement shall be deemed to be modified accordingly.         11. No Liability Upon Distribution of Shares. The liability of the Company under this Agreement and any distribution of Shares made hereunder is limited to the obligations set forth herein with respect to such distribution and no term or provision of this Agreement shall be construed to impose any liability on the Company or the Committee in favor of any person with respect to any loss, cost or expense which the person may incur in connection with or arising out of any transaction in connection with this Agreement.         12. No Right to Be a Director, Etc. Nothing in this Agreement shall confer upon the Optionee any right to continue as a Director of or other advisor to the Company.         13. Resale Limitations. The Optionee acknowledges and agrees that (a) the Shares he may acquire upon exercise of the Option may not be transferred unless they become registered under the Act or unless the holder thereof establishes to the satisfaction of the Company that an exemption from such registration is available, (b) the Company will have no obligation to provide any such registration or take such steps as are necessary to permit sale of such Shares without registration pursuant to Rule 144 under the Act or otherwise, (c) at such time as such Shares may be disposed of in routine sales without registration in reliance on Rule 144 under the Act, such disposition may be made only in limited amounts in accordance with all of the terms and conditions of Rule 144 and (d) if the Rule 144 exemption is not available, compliance with some other exemption from registration will be required.         14. Withholding Taxes.         (a) Whenever Shares are to be delivered pursuant to the exercise of the Option, the Committee may require as a condition of delivery that the Optionee remit an amount sufficient to satisfy all federal, state and other governmental withholding tax requirements related thereto. The Company may, as a condition of the exercise of the Option, deduct from any salary or other payments due to the Optionee, an amount sufficient to satisfy all federal, state and other governmental withholding tax requirements related thereto or to the delivery of any Shares under the Plan.         (b) With the consent of the Committee in its sole discretion, (i) the Optionee may satisfy all or part of any withholding requirements by delivery of unrestricted Shares owned by the Optionee for at least one year (or such other period as the Committee may determine) having a Fair Market Value (determined as of the date of such delivery) equal to all or part of the amount to be withheld; provided, that the Committee may require the Optionee to furnish an opinion of counsel or other evidence acceptable to the Committee to the effect that such delivery would not result in the Optionee incurring any liability under Section 16 of the Act and does not require any Consent and/or (ii) the Optionee may direct that Shares to be issued pursuant to the exercise of the Option be used to satisfy any withholding obligation; provided, that for purposes of satisfying any such obligation the value of a Share shall be equal to the Spread.         15. Construction. The captions and section numbers appearing in this Agreement are inserted only as a matter of convenience. They do not define, limit, construe or describe the scope or intent of the provisions of this Agreement. The use of the singular or plural herein shall not be restrictive as to number and shall be interpreted in all cases as the context shall require. The use of the feminine, masculine or neuter pronoun shall not be restrictive as to gender and shall be interpreted in all cases as the context may require.         16. Time Periods, Etc. Any action required to be taken under this Agreement within a certain number of days shall be taken within that number of calendar days; provided, however, that if the last day for taking such action falls on a weekend or a holiday, the period during such action may be taken shall be automatically extended to the next business day. If the day for taking any action, or on which any action may be taken, under this Agreement falls on a weekend or a holiday, such action may be taken on the next business day.         17. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware and any applicable federal law.         18. Notices. Except as otherwise expressly provided herein, all notices hereunder shall be in writing and delivered or mailed by registered or certified mail, return receipt requested, or by private, overnight delivery services (such as Federal Express) as follows:         If to the Company:         New Horizons Worldwide, Inc.         1231 East Dyer Road, Suite 140         Santa Ana, California 92705-5605         Attention: Chief Financial Officer         If to the Optionee:         Last address set forth on the records         of the Company or its Affiliates or at such other address as either party may hereafter designate by giving notice to the other party as set forth above.         19. Further Assurances. From time to time after the exercise of an Option, either party, upon request of the other and without further consideration, shall execute and deliver to the requesting party any document or instrument, and shall take any other action as may be reasonably requested, to give effect to the exercise of the Option and the terms of this Agreement.         IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf by its duly authorized officer, and the Optionee has hereunto set his hand, all as of the day and year first above written. NEW HORIZONS WORLDWIDE, INC. (the "Company") By:__________________________________ Its: ________________________________ _____________________________________ (the "Optionee")

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.5 Form of Amended and Restated Employment Agreement     THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement") is made effective as of June 1, 2001 by and between Summa Industries, a Delaware corporation (the "Company"), and [Insert A] ("Executive"), with reference to the following facts:     A.  Executive is currently employed by the Company subject to the terms of that certain Employment Agreement, as amended, dated as of March 1994 between the Company and Executive (the "Prior Agreement");     B.  The Company and Executive desire to amend and restate the Prior Agreement, the Company desires to continue to retain the services of Executive and Executive desires to continue to provide such services, upon the terms and conditions hereinafter set forth; and     C.  Schedule A attached hereto contains definitions of certain capitalized terms used herein.     NOW, THEREFORE, IN CONSIDERATION OF the foregoing recitals and the mutual promises and agreements herein contained, Executive and the Company by this Agreement agree as follows:     1.  Employment.  The Company hereby employs Executive, and Executive hereby accepts employment with the Company, upon the terms and conditions hereinafter set forth.     2.  Term.  The term of Executive's employment under this Agreement (the "Employment Term") commenced on the date of the Prior Agreement and shall continue until Executive's employment is terminated. Executive's employment hereunder may be terminated by the Company or Executive at any time, with or without Cause, by delivering written notice of such termination to the other party. Executive acknowledges that, except as specifically set forth herein, Executive is an at will employee of the Company.     3.  Title and Duties.  During the Employment Term, Executive shall hold the titles of [Insert B] plus such other titles as the Board may designate from time to time. Executive shall devote such of his working time and effort to the business and affairs of the Company as may reasonably be required of him in the discharge of the duties and responsibilities of such office, but no less than 40 hours per week on average. During the Employment Term, Executive shall report to the Board.     4.  Compensation.       4.1  Base Salary.  For services performed by Executive for the Company pursuant to this Agreement during the Employment Term, the Company shall pay Executive a base salary at the rate of $[Insert C] per year, payable in substantially equal installments in accordance with the Company's regular payroll practices as in effect from time to time.     4.2  Salary Modifications.  During the Employment Term, the base salary of Executive shall be reviewed no less frequently than annually by the Board to determine whether or not such base salary should be increased or decreased in light of the duties and responsibilities of Executive, the performance thereof, the performance of the Company and the general employment market. If it is determined that a modification is merited, such modification shall be promptly put into effect and the base salary of Executive as so modified shall constitute the base salary of Executive for purposes of Section 4.1.     4.3  Annual Bonuses.  For each fiscal year during the Employment Term, Executive shall be eligible to receive a cash bonus based on the Company's achievement of certain operating and/or financial goals, with an annual bonus amount of up to [Insert D]% of Executive's then current annual base salary, in accordance with the terms of a bonus plan or arrangement adopted and administered by the Board for senior executives of the Company, which plan may be amended from time to time by the Board in its discretion. --------------------------------------------------------------------------------     5.  Benefits.  During the Employment Term, Executive and his dependents shall be eligible for participation in and shall receive all benefits under all employee benefit plans, practices, policies and programs provided by the Company from time to time to the extent applicable generally to other senior executives of the Company; provided, that upon a Change of Control after which the Company is controlled by an operating entity, then (i) Executive and his dependents shall be entitled to receive benefits under such plans, practices, policies and programs, each of which shall be no less favorable than the more favorable of (a) the benefits provided to Executive by the Company prior to the Change of Control and (b) the benefits provided to the acquiring entity's executives with comparable titles or positions, and (ii) if the receipt of any such benefits is determined by time of service, all past services rendered by Executive shall be considered performed for the acquiring entity.     6.  Expense Reimbursement.  The Company shall reimburse Executive for all actual and reasonable expenses incurred by Executive in connection with his duties in accordance with the Company's reimbursement policy as in effect from time to time.     7.  Payment Upon Termination and Change of Control.       7.1 Compensation and benefits shall be payable by the Company upon a termination of this Agreement or a Change of Control in accordance with the following:     (a)  General Termination Payments.  Subject to Sections 7.1(b) and 7.1(c) below, if this Agreement is terminated by either party for any reason, then Executive shall be entitled to receive (i) the amount of base salary earned through the date of termination, (ii) the amount of any bonus, incentive compensation, deferred compensation and other cash compensation accrued relating to Executive as of the date of termination, (iii) any vacation pay, expense reimbursements and other cash entitlements accrued relating to Executive as of the date of termination, and (iv) any other amounts required by applicable law to be paid by the Company.     (b)  Severance Payments.  Subject to Section 7.1(e) below, at any time other than within two years following a Change of Control, the Company terminates the Agreement for any reason other than for Cause, Executive terminates the Agreement for Good Reason or the Agreement terminates due to the Incapacity or death of Executive, then, in addition to the amounts to which Executive is entitled pursuant to Section 7.1(a), Executive shall be entitled to receive on the termination date, as a severance payment, a lump sum payment equal to [Insert E] times Executive's monthly salary as in effect on the date of termination.     (c)  Termination Following a Change of Control.  Subject to Section 7.1(e) below, if within two years following a Change of Control, the Company terminates the Agreement for any reason other than for Cause or if Executive terminates the Agreement for Good Reason, then in consideration for Executive's covenants not to compete with the Company as set forth in Section 9, in addition to the amounts to which Executive is entitled pursuant to Section 7.1(a), (i) Executive shall be entitled to receive on the termination date a lump sum payment equal to [Insert F] times Executive's annual base salary as in effect of the date of termination, (ii) Executive shall be entitled to receive on the termination date a lump sum payment equal to [Insert F] times the highest annual bonus payment Executive has received with respect to the last three completed fiscal years, and (iii) for a period of one year following such termination, the Company shall continue to provide benefits to Executive and his dependents at least equal to those which would have been provided to them in accordance with the plans, programs and arrangements referred to in Section 5 if Executive's employment with the Company had continued for such year, and shall pay Executive's monthly office rental (up to a maximum monthly rental of $1,500) for such period of time; provided, that the benefits referred to in this part (iii) shall only be payable until Executive obtains other full time employment. 2 --------------------------------------------------------------------------------     (d)  Change of Control Bonus.  Subject to Section 7.1(e) below, upon a Change of Control, regardless of whether or not Executive's employment is terminated as a result of such event, Executive shall receive, and the Company shall pay to Executive as a special bonus (the "Change of Control Bonus") upon the consummation thereof, an amount equal to [Insert G].     (e)  280G Limitation.  The Company shall not make the payments provided in Sections 7.1(b) through (d) above to the extent that such payments, after taking into account any other payments in the nature of compensation payable to (or for the benefit of) the Executive contingent on a Change of Control, would result in "parachute payments" as defined in Section 280G(b)(2) of the Code. This determination shall be made prior to the Change of Control, and if applicable, again on the earlier of the date on which the payment provided in Section 7.1(b) or (c) is otherwise triggered. The accounting firm then serving as the Company's independent auditors (the "Accounting Firm") shall provide the Company and the Executive with detailed calculations supporting its determination. All fees and expenses of the Accounting Firm shall be borne by the Company. If the Accounting Firm determines that all or any portion of the payments provided in Sections 7.1(b) through (d) shall not be paid because of the foregoing limitation, then the Accounting Firm shall provide the Executive with an opinion of its determination within 5 days of the Executive's request. The opinion shall provide that all or a portion the payments provided in Sections 7.1(b) through (d) were not paid because such payments would result in "parachute payments" as defined in Section 280G(b)(2) of the Code.     7.2  Mitigation and Set-Off.  In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement, and, except as set forth in Section 7.1(c)(iii) above, such amounts shall not be reduced whether or not Executive obtains other employment.     7.3  Exclusivity of Remedies.  Executive agrees that the rights and entitlements set forth in Section 7.1 are his exclusive rights and entitlements from the Company upon the termination of Executive's employment with the Company for any reason, and upon such termination, the Company shall be released from all other obligations under this Agreement or otherwise.     7.4  Return of Company Property.  Upon termination of this Agreement for any reason, Executive shall, subject to Section 7.1(c)(iii), immediately cease use of any and all Company property in his possession and shall immediately return any and all Company property in his possession, custody, or control to the Company, including without limitation any and all Confidential Information.     8.  Nondisclosure and Nonuse of Confidential Information.  Executive shall not disclose or use at any time, either during the Employment Term or thereafter, any Confidential Information of which Executive is or becomes aware, whether or not such information is developed by Executive, except to the extent that such disclosure or use is directly related to and required by Executive's performance of his duties under this Agreement. Executive will take all appropriate steps to safeguard Confidential Information and to protect it against disclosure, misuse, espionage, loss and theft. As requested by the Company from time to time and upon the conclusion of the Employment Term, Executive shall promptly deliver to the Company all copies and embodiments, in whatever form, of all Confidential Information in Executive's possession or within Executive's control (including, but not limited to, written records, notes, photographs, manuals, notebooks, documentation, program listings, flow charts, magnetic media, disks, diskettes, tapes and all other materials containing any Confidential Information) regardless of the location or form of such material and, if requested by the Company, will provide the Company with written confirmation that all such materials have been delivered to the Company.     9.  Noncompetition and Nonsolicitation.  Prior to termination of this Agreement, and for a period of two (2) years following termination of his employment hereunder, Executive shall not, without the 3 -------------------------------------------------------------------------------- Company's prior written consent, (i) directly or indirectly engage in any business activity, or have any interest in any person, firm or other entity engaged in any business activity, in which the Company at the time is engaged or to the knowledge of Executive, is planning to engage; (ii) directly or indirectly: (a) divert or take away or solicit or attempt to divert or take away any of the Company's customers, including without limitation those customers with whom Executive became acquainted while retained by the Company; (b) employ, or knowingly permit any business entity controlled by Executive to employ, any person who during the period of twelve (12) months immediately preceding such time has been employed by the Company; (c) solicit or otherwise seek to induce any employee of the Company to leave his or her employment with the Company; or (d) undertake planning for or organization of any business activity that will injure the Company's business, or conspire with employees of the Company for the purpose of organizing any such injurious business activity; provided, however, that with respect to the two (2) year period after termination of Executive's employment with the Company, the restrictive covenants set forth in this Section 9 shall only apply if (y) such termination results from Executive's resignation without Good Reason or from discharge for Cause and (z) the Company has paid in full all amounts owed by the Company to Executive pursuant to the terms of this Agreement.     10.  Legal Expenses.  In the event of any dispute or litigation between Executive and Company concerning any of the rights or obligations of either party under this agreement, the prevailing party shall be entitled to reasonable costs and expenses, including reasonable attorneys' fees, in connection therewith.     11.  Injunctive Relief; Profits.  Executive understands that monetary damages will not be sufficient to avoid or compensate for a breach of any of the terms of Sections 8 or 9 above and that injunctive relief would be appropriate to prevent any such actual or threatened breach. Such right to obtain injunctive relief may be exercised, without posting a bond, at the option of the Company, concurrently with, prior to, after, or in lieu of, the exercise of any other rights or remedies which the Company may have as a result of any such breach or threatened breach. Executive shall account for and pay over to the Company all compensation, profits and other benefits, after taxes, inuring to Executive's benefit which are derived or received by Executive or any of his Affiliates resulting from any action or transaction constituting a breach of any term of Sections 8 or 9 above.     12.  Survival.  The terms of Sections 7.1(c)(iii), 7.1(d), 7.1(e), 8, 9, 10, 11, 12, 13, and, to the extent necessary to construe or enforce such Sections, Section 14 shall survive the termination of the Agreement indefinitely, except as otherwise expressly provided herein.     13.  Indemnification.  To the fullest extent permitted by law and without limiting any other indemnification rights Executive may have, the Company shall, during and after the Employment Term, indemnify Executive (including the advancement of expenses) for any judgments, fines, amounts paid in settlement and reasonable expenses, including attorneys' fees, incurred by Executive in connection with the defense of any lawsuit or other claim for which he is made a party by reason of having at any time (including prior to the date hereof) been an officer, director or employee of the Company or any of its Affiliates.     14.  Miscellaneous.       14.1  Notices.  All notices, requests, demands and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given (i) upon receipt, if delivered personally, (ii) upon confirmation of receipt, if given by 4 -------------------------------------------------------------------------------- electronic facsimile or (iii) on the third business day following mailing, if mailed first-class, postage prepaid, registered or certified mail as follows: If to the Company to: Summa Industries 21250 Hawthorne Boulevard, Suite 500 Torrance, California 90503 Attn: Chief Executive Officer If to Executive to: [Insert H]     Either party may by notice given in accordance with this Section 14.1 to the other party designate another address or person for receipt of notices under this Agreement.     14.2  Entire Agreement.  This Agreement contains the entire agreement of the parties with respect to the employment relationship between the Company and Executive, and supersedes all prior agreements, representation and warranties, written or oral, with respect thereto, including, without limitation, the Prior Agreement.     14.3  Waivers and Amendments.  This Agreement may be amended, superseded, canceled, renewed or extended, and the terms of this Agreement may be waived, only by a written instrument signed by each of the parties hereto or, in the case of a waiver, by the party waiving compliance. The failure of a party to insist, in any one or more instances, upon performance of the terms or conditions of this Agreement shall not be construed as a waiver or relinquishment of any right granted under this Agreement or of the future performance of any such term, covenant or condition. No waiver on the part of any party of any right, power or privilege, nor any single or partial exercise of any such right, power or privilege, shall preclude any further exercise of such right, power or privilege or the exercise of any other such right, power or privilege.     14.4  Governing Law.  Except for the provisions of Section 9, which shall be governed by and construed in accordance with the substantive and procedural the laws of the jurisdiction in which enforcement of such provisions are sought, this Agreement shall be governed by and construed in accordance with the substantive and procedural laws of the State of California applicable to agreements made and to be performed entirely within such State. The parties hereby agree that any action, suit, arbitration or other proceeding arising out of or related to this Agreement or the relationship created by this Agreement shall be conducted only in Los Angeles County, California. Each party hereby irrevocably consents and submits to the personal jurisdiction of and venue in United States District Court for the Central District of California and in the Superior Court and Municipal Court for Los Angeles County in any legal action, equitable suit or other proceeding arising out of or related to this Agreement or the employment relationship between the Company and Executive.     14.5  Confidentiality of Disputes.  If there shall be a dispute between the parties arising out of or relating to (i) the negotiations of this Agreement; (ii) this Agreement; or (iii) the employment relationship between the Company and Executive, each party shall keep confidential the existence, the nature of and any information concerning such dispute. In addition, if any arbitration or other proceeding is held with respect to such dispute, the parties shall cause such arbitration or other proceeding to be conducted in confidence and the results thereof to be maintained in confidence. Nothing in this Section 14.5 shall prohibit a party from disclosing information concerning a dispute in an arbitration or other proceeding relating to such dispute. Nothing in this Section 14.5 shall prohibit a party from disclosing information concerning a dispute to its advisors, provided that (i) such disclosure is reasonably necessary for the advisor to assist the party in connection with the 5 -------------------------------------------------------------------------------- dispute, (ii) the party informs its advisor of the confidential nature of the information, and (iii) the advisor delivers to the party written assurance that it will preserve the confidential nature of the information (it being agreed that the party will be responsible to the other party for any non-permitted disclosure by the advisor).     14.6  Binding Effect; Assignment.  This Agreement shall be binding upon and inure to the benefit of the parties and their respective permitted successors and permitted assigns. Neither this Agreement, nor any of the rights under this Agreement, may be assigned by any party, nor may any party delegate any obligations under this Agreement, without the written consent of the other party hereto. Any non-permitted assignment or attempted assignment shall be void. Notwithstanding the foregoing, the Company may assign this Agreement, and may delegate any of its obligations under this Agreement, without the prior written consent of Executive upon any Change of Control.     14.7  Counterparts.  This Agreement may be executed by the parties in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument.     14.8  Headings.  The headings herein are for reference only and shall not affect the interpretation of this Agreement.     14.9  Severability.  Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement.     14.10  Further Assurances.  Each party hereto shall execute such documents and other papers and take such further actions as may be reasonably required or desirable to carry out the provisions of this Agreement and the transactions contemplated by this Agreement.     14.11  Executive Representations.  Executive hereby represents and warrants that he is free to enter into this Agreement and to render his services pursuant to this Agreement, and that he is not subject to any obligation or restriction that would prevent him from discharging his duties under this Agreement, and agrees to indemnify and hold harmless the Company from and with respect to any liability, damages or costs, including attorneys' fees, arising out of any breach by Executive of this representation and warranty. Executive acknowledges that he has carefully read this Agreement, knows its contents, and either has been represented by independent counsel who has explained to him the meaning and legal consequences of this Agreement or has determined not to obtain such independent counsel after being advised to do so by the Company.     14.12  Payment of Taxes.  Except as expressly provided herein, to the extent that any taxes become payable by Executive by virtue of any payments made or benefits conferred by the Company, the Company shall not be liable to pay or obligated to reimburse Executive for any such taxes or to make any adjustment under this Agreement. Any payments otherwise due under this Agreement to Executive shall be reduced by any required withholding for Federal, State and/or local taxes and other appropriate payroll deductions. 6 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first written above.     "Company"     SUMMA INDUSTRIES     By:    --------------------------------------------------------------------------------     "Executive"        -------------------------------------------------------------------------------- 7 -------------------------------------------------------------------------------- SCHEDULE A Definitions     "Affiliate" means, with respect to any Person, (i) any other Person who, either directly or through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such Person; (ii) any agent, officer, director, employee, or partner of such Person, or any of the Persons described in clause (i); and (iii) any family member of such Person.     "Board" means the Board of Directors of the Company.     "Cause" means:     (a) Executive's commission of any act of fraud, embezzlement, dishonesty or theft toward the Company;     (b) Executive's continuing failure to substantially perform the duties, functions and responsibilities of the individual's position with the Company after written warning from the Board in which the performance deficiencies are identified and a reasonable cure period of at least thirty (30) days is provided;     (c) Executive's conviction of a felony or performance of an act of illegal discrimination, including, but not limited to, sexual harassment.     Termination for Cause must be evidenced by a specific resolution adopted by a unanimous vote of the Board after Executive is given an opportunity prior to the expiration of such 30-day period, together with his legal counsel, to be heard before the Board. At least 15 days prior to such hearing, the Board shall provide Executive with a written notice which lists the Board's reasons for termination of this Agreement.     "Change of Control" means:     (a) the acquisition by a person or a group of related persons, other than the Company or a person controlling, controlled by or under common control with the Company, of beneficial ownership (as determined pursuant to the provisions of Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of securities possessing (whether immediately or upon subsequent conversion or exercise) (30%) or more of the total voting power of the Company's outstanding securities, or     (b) the acquisition by a person or a group of related persons, other than the Company or a person controlling, controlled by or under common control with the Company, of beneficial ownership (as determined pursuant to the provisions of Rule 13d-3 under the Exchange Act) of securities possessing (whether immediately or upon subsequent conversion or exercise) the right to elect a majority of the Company's Board of Directors, or     (c) the sale, transfer or other disposition (other than in the ordinary course) of substantially all of the Company's assets, or     (d) the first date within any period of thirty-six (36) consecutive months or less on which there is effected a change in the composition of the Company's Board of Directors such that a majority of the Board (determined by rounding up to the next whole number) ceases to be comprised of individuals who either (i) have been members of the Company's Board continuously since the beginning of such period or (ii) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (i) who were still in office at the time such election or nomination was approved by the Board. 8 -------------------------------------------------------------------------------- Notwithstanding the foregoing, "Change of Control" shall exclude any transaction in which "management" of the company obtains "control" of the company immediately after such transaction (a "Management Lead Buyout"). As used in this paragraph, a Management Lead Buyout shall mean an ownership change in which employees, including senior level management, of the Company and its subsidiaries own, directly or indirectly (through trusts, partnerships, corporations, limited liability companies, Employee Stock Ownership Plan or otherwise), securities representing in the aggregate (whether immediately or upon subsequent conversion or exercise) thirty percent (30%) or more of the total voting power and/or equity of the Company's outstanding securities. For purposes of determining ownership through entities, the attribution rules under Section 267 of the Internal Revenue Code and the regulations thereunder will be utilized.     "Code" means the Internal Revenue Code of 1986, as amended.     "Company" means Summa Industries, a Delaware corporation, and, for purposes of Section 7.1(c) above, shall also mean its successors and assigns, and, for purposes of Sections 8 and 9 above, shall also mean each of its Affiliates.     "Confidential Information" means information that is not generally known to the public that the Company considers and treats as confidential and that is used, developed or obtained by the Company or its Affiliates in connection with the conduct of its business, including, but not limited to, (i) fee, cost and pricing structures; (ii) analyses; (iii) reports; (iv) computer software, including operating systems, applications and program listings; (v) flow charts, manuals and documentation; (vi) data bases; (vii) accounting and business methods; (viii) the identity of customers and contractual counterparties; (ix) copyrightable or patentable works; (x) customer solicitation letters; (xi) brochures and other marketing materials of limited distribution; (xii) any work product generated on behalf of an existing or prospective customers; (xiii) any information received from an existing or prospective customer; (xiv) any information relating to an existing or prospective customer (including, without limitation, phone numbers, addresses and personal facts); (xv) the terms of any agreement between the Company or any Affiliate and a customer; (xvi) proprietary information; and (xvii) trade secrets.     Confidential Information does not include any information that has been published in a form or is generally available to the public prior to the date Executive proposes to disclose or use such information (unless such publication constituted a breach by Executive of his duties under Section 8 above). Information will not be deemed to have been published merely because individual portions of the information have been separately published, but only if all material features comprising such information have been published in combination.     "Control" (including, with correlative meaning, all conjugations of such term) means the ability to control, direct or cause direction of the management and policies of a Person, either directly or through one or more intermediaries, whether by ownership of voting securities, by contract or otherwise.     "Good Reason" shall exist if any of the following events occur without Executive's express written consent, and the occurrence of such event is not cured by the Company after written warning by Executive and a cure period of fifteen (15) days:     (e) there is an adverse change in the nature or the scope of Executive's authority, in his overall working environment or in his title;     (f)  Executive is assigned duties materially and adversely inconsistent with his present duties, responsibilities and status;     (g) there is a reduction in Executive's rate of base salary or annual bonus, or Executive's base salary, bonus or benefits are not raised or administered on a consistent percentage basis as compared to raises granted to comparable senior executives of the Company; or 9 --------------------------------------------------------------------------------     (h) the Company changes by 30 miles or more the principal location in which Executive is required to perform services.     For the purposes of this Agreement, any good faith determination of Good Reason made by Executive shall be conclusive.     "Incapacity" (including, with correlative meaning, all conjugations of such term) means the inability of Executive to perform the normal duties of his position under this Agreement for a continuous period of 90 calendar days (or such longer period as is required by law) or any incapacity, however caused, that, in the reasonable opinion of the Board, is likely to prevent Executive from performing his normal duties under this Agreement for more than 150 calendar days (or such longer period as is required by law) in any twelve consecutive month period. Executive acknowledges that his position is essential to the Company and the functioning of its business and that the foregoing periods therefore are reasonable.     "Person" means and include an individual, a partnership, a joint venture, a limited liability company, a corporation, a trust, an unincorporated organization and a governmental entity or any department or agency thereof. Inserts of Executive Specific Terms to Form of Amended and Restated Employment Agreement Insert A: "James R. Swartwout"; "Trygve M. Thoresen"; "Paul A. Walbrun" Insert B: "Chairman of the Board, President, Chief Executive Officer & Chief Financial Officer" for James R. Swartwout; "Vice President of Business Development, General Counsel and Secretary" for Trygve M. Thoresen; and "Vice President and Controller" for Paul A. Walbrun Insert C: "$350,000" for James R. Swartwout; "$174,000" for Trygve M. Thoresen; and "$108,000" for Paul A. Walbrun Insert D: "50%" for James R. Swartwout; "40%" for Messrs. Thoresen and Walbrun Insert E: "twelve" for James R. Swartwout; "six" for Messrs. Thoresen and Walbrun Insert F: "two" for James R. Swartwout; "one" for Messrs. Thoresen and Walbrun Insert G: "two times Executive's annual base salary as in effect on the date of consummation of the Change of Control" for James R. Swartwout; "(i) one times Executive's annual base salary as in effect on the date of consummation of the Change of Control, and (ii) one times the amount of the highest annual bonus payment Executive has received with respect to the Company's last three completed fiscal years" for Messrs. Thoresen and Walbrun Insert H: Messrs. Swartwout; Thoresen and Walburn, each c/o Summa Industries, 21250 Hawthorne Blvd., Suite 500, Torrance, CA 95030 10 -------------------------------------------------------------------------------- QuickLinks Form of Amended and Restated Employment Agreement SCHEDULE A Definitions

1 Exhibit 10.10 PARALLEL PETROLEUM CORPORATION CHANGE OF CONTROL AGREEMENT This Change of Control Agreement (this "Agreement"), dated as of June 1, 2001, is between Parallel Petroleum Corporation, a Delaware corporation ("Parallel"), and __________________ ("Employee"). RECITATIONS The Board of Directors of Parallel has determined that it is imperative that Parallel and the Board of Directors of Parallel be able to rely upon the Employee to continue in the Employee's position, and that Parallel be able to receive and rely upon the Employee's continued services in furtherance of the best interests of Parallel and its stockholders without concern that the Employee might be distracted by the personal uncertainties and risks created by a Change of Control; The Board of Directors of Parallel has authorized Parallel to enter into this Agreement with the Employee; NOW, THEREFORE, to assure Parallel that it will have the continued dedication of the Employee and the availability of the Employee's services notwithstanding the threat or occurrence of a Change of Control, to induce the Employee to remain in the employ of Parallel, and for other good and valuable consideration, Parallel and the Employee agree as follows: 1. Definitions. "Affiliate" means with respect to any Person, any other Person who is, or would be deemed to be, an "affiliate" or an "associates" of such Person within the respective meanings ascribed to such terms in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the "1934 Act"), as in effect on the date of this Agreement. 2 A Person will be deemed the "Beneficial Owner" of any securities which such Person or any of such Person's Affiliates would be deemed to beneficially own, directly or indirectly, within the meaning ascribed to such term in Rule 13d-3 under the 1934 Act as in effect on the date of this Agreement. "Change of Control" means the occurrence of any one or more of the following events: (1) Any Person becomes the Beneficial Owner of Voting Shares of Parallel entitling such Person to 15% or more of the Voting Power of Parallel; (2) Less than a majority of the members of the Board of Directors of Parallel shall be Continuing Directors; or (3) The stockholders of Parallel approve (i) a transaction providing for Parallel to be merged with or into, consolidated with or otherwise combined with or into another Person, (ii) a transaction providing for all or substantially all the assets or stock of Parallel to be acquired by or leased to another Person or (iii) the liquidation or dissolution of Parallel. "Company" means Parallel Petroleum Corporation or any Successor. "Continuing Director" means a director of Parallel who either (1) was a director of Parallel on the date of this Agreement or (2) is an individual whose appointment, election, or nomination for election, as a director of Parallel was approved by a vote of at least a majority of the directors of Parallel then still in office who were Continuing Directors (other than an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of Parallel, as such terms are used in Rule 14a-11 under the 1934 Act as in effect on the date of this Agreement). "Earnings" means an amount equal to the product obtained by multiplying (a) twelve by (b) the monthly gross salary of Employee paid by Parallel for the month immediately preceding the month in which a Change of Control occurs. 3 "Person" means any natural person, corporation, trust, company, organization, association, partnership or other entity of any kind, and any successors or assigns thereof, and shall also include any group of Persons acting jointly or in concert. "Successor" means any Person into or with which Parallel shall be merged, consolidated or otherwise combined, or any Person which acquires all or substantially all the assets of Parallel and in connection therewith assumes all or substantially all of Parallel's obligations and liabilities, including Parallel's obligations under this Agreement. "Vesting Date" means the time and date upon which a Change of Control occurs. "Voting Shares" means all securities of a company entitling the holders thereof to vote in an annual election of directors (without consideration of the rights of any class of stock other than the Common Stock to elect directors by a separate class vote); and a specified percentage of the "Voting Power" of a company shall mean such number of the Voting Shares as shall enable the holders thereof to cast such percentage of all the votes which could be cast in an annual election of directors (without consideration of the rights of any class of stock other than the Common Stock to elect directors by a separate class vote). 2. Services During Certain Events. If Employee continues to serve as an employee of Parallel from the date hereof until the Vesting Date, then Employee shall be entitled to receive a bonus in the amount and as otherwise specified in Section 3 below. 3. Payment of Bonus. (a) The Company shall pay to Employee a bonus within ten days after the Vesting Date; (b) the bonus will be paid in cash in a single lump sum; and (c) the bonus will be in an amount equal to Employee's Earnings. 4 4. Continuation of Other Benefits. For a period commencing on the Vesting Date and continuing for twelve months thereafter, the Company will continue to provide Employee and Employee's dependents with the same level of coverage under the medical, dental, disability and life insurance and retirement plans as were in effect for Employee (and dependents) immediately prior to the Vesting Date and on the same terms and conditions as in effect immediately prior to the Vesting Date. If the Employee cannot continue to participate in the plans of the Company, the Company shall otherwise provide such benefits on the same after-tax basis as if participation had continued. The twelve-month period during which medical and dental coverage is provided to Employee under this Section 4 will not be considered part of the "Continuation Period" for purposes of electing any COBRA continuation coverage. 5. Other Benefit Plans. The bonus provided for in this Agreement is not intended to require or to exclude Employee's continued participation in other benefit plans in which Employee currently participates or to preclude other compensation or benefits as may be authorized by the Board of Directors of Parallel from time to time. 6. Reimbursement of Expenses. The Company will pay all legal fees and related expenses which Employee may reasonably incur in seeking to obtain or enforce any payment, benefit or right provided by this Agreement after a Change in Control, including any such fees and expenses incurred in seeking advice with respect to this Agreement; provided, however, the Employee shall be required to repay any such amounts to the Company to the extent that a court of competent jurisdiction issues a final and non-appealable order setting forth the determination that the position taken by the Employee was frivolous or advanced in bad faith. 7. Conditions to the Obligations of the Company. The Company will have no obligation to pay or cause to be paid to Employee the bonus described herein if Employee dies, retires, resigns or is removed or terminated by Parallel as an employee of Parallel prior to the Vesting Date. 8. No Right to Continued Employment. This Agreement does not, and will not be construed to, give Employee any right to remain in the employ of Parallel. Parallel reserves the right to terminate Employee's employment with Parallel at any time; provided however, if a Change of Control occurs prior to Employee's death, retirement, resignation, removal 5 or termination, the rights and benefits of the Employee under Sections 3, 4, 5 and 6 of this Agreement shall survive any such termination. 9. Confidentiality. (a) Confidentiality. Employee agrees that at all times while Employee is serving as an employee of Parallel, Employee will not without the consent of Parallel, disclose to any person, firm or corporation any confidential information of Parallel or its subsidiaries which is now known to Employee or which hereafter may become known to Employee as a result of Employee's service as an employee or Employee's association with Parallel and which could be helpful to a competitor, unless such disclosure is required under the terms of a valid and effective subpoena or order issued by a court or governmental body; provided, however, that the foregoing shall not apply to confidential information which becomes publicly disseminated by means other than a breach of this Agreement. (b) Remedies for Breach. It is recognized that damages in the event of breach of this Section 9 by Employee would be difficult, if not impossible, to ascertain, and it is therefore agreed that Parallel, in addition to and without limiting any other remedy or right it may have, shall have the right to an injunction or other equitable relief in any court of competent jurisdiction enjoining any such breach, and Employee hereby waives any and all defenses Employee may have on the ground of lack of jurisdiction or competence of the court to grant such an injunction or other equitable relief. The existence of this right shall not preclude Parallel from pursuing any other rights and remedies at law or in equity which Parallel may have. 10. Term of Agreement. If a Change of Control has not occurred, this Agreement shall automatically terminate and expire on the second anniversary of this Agreement, unless extended for an additional period or periods by resolution adopted by the Board of Directors of Parallel. If a Change of Control occurs, this Agreement shall continue in full force and effect and will not terminate or expire until Employee receives the bonus and benefits to which Employee is entitled hereunder. 6 11. Miscellaneous. (a) No Adverse Actions. Upon a Change of Control, no action, including, but not by way of limitation, the amendment, suspension or termination of this Agreement, will be taken which would adversely affect the rights of Employee or the operation of this Agreement with respect to the bonus and benefits to which Employee may have become entitled hereunder as a result of such Change of Control. (b) Assignment. Except as provided in subsection (g)(ii) below, no right, benefit or interest hereunder is subject to assignment, anticipation, alienation, sale, encumbrance, charge, pledge, hypothecation or set-off in respect of any claim, debt or obligation, or to execution, attachment, levy or similar process. (c) Construction of Agreement. Except as expressly provided herein, nothing in this Agreement will be construed to amend any provision of any plan or policy of the Company. This Agreement is not and nothing herein shall be deemed to create, a commitment of continued service by Employee as an employee of Parallel. The benefits provided under this Agreement are in addition to any other compensation agreement or arrangement that the Company may have with Employee. (d) Amendment. This Agreement may not be amended, modified or canceled except by written agreement of the Company and Employee. (e) Waiver. No provision of this Agreement may be waived except by a writing signed by the party to be bound thereby. (f) Severability. If any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement will remain in full force and effect to the fullest extent permitted by law. 7 (g) Successors. (i) This Agreement is binding upon any Successor to Parallel, and any Person that acquires substantially all of Parallel's assets or substantially all its business (whether direct or indirect, by purchase, merger, consolidation or otherwise), in the same manner and to the same extent that Parallel would be obligated under this Agreement if no succession had taken place. (ii) This Agreement will inure to the benefit of, and be enforceable by, Employee's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Employee dies after the Vesting Date but prior to the receipt of the bonus payable hereunder with respect to events occurring prior to death, such bonus will be paid pursuant to the last beneficiary designation executed by the Employee and filed with Parallel. If no beneficiary form has been filed with respect to this Agreement, the bonus will be paid to Employee's estate. (h) Taxes. The Company will withhold from all payments due to Employee (or Employee's beneficiary or estate) hereunder all taxes which, by applicable federal, state, local or other law, Parallel is required to withhold therefrom. (i) GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. (j) Gender. Wherever in this Agreement words are used in the masculine or neuter gender, they will be read and construed as in the masculine, feminine or neuter gender wherever they would so apply, and vice versa. Wherever words appear in the singular or plural, they will be read and construed as in the plural or singular, respectively, wherever they would so apply. (k) Headings. The headings of the Sections herein are included solely for reference convenience, and will not in any way affect the meaning or interpretation of the Agreement. 8 (l) Entire Agreement. This Agreement sets forth the entire agreement and understanding of the parties hereto with respect to the matters covered hereby. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. PARALLEL PETROLEUM CORPORATION By: EMPLOYEE _

EXHIBIT 10.8                   TERMINAL E LEASE AND SPECIAL FACILITIES LEASE AGREEMENT   by and between CITY OF HOUSTON, TEXAS as Lessor and CONTINENTAL AIRLINES, INC. as Lessee   August 1, 2001 TERMINAL E LEASE AND SPECIAL FACILITIES LEASE AGREEMENT I N D E X Page No. ARTICLE 1DEFINITIONS AND INTERPRETATIONS   Section 1.01: Definitions 3 Section 1.02: Interpretations 14 ARTICLE 2REPRESENTATIONS   Section 2.01: Representations by the City 15 Section 2.02: Representations by Lessee 15 Section 2.03: Representations by the City and Lessee 16 ARTICLE 3LEASE AND TERM; GRANT OF EASEMENTS ANDGROUND LEASES; EXCLUSIVE AND PREFERENTIAL USE SPACE   Section 3.01: Lease of Terminal E Project 17 Section 3.02: Term of Lease; Options to Extend 17 Section 3.03: Easements and Ground Leases for Lessee Project Components 18 Section 3.04: Condition of Lessee Project Components, Ground Lease Properties and Easements 18 Section 3.05: City Right of Entry 19 Section 3.06: Lessee=s Rights to Use and Occupy the Terminal E Project 19 Section 3.07: Preferential Use of Terminal E Apron Area 20 ARTICLE 4ISSUANCE OF SPECIAL FACILITIES BONDS; PAYMENT OFCOSTS OF THE LESSEE PROJECT COMPONENTS   Section 4.01: Issuance of Series 2001 Bonds 22 Section 4.02: Issuance of Additional Bonds and Additional Obligations 22 Section 4.03: Application of Proceeds; Insufficiencies 23 Section 4.04: Refunding Bonds 23 Section 4.05: Optional Redemption of Bonds 24 ARTICLE 5DESIGN, CONSTRUCTION AND ACQUISITION OFTHE TERMINAL E PROJECT SPECIAL FACILITIES   Section 5.01: Lessee Project Components 25 Section 5.02: City Project Components and City International Facilities Project 27 Section 5.03: Inventory of Special Facilities; Replacements 28 Section 5.04: Title to Lessee Project Components 28 Section 5.05: Design, Construction and Acquisition of Additional Special Facilities 28 Section 5.06: Personal Property Not Constituting Special Facilities 29 ARTICLE 6SPECIAL FACILITIES PAYMENTS; OTHER RENT AND CHARGES   Section 6.01: Special Facilities Payments While Bonds Outstanding 30 Section 6.02: Obligation to Pay Special Facilities Payments Unconditional 31 Section 6.03: Pledge of Special Facilities Payments 32 Section 6.04: Operation and Maintenance and City Charges Relating to Lessee Project Components and Other Special Facilities 32 Section 6.05: Statistical Report 33 Section 6.06: Ground Rentals 33 Section 6.07: City Charges 34 Section 6.08: Landing Fees 36 Section 6.09: Payment Provisions 37 Section 6.10: Conforming Adjustments After December 31, 2017 39 Section 6.11: No Other Fees 39 ARTICLE 6ASPECIAL LIMITATIONS ON LESSEE=S OBLIGATIONSDURING THE CONSTRUCTION PERIOD   Section 6A.01: Special Provisions During Construction Period 40 Section 6A.02: Insurance During Construction Period 41 Section 6A.03: Indemnities for Environmental Matters during Construction Period 41 Section 6A.04: Indemnities for Matters other than Environmental during Construction Period 42 Section 6A.05: Condemnation or Casualty during Construction Period 42 Section 6A.06: Phase Status Certifications and Resulting Actions by Lessee 44 Section 6A.07: Redemption of Bonds after An Event of Phase Termination 47 Section 6A.08: Actions by City Upon an Event of Phase Termination 47 Section 6A.09: Guaranty Trigger Event During Construction Period 48 Section 6A.10: Results of Guaranty Trigger Event 49 Section 6A.11: Covenants Applicable to Lessee during the Respective Construction Periods 49 ARTICLE 7USE OF SPECIAL FACILITIES   Section 7.01: Use of Airport 50 Section 7.02: Limitations of Use of Airport 51 Section 7.03: Rights to Concessions 52 Section 7.04: Special Provisions with respect to South Concourse 53 Section 7.05: Right to Lease to United States Government 53 ARTICLE 8LESSEE'S OBLIGATIONS AND CONDITIONS TOLESSEE'S USE OF SPECIAL FACILITIES   Section 8.01: Maintenance of Special Facilities and Terminal E Apron Area at Lessee's Expense 54 Section 8.01A: Maintenance of City Project Components and APM 54 Section 8.02: Taxes, Charges, Utilities, Liens 55 Section 8.03: Compliance with Airport Rules and Regulations and Law; Nondiscrimination 56 Section 8.04: Compliance with Tax Law 58 Section 8.05: Environmental Matters 59 Section 8.06: City's Right To Maintain or Repair Special Facilities 61 Section 8.07: Termination Procedures 62 ARTICLE 9LIABILITY, INSURANCE AND CONDEMNATION   Section 9.01: Release and Indemnification of City and Trustee 63 Section 9.02: General Insurance Requirements 65 Section 9.03: Risks and Minimum Limits of Coverage 65 Section 9.04. Other Provisions 66 Section 9.05: Disposition of Insurance Proceeds 68 Section 9.06: Condemnation 69 Section 9.07: Reconstruction or Repair 70 ARTICLE 10EVENTS OF DEFAULT AND REMEDIES   Section 10.01: Events of Default 71 Section 10.02: Remedies on Default 72 Section 10.03: Additional Remedy 73 Section 10.04: No Remedy Exclusive 73 Section 10.05: Agreement to Pay Attorneys' Fees and Expenses 74 Section 10.06: No Additional Waiver Implied by One Waiver 74 Section 10.07: Enforcement by City Attorney 74 ARTICLE 11ASSIGNMENTS, SUBLETTING AND TERMINATION BY LESSEE   Section 11.01: Assignments and Subletting by Lessee 75 Section 11.02: Termination of Agreement by Lessee 75 ARTICLE 12MISCELLANEOUS   Section 12.01: Lessee to Maintain Its Corporate Existence 76 Section 12.02: Exempt Facilities 76 Section 12.03: Notices 76 Section 12.04: Consents and Approvals 78 Section 12.05: Rights Reserved to City 79 Section 12.06: Force Majeure 79 Section 12.07: Severability Clause 79 Section 12.08: Place of Performance; Laws Governing 79 Section 12.09: Brokerage 79 Section 12.10: Individuals Not Liable 80 Section 12.11: Binding Nature of Agreement; Benefits of Agreement 80 Section 12.12: Ambiguities 80 Section 12.13: Survival 80 Section 12.14: No Merger of Title 80 Section 12.15: Most Favored Nation 80 Section 12.16: Operation of Airport 81 Section 12.17: Entire Agreement 81     Description of Terminal E Project Exhibit "A" Description of Easements Exhibit "B" Description of Ground Lease Properties Exhibit "C" Deed and Bill of Sale for Lessee Project Components Exhibit "D" Schedule of Certain Special Facilities Payments for Lessee=s Tax Reporting Purposes Exhibit "E" Central FIS Area Subject to Lessee Concessions Exhibit "F" Illustrative Calculation of Terminal E Apron Area Charges Exhibit "G" Allocated Bond Amounts Exhibit "H" Form of Statistical Report Exhibit "I" Form of Agreement of Responsibility Exhibit "J" Form of Acknowledgment and Reporting Agreement Exhibit "K" TERMINAL E LEASE AND SPECIAL FACILITIES LEASE AGREEMENT THE STATE OF TEXAS ' COUNTY OF HARRIS ' THIS TERMINAL E LEASE AND SPECIAL FACILITIES LEASE AGREEMENT (hereinafter called "Agreement") dated as of the 1st day of August, 2001 is made and entered into between the CITY OF HOUSTON, TEXAS, a municipal corporation and Home Rule City, situated principally in Harris County, Texas (hereinafter called "City"), and CONTINENTAL AIRLINES, INC., a corporation organized and existing under the laws of the State of Delaware, duly authorized to do business in the State of Texas (hereinafter called "Lessee"). W I T N E S S E T H : WHEREAS, City is the owner of land and certain improvements known as the George Bush Intercontinental Airport/Houston, located in the City of Houston, Harris County, Texas (hereinafter called "Airport"), which is operated as a public airport, as a part of the City's Airport System (as hereinafter defined), and City has the power and authority to lease premises and facilities thereon and to grant rights and privileges with respect thereto, including those set forth herein; and WHEREAS, Lessee is engaged in the business of commercial air transportation as a scheduled air carrier; and WHEREAS, the City and Lessee desire to enter into this agreement with respect to the development, financing, construction, use and lease of the Terminal E Project (as hereinafter defined), which shall be comprised of City Project Components and Lessee Project Components (both as hereinafter defined); and WHEREAS, the City, which will provide its own financing for the City Project Components, also has been requested to provide financing for the Lessee Project Components; and WHEREAS, the City has found and determined that it is in the public interest and a public purpose for the City to finance the costs of the Lessee Project Components through the issuance of certain special facilities revenue bonds payable from certain revenues derived solely from amounts payable with respect to the special facilities as provided for herein; and WHEREAS, all ordinances heretofore adopted by the City authorizing the issuance of its Airport System Revenue Bonds payable from any or all gross revenues derived by the City from the operation of its Airport System, which includes the Airport, provide for the exclusion from such pledge of certain revenues derived solely from "Special Facilities Leases" of "Special Facilities" that are pledged to the payment of "Special Facilities Bonds"; and WHEREAS, the City and Lessee desire to enter into this Agreement (i) to provide for the development, use and lease of the Terminal E Project, (ii) to constitute a "Special Facilities Lease," to provide for the construction and acquisition of certain Special Facilities initially consisting of the Lessee Project Components, to provide for the issuance of "Special Facilities Bonds" to finance certain costs of such Lessee Project Components and other Special Facilities, and to provide for the payment of certain amounts, including Special Facilities Payments (as herein defined), sufficient to meet the City's obligation for interest payments and principal repayment on all Special Facilities Bonds and (iii) to set forth certain other agreements of the parties with respect to the Terminal E Project, the City Project Components, the Lessee Project Components and other Special Facilities; NOW, THEREFORE, for and in consideration of the premises and of the mutual covenants and agreements herein contained and in consideration of the rentals and other amounts to be paid as herein provided, the City and Lessee do hereby covenant and agree as follows: ARTICLE 1 DEFINITIONS AND INTERPRETATIONS Section 1.01: Definitions. In this Agreement, the following terms shall have the following meanings, respectively, unless the context clearly indicates otherwise: "Additional Bonds" shall mean all additional bonds which may be issued by the City payable from the same sources as the Series 2001 Bonds for the purposes and in the general manner specified in Section 4.02 hereof. Additional Bonds shall be entitled to the benefits of the Guaranty. "Additional Obligations" shall mean all additional bonds, notes or other obligations which may be issued by the City payable from reletting revenues of a Phase of the Terminal E Project as provided in Section 4.02(b). Additional Obligations shall not be entitled to the benefits of the Guaranty. "Agreed Terminal D Gate Utilization Standard" shall have the meaning assigned in Section 7.04(b) hereof. "Airfield Area" shall mean the runways, taxiways, and apron areas (other than the Apron Areas), navigational aids, hazard designation and warning devices, airfield security roads and fencing, blast fencing, lighting, clear zones and safety areas for landing, taking off and taxiing of aircraft, aviation easements, land utilized in connection therewith or acquired for such purpose, and facilities, the acquisition, construction or installation cost of which is wholly or partially paid by the City. "Airport" shall mean George Bush Intercontinental Airport/Houston, Houston, Texas, as it now exists or may be modified or expanded from time to time in the future. "Airport System" shall mean all airport, heliport and aviation facilities, or any interest therein, now or from time to time hereafter owned, operated or controlled in whole or in part by the City, together with all properties, facilities and services thereof, and all additions, extensions, replacements and improvements thereto, and all services provided or to be provided by the City in connection therewith, but expressly excluding special facilities. The Airport System currently includes the present airports of the City, known as "George Bush Intercontinental Airport/Houston," "William P. Hobby Airport" and "Ellington Field." "Airport System Revenue Bonds" means the bonds, notes (including commercial paper notes) and other obligations of the City secured by Airport System revenues generally (but expressly excluding revenues derived from special facilities), including the City=s Airport System Senior Lien Revenue Bonds and Notes, Airport System Subordinate Lien Revenue Bonds and Notes and Airport System Inferior Lien Revenue Bonds and Notes. "Allocated Bond Amount" shall have the meaning assigned to it from time to time in Section 6A.01(b). "APM" shall mean the automated people mover system, the first phase of which connects Terminals B and C and which is to be extended by the City to the international facilities area. "APM Maintenance Facility" shall mean any discrete offline maintenance facility constructed for the benefit of the APM. "Apron Areas" shall mean the apron areas for the various terminals and common use cargo areas at the Airport, including the Terminal E Apron Area. "Best Efforts" when used herein in connection with a party's taking of an action or attempting to cause a specific result to occur shall mean that the party obligated to use its Best Efforts in such regard shall use all commercially reasonable efforts under the then applicable circumstances, as considered in good faith by the party so obligated, to take such action or cause such result to occur, it being agreed, however, that without limiting the generality of the foregoing, when describing an obligation of the City, "Best Efforts" shall not include the obligation to invoke the City's police powers or any other power or authority derived solely from the City's status as a municipal corporation. "Bondholders" shall mean the owners of the Bonds or the beneficial interests therein. "Bonds" shall mean collectively the Series 2001 Bonds and any Additional Bonds and Refunding Bonds from time to time hereafter issued. "Business Day" shall mean any day other than a Saturday, Sunday, or legal holiday or the equivalent (other than a moratorium) on which banking institutions generally in Houston, Texas or New York, New York are authorized or required by law or executive order to close. "Capitalized Interest Sub-Account" shall have the meaning assigned in the Trust Indenture. "Central FIS" shall mean a structure to be constructed by the City between Terminals D and E for the primary purpose of processing inbound international passengers and for related purposes as provided in the International Facilities Agreement and the Program Definition Manual. The Central FIS shall not include Lessee=s Central Ticketing Facility. "City" shall mean the City of Houston, Texas, or such other agency, board, authority, or private entity which may succeed to the jurisdiction of the City over the Airport. "City Amortization" shall mean the level annual charge required to recover the net cost of a City Capital Improvement over the Useful Life of such City Capital Improvement at the City=s Cost of Capital. "City Capital Improvements" shall mean any improvement or asset, or series of related improvements or assets, acquired or constructed by City at the Airport, including without limitation any security facilities or equipment, which has a net cost of $150,000 or more (adjusted annually for changes in the Consumer Price Index from July 1, 1998 to a maximum of $300,000) and a Useful Life of more than one year (but excluding facilities acquired or constructed with the proceeds of special facility revenue bonds which are secured solely by the net rent payable under the special facility lease for such facility and which debt service is in fact retired in such manner, unless such facilities are subsequently acquired by City). For the purposes of this Agreement, the net cost of each City Capital Improvement shall be the total cost (including actual construction costs; architectural and engineering fees, program management fees, testing and inspection fees, construction management fees, permit fees, and other direct or allocable fees; interest during construction; and allocable out-of-pocket financing costs) less any grants-in-aid or similar amounts used in financing the City Capital Improvement. "City Charges" shall mean those charges authorized in Section 6.07. City Charges shall also include Interim City Charges that Lessee may elect to pay under Section 3.06. "City International Facilities Project" shall consist of (i) the Central FIS, (ii) the City Project Components, (iii) certain improvements to Terminal D, (iv) a certain parking structure, (v) certain infrastructure and (vi) expansion of the Automated People Mover, all as more fully provided in the International Facilities Agreement and the Program Definition Manual. "City International Ticketing Facility Components" shall mean the Terminal E Pedestrian Bridges, the Shell for Central Ticketing Facility and Associated Ramp and the Baggage Tunnel. "City Operation and Maintenance Expenses" shall mean all reasonable and necessary current expenses of City, paid or accrued, of operating, maintaining, repairing, and administering the Airport; including, without necessarily limiting the same, salaries and wages, fringe benefits, contractual services, utilities, professional services, police protection services, fire protection services, administrative expenses, the cost of materials and supplies used for current operations, equipment, insurance premiums, the reasonable charges of any paying agents and any other depository bank pertaining to the Airport, as well as overhead expenses of (a) the Department (which shall be fairly allocated among City's airport facilities in accordance with generally accepted accounting practices) and (b) other City departments whose services are directly related or reasonably allocable to the administration of the Airport (which shall be determined in accordance with a City-wide administrative cost allocation plan then in effect); provided, however, City Operation and Maintenance Expenses shall not include any allowance for depreciation, payments in lieu of taxes, City Capital Improvements, any charges for the accumulation of reserves for capital replacements or charges resulting from the negligence or breach of existing agreements by the City, its employees or contractors. "City Project Components" shall mean those components of the Terminal E Project being constructed and financed by the City, other than with the Bonds, which consist of the Terminal E Apron Area, the Terminal E Fueling Facilities, the Terminal E Pedestrian Bridges, the Terminal E Utilities, the Shell for Central Ticketing Facility and Associated Ramp and Baggage Tunnel, all as more fully described in Exhibits "A-5," "A-6," "A-7," "A-8,""A-9" and "A-10" of Exhibit "A" attached hereto and by this reference made a part hereof, together with any modifications, additions or reductions thereto approved by the Director subject to the limitations imposed by the Trust Indenture. The City Project Components include the City South Concourse Components and the City International Ticketing Facility Components. "City Project Consultant" shall mean any independent firm engaged by the City with expertise in construction management and cost estimating for projects similar to the Lessee Project Components. "City South Concourse Components" shall mean the Terminal E Apron Area, the Terminal E Fueling Facilities and the Terminal E Utilities. "City=s Cost of Capital" shall mean (a) for City Capital Improvements financed with Airport System Revenue Bonds, the effective interest rate on the Airport System Revenue Bonds used to finance the particular City Capital Improvement and (b) for City Capital Improvements financed with other Airport funds, the current Revenue Bond Index (of 22-year+, "A" rated bonds) published daily in the Wall Street Journal (or successor publication thereto), for the end of the latest month preceding the calculation of the rates and charges, but no later than June 30 of the City=s fiscal year in which the City Capital Improvement is placed in service. "Construction Accounts" shall have the meaning assigned in the Trust Indenture. "Construction Period" shall mean the period from the execution and delivery of this Agreement through the date of Substantial Completion of the South Concourse Phase, the International Ticketing Facility Phase or the entire Terminal E Project, as the case may be. In the event Segments of Lessee Project Components or City Project Components, as applicable, have different dates of Substantial Completion, there shall be different Construction Periods for each Segment, with each such Construction Period ending on the date of Substantial Completion of the applicable Segment. "Continental" shall mean Continental Airlines, Inc., a Delaware corporation. "Continental Airport Use and Lease Agreement" shall mean the Use and Lease Agreement effective as of January 1, 1998 between the City and Continental with respect to Continental=s use of the Airport and lease of space in Terminals B and C at the Airport. "Costs of City Project Components" shall mean all costs of financing the construction and acquisition of the City Project Components and the issuance of Airport System Revenue Bonds for such purpose, including without limitation the following: (i) all amounts paid to design, construct, acquire, fabricate, equip and install the City Project Components, including without limitation, all costs of utility extensions and connections and all amounts paid under all contracts for goods, services and facilities related thereto; (ii) all amounts necessary to provide for work performed, material purchased or expenditures incurred, pertaining to or in connection with the City Project Components approved by City including, without limitation, the charges of any architects or engineers for plans, specifications, drawings, supervision and inspection for the City Project Components; (iii) all expenses incurred for the review of plans, specifications and contracts for the City Project Components and for the inspection in connection with the construction and acquisition thereof; (iv) the cost of any and all permits, licenses, fees, performance and payment bonds, appraisals and insurance policies procured in connection with the acquisition and construction of the City Project Components; (v) legal, accounting and bond advisory, underwriting and consultant fees and expenses, including any fees and expenses of any bond insurer and provider of any reserve fund surety, bond rating agencies and all costs and expenses incident to the authorization, issuance, delivery and sale of the Airport System Revenue Bonds issued to finance the Costs of City Project Components, including without limitation the preparation, execution, delivery and recording of any preliminary and the final offering documents pertaining to such revenue bonds, and any printing fees for such documents, any purchase agreements pursuant to which such revenue bonds will be sold, all credit agreements and other documents providing security for such bonds, the costs and fees, including legal fees, incident to the qualification of such bonds for offer and sale under securities laws and the preparation of any memorandum as to the eligibility of such bonds for offer and sale and for investment under state laws if required or if applicable; (vi) interest accruing on Airport System Revenue Bonds during the period of construction of the City Project Components financed with the proceeds thereof; (vii) such other and additional fees, costs, expenses and expenditures of whatever nature incidental or pertaining to the design, acquisition, construction, fabrication, equipping and installation of the City Project Components, including funding of any associated reserve fund or account, and all other costs and expenses that may properly be capitalized as costs of the City Project Components. "Costs of the Lessee Project Components" or "Costs of the Special Facilities" shall mean all costs of financing the construction and acquisition of the Lessee Project Components or other Special Facilities, as the case may be, and the issuance of Bonds for such purpose, including without limitation the following: (i) all amounts paid to design, construct, acquire, fabricate, equip and install the Lessee Project Components or other Special Facilities, including without limitation, all costs of utility extensions and connections and all amounts paid under all contracts for goods, services and facilities related thereto; (ii) all amounts necessary to provide for work performed, material purchased or expenditures incurred, pertaining to or in connection with the Lessee Project Components or any other Special Facilities approved by City including, without limitation, the charges of any architects or engineers for plans, specifications, drawings, supervision and inspection for the Lessee Project Components or Special Facilities; (iii) all expenses incurred for the review of plans, specifications and contracts for the Lessee Project Components or other Special Facilities and for the inspection in connection with the construction and acquisition thereof; (iv) the cost of any and all permits, licenses, fees, performance and payment bonds, appraisals and insurance policies procured in connection with the acquisition and construction of the Lessee Project Components or other Special Facilities; (v) legal, accounting and bond advisory, underwriting and consultant fees and expenses, including any fees and expenses of any bond insurer and provider of any reserve fund surety, bond rating agencies and all costs and expenses incident to the authorization, issuance, delivery and sale of the Bonds, including without limitation the preparation, execution, delivery and recording of this Agreement, the Trust Indenture, any preliminary and the final offering documents pertaining to the Bonds, and any printing fees for such documents, any purchase agreements pursuant to which the Bonds will be sold, all credit agreements and other documents providing security for the Bonds or the obligations owing to the City hereunder and all other agreements and documents involved and contemplated hereby, the costs and fees, including legal fees, incident to the qualification of the Bonds for offer and sale under securities laws and the preparation of any memorandum as to the eligibility of the Bonds for offer and sale and for investment under state laws if required or if applicable; (vi) interest accruing on the Bonds during the period of construction of the Lessee Project Components or other Special Facilities financed with the proceeds thereof; (vii) Ground Rentals and utility charges payable under Section 6.04 relating to the Terminal E Project during the period of construction of the Lessee Project Components or other Special Facilities financed with the proceeds of the Bonds; and (viii) such other and additional fees, costs, expenses and expenditures of whatever nature incidental or pertaining to the design, acquisition, construction, fabrication, equipping and installation of the Lessee Project Components or other Special Facilities, including funding of the Reserve Account, if any (as defined in the Trust Indenture), and all other costs and expenses that may properly be capitalized as costs of the Lessee Project Components or other Special Facilities. "Costs of Terminal E Project" shall mean the sum of the Costs of the City Project Components plus the Costs of the Lessee Project Components to the extent that the same are capitalizable into the basis of the Terminal E Project in accordance with generally accepted accounting principles. "Department" shall mean the Department of Aviation of the City. "Director" shall mean the Director of the Department or his designee. "Easements" shall mean all of the easement or easements described in Exhibit "B" attached hereto. "Event of Default" shall mean those events so defined in Section 10.01 hereof. "Event of Phase Termination" shall have the meaning assigned in Section 6A.06 hereof. "Excess Reletting Proceeds" shall mean those excess proceeds of reletting either Phase of the Terminal E Project as provided in both Section 6A.05(e) and Section 6A.08(b). "Fiscal Year" shall mean the City=s fiscal year, currently July 1 to June 30. "Force Majeure" shall mean neither City nor Lessee shall be deemed in violation of this Agreement during the period of Force Majeure if it is actually prevented from performing any of its material obligations hereunder solely by reason of strikes, boycotts, labor disputes, embargoes, shortage of material, acts of God, acts of the public enemy, acts of superior governmental authority, weather conditions, tides, riots, rebellion, sabotage, or any other circumstances for which it is not responsible or which is not in its control; provided, however, that these provisions shall not excuse Lessee from paying the rentals and fees specified in Articles 6 and 6A. This relief is not applicable unless the affected party uses Best Efforts to remove the Force Majeure as expeditiously as possible. "Ground Handling Services" shall mean any of the following: on and off loading of passengers, baggage, mail or cargo; into-plane fueling; servicing aircraft lavatories; providing ground power, potable water and preconditioned air; cleaning the interior or exterior of aircraft; emergency maintenance of aircraft engines and systems; and any other similar ground services. "Ground Lease Properties" shall mean the footprint for South Concourse and those portions of the floor space within the Central FIS and the parking facility located east of Terminal C at the Airport known as the Terminal C-East Garage as are required to construct the Lessee Project Components thereon or therein, all as more fully described in Exhibit "C" attached hereto. "Ground Rentals" shall mean the rentals to be paid directly to the City pursuant to Section 6.06 as consideration for the Ground Lease Properties. Ground Rentals shall also include all Interim Ground Rent that Lessee may elect to pay pursuant to Section 3.06. "Guaranty" shall mean the guaranty agreement dated as of August 1, 2001, from Lessee to the Trustee guaranteeing the Series 2001 Bonds and any Additional Bonds with respect to each Phase upon the occurrence of certain events as described therein. "Interest and Redemption Fund" shall mean the fund so defined in the Trust Indenture for the collection of Special Facilities Payments and payment of the Bonds. "Interim City Charges" shall mean the City Charges that Lessee pays prior to Substantial Completion of either Phase of the Terminal E Project in connection with its use of a Segment pursuant to Section 3.06. "Interim Ground Rent" shall mean the Ground Rentals that Lessee pays prior to Substantial Completion of the entire Terminal E Project in connection with its use of a Segment pursuant to Section 3.06 hereof. "Interim Special Facilities Payments" shall mean the rentals Lessee pays prior to Substantial Completion of either Phase of the Terminal E Project in connection with its use of a Segment pursuant to Section 3.06(b)(iii)(x) hereof. "International Facilities Agreement" shall mean the International Facilities Agreement by and between Lessee and the City. Until the International Facilities Agreement is entered into, the term shall mean those provisions pertaining to Terminal D and the Central FIS which are contained in the Term SheetBInternational Services Expansion Program between the City and Lessee countersigned on December 30, 1999, and which are not inconsistent with the provisions of this Agreement. "International Ticketing Facility Phase" shall mean the City International Ticketing Facility Components and the Lessee International Ticketing Facility Components. "Landing Fees" shall mean the landing fees payable by Lessee as provided in Section 6.08 hereof. "Lessee" shall mean Continental Airlines, Inc., a Delaware corporation, and its successors and assigns as lessee hereunder. "Lessee Central Ticketing Facility" shall mean those tenant improvements, fixtures, equipment and related facilities in the Central FIS as described in Exhibit "A-2" to this Agreement and as more fully provided in the Program Definition Manual. "Lessee International Ticketing Facility Components" shall mean Lessee Central Ticketing Facility and Lessee=s Terminal E Baggage System Improvements. "Lessee Loss Payment" shall have the meaning assigned in Section 6A.06. "Lessee Project Components" shall mean the South Concourse, Lessee=s Central Ticketing Facility, Lessee=s Terminal C-East Garage ATO Facility and Lessee=s Terminal E Baggage System Improvements, all as more fully described in Exhibits "A-1," "A-2," "A-3" and "A-4" of Exhibit "A" attached hereto and by this reference made a part hereof, together with any modifications, additions or reductions thereto approved by the Director. "Lessee South Concourse Components" shall mean the South Concourse and the Lessee=s Terminal C-East Garage ATO Facility. "Lessee=s Terminal C-East Garage ATO Facility" shall mean those tenant improvements, fixtures, equipment and related facilities in the parking facility located east of Terminal C at the Airport known as the Terminal C-East Garage, including walkways to connect the same with the South Concourse as described in Exhibit "A-3" to this Agreement. "Lessee's Terminal E Baggage System Improvements" shall mean those tenant improvements, fixtures, equipment and related facilities in the parking facility located east of Terminal C at the Airport known as the Terminal C-East Garage, consisting of a baggage conveyance system to connect the same with the Lessee=s Central Ticketing Facility as described in Exhibit "A-4" to this Agreement and more fully provided in the Program Definition Manual. "Outstanding" shall have the meaning assigned in the Trust Indenture. "Phase" shall mean the International Ticketing Facility Phase and/or the South Concourse Phase. "Program Definition Manual" shall mean the Project Definition Manual for International Services Expansion Program dated April 4, 2000, which was jointly developed by the City and Lessee, as it may be amended from time to time with the joint concurrence of the City and Lessee. "Refunding Bonds" shall mean all refunding bonds which may be issued by the City for the purposes set forth in Sections 4.04 hereof, and which shall be payable from the same sources as the Bonds. "Renewal and Replacement Fund" shall mean the fund of such name that the City is obligated to maintain pursuant to its ordinances authorizing its Airport System Revenue Bonds. "Segment" shall mean any discrete, independently operable segment of the Lessee Project Components or City Project Components as may be agreed to by Lessee and the Director for which a date of Substantial Completion may be established as more fully provided in Section 3.06. "Series 1997A Bonds" shall mean the City's Airport System Special Facilities Revenue Bonds, Series 1997A (Automated People Mover Project) in the original principal amount of $74,200,000, the payment of which is secured by a special facilities lease agreement with and guaranty from Lessee. "Series 2001 Bonds" shall mean the series of Bonds to be issued pursuant to this Agreement and the Trust Indenture, which shall be entitled the "City of Houston, Texas, Airport System Special Facilities Revenue Bonds (Continental Airlines, Inc. Terminal E Project), Series 2001." "Shell for Central Ticketing Facility and Associated Ramp" shall mean those portions of the Central FIS that encase Lessee=s Central Ticketing Facility together with the vehicle ramp adjacent thereto, as more fully described in Exhibit "A-9" of Exhibit "A" to this Agreement. "South Concourse" shall mean those buildings, improvements, fixtures, equipment and related facilities as more fully described in Exhibit "A-1" to this Agreement and as more fully provided in the Program Definition Manual. "South Concourse Phase" shall mean the City South Concourse Components and the Lessee South Concourse Components. "Special Facilities" shall mean the Lessee Project Components, all extensions, additions, modifications and improvements thereto and all other improvements, fixtures, equipment and facilities that, pursuant to this Agreement or any supplement hereto or amendment hereof, are financed with any proceeds of the Series 2001 Bonds or any Additional Bonds. "Special Facilities Payments" shall mean the rentals payable to the Trustee on behalf of the City pursuant to Section 6.01(a)(i) and (ii) hereof for the purpose of being applied to the payment of the Bonds and making required deposits to the Interest and Redemption Fund. Special Facilities Payments shall also include any Lessee Loss Payment made by Lessee upon an Event of Phase Termination and all Interim Special Facilities Payments that Lessee may elect to pay pursuant to Section 3.06. "Subsidiary" shall mean any subsidiary of Lessee that is wholly owned as of the date hereof or that may become wholly owned provided that, during the exercise of rights hereunder by such entity as a Subsidiary, the Lessee shall be responsible for the actions of (including the payment of any activity fees incurred by) any such Subsidiary until such time as Lessee notifies the City in a writing delivered to the City that Lessee will no longer be responsible for the actions (or activity fees) of such Subsidiary, which notice Lessee shall have the right to give only if such Subsidiary ceases to be a wholly owned subsidiary of Lessee, and if such notice is given, then from and after (but not until) the date that the City approves (if at all) a partial assignment by Lessee to such Subsidiary of the space at the Airport occupied by such Subsidiary (along with a partial assignment of the rights utilized by such Subsidiary in connection with its operations at the Airport) in accordance with the provisions of Article 11 hereof, Lessee no longer shall be responsible for the actions (or activity fees) of such Subsidiary. The term ASubsidiary" shall also mean, for any air carrier that on or after the date of this Agreement shall have been wholly owned by the Lessee and thereafter shall cease to be so wholly owned, such air carrier only with respect to those operations of such air carrier that are conducted under Lessee=s name or a derivative of Lessee=s name, if (i) Lessee shall have agreed to be responsible for such operations of (including payment of all related activity fees and charges incurred by) such air carrier to the same extent as if such operations were conducted by Lessee, which shall be evidenced by the Lessee=s execution and delivery to the Director of an Agreement of Responsibility in substantially the form attached hereto as Exhibit AJ@ and (ii) the air carrier shall have executed and delivered to the Director an Acknowledgment and Reporting Agreement in substantially the form attached hereto as Exhibit AK@. "Substantial Completion" or "Substantially Completed" shall mean (i) with respect to the Lessee Project Components, the date on which the Lessee Project Components (or any Segment) shall be sufficiently completed to enable use and occupancy for their intended purpose, as evidenced by a certificate executed by an authorized Lessee representative, a licensed architect or another party approved by the Director and a Certificate of Occupancy issued by the City, (ii) with respect to the City Project Components, the date on which the City Project Components shall be sufficiently completed to enable use and occupancy for their intended purpose, as evidenced by a certificate executed by the Director and a Certificate of Occupancy issued by the City and (iii) with respect to the Terminal E Project, or either Phase thereof, the date on which both the Lessee Project Components and the City Project Components (or in the case of a Phase the Lessee Project Components and City Project Components within such Phase) are so certified to be sufficiently completed to enable use and occupancy for their intended purpose. Substantial Completion hereunder need not have the same meaning ascribed to it in construction contracts for elements of the Terminal E Project. "Systems" shall mean the systems, facilities and improvements located on and serving the Airport, including but not limited to: (a) the access roads and other roadways serving the terminal complex; (b) the interterminal passenger transportation system; (c) the heating, ventilation, and air conditioning (HVAC) plant and related distribution systems; (d) the terminal building mechanical areas and systems; and (e) the incinerators / compactors. "Systems Costs" shall mean the total of annual City Operation and Maintenance Expenses and annual City Amortization charges associated with each of the Systems. "Terminal D" shall mean the Mickey Leland International Airlines Building at the Airport. "Terminal E Apron Area" shall mean the apron area more fully described in Exhibit "A-5" to this Agreement. "Terminal E Fueling Facilities" shall mean the fueling facilities more fully described in Exhibit "A-6" to this Agreement. "Terminal E Pedestrian Bridges" shall mean the pedestrian bridges more fully described in Exhibit "A-7" to this Agreement. "Terminal E Project" or "Terminal E" shall mean collectively the Lessee Project Components and the City Project Components. "Terminal E Utilities" shall mean the utilities more fully described in Exhibit "A-8" to this Agreement. "Trust Indenture" shall mean the Trust Indenture, dated as of August 1, 2001, together with all supplements and amendments thereto, entered into by and between the City and the Trustee to provide for the issuance of and security for the Series 2001 Bonds. "Trustee" shall mean the bank designated as Trustee under the Trust Indenture, or any successor trustee thereunder. "Use Agreement" shall mean the Continental Airport Use and Lease Agreement and/or any other successor use and lease agreement or other successor agreement, howsoever denominated, between Lessee and the City, pursuant to which Lessee is granted the right to operate its commercial air transportation business on the Airport in consideration for its payment of landing fees and other amounts and its agreement to abide by certain rules and regulations regarding its operations on the Airport, and if none shall exist, subject to Section 12.15 hereof, any such agreement between the City and any other carrier engaged in the air passenger transportation business at the Airport, and if none shall exist with any other carrier, then it shall mean the ordinance or ordinances of the City regulating such matters and imposing such landing fees and other rates and charges. "Useful Life" shall mean the estimated period of time that a City Capital Improvement is to be recovered through the City Amortization process. In general, Useful Lives will be assigned to City Capital Improvements by the Director based on generally accepted accounting principles. For purposes of calculating rates and fees under this Agreement, improvements to the City Project Components financed by the City through means other than Bonds will be assigned Useful Lives of 25 years. Section 1.02: Interpretations. All terms defined herein and all pronouns used in this Agreement shall be deemed to apply equally to singular and plural and to all genders. The table of contents, titles and headings of the articles and sections of this Agreement have been inserted for convenience of reference only and are not to be considered a part hereof and shall not in any way modify or restrict any of the terms or provisions hereof. This Agreement and all the terms and provisions hereof shall be liberally construed to effectuate the purposes set forth herein and to provide for the full and timely payment of all Bonds from time to time hereafter issued by the City, which Bonds shall be secured by a pledge of the Special Facilities Payments payable under this Agreement. In the event of any ambiguity contained herein, it shall not be construed for or against any party hereto on the basis that such party did or did not author same. ARTICLE 2 REPRESENTATIONS Section 2.01: Representations by the City. The City makes the following representations as the basis for its undertakings in this Agreement: (a) The City, as the owner of the Airport, is authorized to enter into this Agreement and provide for the design, construction, financing, operation, use and lease of the Terminal E Project as provided herein; (b) The City has the power and authority to grant the Ground Lease Properties and the Easements to the Lessee for the purposes of constructing, installing, equipping, maintaining and operating the Lessee Project Components and other Special Facilities; (c) The City has the power and authority to acquire ownership and title to the Lessee Project Components as they are constructed, installed and equipped by Lessee on the Ground Lease Properties and the Easements, to acquire the other Special Facilities, and to lease same to Lessee pursuant to the terms and conditions contained herein; (d) The City has the power and authority to issue the Bonds for the purpose of paying the Costs of the Lessee Project Components and to pledge to the payment of the Bonds the Special Facilities Payments payable under this Agreement and by proper municipal action it has been authorized to execute and deliver this Agreement; (e) The City will cooperate with Lessee and use its Best Efforts to secure economic inducements and incentives for its participation in the International Facilities Agreement and the development of the Terminal E Project, subject to allocation criteria applied at the Airport System on a consistent basis; and (f) All representations relating to the City contained in the recitals to this Agreement are true and correct in all material respects. Section 2.02: Representations by Lessee. The Lessee makes the following representations as the basis for its undertakings in this Agreement: (a) Lessee is a corporation validly existing under the laws of the State of Delaware; it is in good standing under its certificate of incorporation and the laws of the State of Delaware; it is duly authorized to do business in the State of Texas; it has the power to enter into this Agreement and the Guaranty without violating the terms of any other agreement to which it is a party; and by proper corporate action it has been duly authorized to execute and deliver this Agreement and the Guaranty; (b) Lessee will occupy and possess the Ground Lease Properties and the Easements for the purposes and upon the terms and conditions set forth herein; it will, subject to the City's issuance and sale of the Series 2001 Bonds, carry out, or cause to be carried out, its obligations hereunder with respect to the construction, installation and equipping of the Lessee Project Components substantially in the manner herein provided, causing title to the Lessee Project Components to vest in the City in the manner herein provided, and carry out its obligations contained herein with respect to the occupancy, possession, operation and maintenance of the Lessee Project Components and any other Special Facilities for the purposes and in the manner provided herein, all subject to the terms and conditions of this Agreement; and (c) All representations relating to Lessee contained in the recitals to this Agreement are true and correct in all material respects. Section 2.03: Representations by the City and Lessee. It is the intent of the City and the Lessee that this Agreement constitute an operating lease from the City to the Lessee for purposes of the Lessee's financial reporting. ARTICLE 3 LEASE AND TERM; GRANT OF EASEMENTS AND GROUND LEASES; EXCLUSIVE AND PREFERENTIAL USE SPACE Section 3.01: Lease of Terminal E Project. Subject to the terms and conditions of this Agreement, the City hereby leases, lets and demises unto Lessee, and Lessee hereby leases and rents from the City, the Terminal E Project, including the City Project Components, the Lessee Project Components and any additional Special Facilities. Section 3.02: Term of Lease; Options to Extend. (a) The term of this Agreement shall commence on August 29, 2001 and shall continue, unless sooner terminated in accordance with this Agreement, until the later of (i) final scheduled maturity of the Series 2001 Bonds or (ii) the earlier of (x) 25 years from the date of beneficial occupancy of the Central FIS or (y) subject to continued compliance with Section 8.04(b), 36 years from the first date of beneficial occupancy of any Segment of the Lessee=s Project Components (the "Expiration Date"). (b) Lessee shall have the option to extend the term of this Agreement for an additional 5-year period after the Expiration Date, subject to the conditions set forth below, upon giving written notice of such election to the Director no later than 1 year prior to the Expiration Date. Lessee=s right to exercise such option is subject to the following conditions with respect to the period of such extension: (i) For the Lessee Project Components, Lessee shall continue to pay applicable City Charges, but in lieu of the rentals payable under Section 6.01, Lessee shall pay an additional rental at the then-current market rate (which, to the greatest extent permitted by federal tax laws applicable to the Bonds, shall not exceed the overall level of rates then charged to other carriers for comparable space in Terminal D, taking into account the different ratemaking methodology in Terminal D) for all usable space other than public space and concession space; (ii) All concessions located within the Lessee Project Components, and all revenues from such concessions, shall revert to the City; provided that, during the extended term hereof, Lessee shall be entitled to retain any concession revenues derived from Lessee's Terminal C-East ATO Garage Facility, unless the City elects (which the City shall have the right to do) to make the walkway connecting such facility to the South Concourse public space (in which case Lessee shall continue paying rentals for the remaining portion of the facility (but shall not continue paying Ground Rentals in respect of the walkway) in the same amount as Lessee was paying at the end of the initial term hereof for such space (including any adjustment thereto during the extended term hereof in accordance with Section 6.06(c) hereof); provided further that, if Lessee's use of the South Concourse is not exclusive during the extended term hereof pursuant to Section 3.02(b)(iii) hereof, then the City shall convert the walkway to public use as provided above; and (iii) If any of the gates located in the South Concourse have not met the utilization standards which on June 1, 2001 were contained in Section 4.01C of the Continental Airport Use and Lease Agreement (based upon the use of such gates by Lessee, any Subsidiary and, to the extent permitted in Section 11.01, airlines with which Lessee has a formal code-share relationship) during the 12-month period ending 13 months prior to the Expiration Date, then continued use of those gates during the option period shall be on a preferential use basis and not on an exclusive basis. In such an event, the preferential rights herein provided for shall be subject to non-preferential use by other airlines as provided in Section 4.01C of the Continental Airport Use and Lease Agreement as in effect on June 1, 2001 (and when any such use is made by another, Lessee shall be compensated for such use by the user thereof in an amount reasonably acceptable to the City and Lessee). Section 3.03: Easements and Ground Leases for Lessee Project Components. (a) Subject to the terms and conditions contained in this Agreement, the City hereby grants and conveys to Lessee the Ground Lease Properties for a term corresponding to the term of Lessee=s leasehold estate in the Lessee Project Components to be constructed and located on, in or appurtenant to such Ground Lease Properties, including any extensions or renewals thereof. The Ground Lease Properties shall be used solely for the purpose of constructing, equipping, acquiring, operating and maintaining the Lessee Project Components and related authorized purposes. (b) Subject to the terms and conditions of this Agreement, the City hereby grants and conveys to Lessee the Easements for a term corresponding to the term of Lessee's leasehold estate in the Lessee Project Components to be located in or appurtenant to such Easements, including any extensions or renewals thereof. The Easements shall be used solely for the purpose of constructing, equipping, acquiring, operating and maintaining the Lessee Project Components and related authorized purposes. (c) Subject to the terms hereof, Lessee shall have the right of reasonable ingress to and egress from the Terminal E Project over the portions of the Airport necessary for conducting its authorized operations in accordance with the terms hereof, including the operation of buses between terminals, subject to reasonable regulations promulgated by the Director. (d) In the event the City and Lessee determine it is necessary or desirable to amend, correct, further define or delineate, delete from or add to any descriptions of the Ground Lease Properties and the Easements, they may do so by a supplement or addendum hereto duly executed by the Director and an authorized officer of the Lessee, subject to the limitations imposed by the Trust Indenture. Section 3.04: Condition of Lessee Project Components, Ground Lease Properties and Easements. The Lessee has full and exclusive responsibility for ascertaining the suitability of the Lessee Project Components, Easements, and Ground Lease Properties for their intended use. The City makes no representations or warranties, either express or implied, as to the condition of the Lessee Project Components, Easements, and Ground Lease Properties for the use intended by the Lessee. The Lessee agrees to take the Lessee Project Components, Easements, and Ground Lease Properties in their "as-is" condition. The City acknowledges that Lessee does not assume any responsibility, except to the extent caused by Lessee, for any Hazardous Materials (as defined in Section 8.05C below) that existed on the Easements or Ground Lease Properties as of the date of commencement of the term. Within 15 days of its discovery of any such pre-existing condition, Lessee shall notify the Director. To the extent Lessee is not responsible for such pre-existing condition, following notification of the Director, the City will use its Best Efforts to promptly remediate such condition (to the extent required by applicable environmental laws, regulations or decrees) and minimize interference with Lessee=s business operations or the Lessee Project Components. Section 3.05: City Right of Entry. The City may enter upon the Ground Lease Properties, Easements and Lessee Project Components (i) except as provided in (ii) and (iii), at any reasonable time for any purpose necessary, incidental to or connected with the performance of Lessee's obligations hereunder, or in the exercise of the City's governmental functions, (ii) for portions of Lessee Project Components subject to concession agreements, upon 24 hours= notice (or such other reasonable notice provisions which Lessee shall have previously provided to the City) except in cases of emergency and (iii) upon the termination or cancellation of this Agreement in accordance with the provisions of Article 10 hereof, and such entry or reentry shall not constitute a trespass nor give Lessee a cause of action for damages against the City; provided, however, the City shall use all reasonable efforts to minimize any interference or interruption with Lessee's business operations. Section 3.06: Lessee=s Rights to Use and Occupy the Terminal E Project. Subject to the terms of this Agreement, Lessee shall have the following rights of quiet enjoyment with respect to the Terminal E Project during the term of this Agreement: (a) Prior to Substantial Completion of each Phase of the Terminal E Project, Lessee's rights shall be limited in such Phase to those rights of ingress and egress, and the rights to engage in all activities necessary or appropriate to design, construct, equip and install the Lessee Project Components in such Phase as provided in this Agreement, including without limitation Section 6A.11, except as provided in the special provisions in subsection (b) and (c) below. (b) Prior to Substantial Completion of either Phase of the Terminal E Project, Lessee may elect to enjoy full rights of use and occupancy of any Segment of the Lessee Project Components included in such Phase if all of the following occur: (i) Substantial Completion of such Segment has occurred and notice thereof has been given to the Trustee. (ii) Lessee shall reasonably satisfy the Director that sufficient records exist to establish the Cost of the Lessee Project Components allocable to such Segment and the corresponding Special Facilities Payments and the Director shall approve such allocation (and copies of such allocation and approval shall be delivered to the Trustee). (iii) Lessee agrees to pay, and pays when due, all of the following for the period of time it uses and occupies the Segment prior to Substantial Completion of the Phase of which it is a part: (X) An allocable amount of the rentals payable under Section 6.01(a)(i) and (ii) hereof (excluding for such purpose any amounts then on deposit or available to be deposited in the Interest and Redemption Fund under the Trust Indenture because of transfers from a Capitalized Interest Sub-Account under the Trust Indenture) that would be payable for such period based upon the proportion that the Cost of the Lessee Project Components allocable to the Segment bears to the entire amount of Bonds issued for the Terminal E Project, which payments shall be made by depositing directly with the Trustee for the account of the Interest and Redemption Fund; (Y) Any Ground Rent allocable to the Segment, which payments shall be made directly to the City; plus (Z) All City Charges allocable to the Segment, which payments shall be made directly to the City. (iv) Lessee confirms its obligations to pay all costs of operating and maintaining the Segment for the period of time it occupies the Segment prior to Substantial Completion of the Terminal E Project. (c) Prior to Substantial Completion of either Phase of the Terminal E Project, Lessee may elect to enjoy full rights of use and occupancy of any Segment of the City Project Components included in such Phase if all of the following occur: (i) Substantial Completion of such Segment has occurred; (ii) Lessee agrees to pay, and pays when due, for the period of time it occupies the Segment prior to Substantial Completion of the Phase which includes the Segment all City Charges allocable to such Segment. Section 3.07: Preferential Use of Terminal E Apron Area. (a) Lessee is being granted preferential use of the Terminal E Apron Area, but not exclusive use. At those times that Lessee (including any Subsidiary or code-share airline) has no scheduled use for an aircraft parking position on the Terminal E Apron Area and there are no other aircraft parking positions at the Airport available for use, Lessee shall allow other scheduled or nonscheduled airlines authorized by City to use Airport facilities to use such aircraft parking position as circumstances and the public interest may require for loading and unloading only, but in no event shall said use by others take precedence over Lessee's use (including the use by any Subsidiary or code-share airline). Lessee shall have the right to limit the duration of such usage to the actual time required for unloading, loading, and flight service operations and may require that such user tow off and back on to accommodate Lessee's use. When such use is to be made of the Terminal E Apron Area, Lessee shall be properly compensated for such use by the user of the Terminal E Apron Area based on and in accordance with the attached Illustrative Calculation of Terminal E Apron Area Compensation to Lessee in Exhibit "J" hereof. (b) Lessee shall have the right to locate any number of aircraft within the Terminal E Apron Area for the purpose of loading and unloading passengers, baggage, cargo and mail; provided, that Lessee shall not park aircraft in such a manner as would prohibit access, ingress, and egress to and from all aircraft parking positions by aircraft, ramp equipment, and traffic of other airlines permitted the use thereof in accordance with the terms hereof or would prohibit the movement of such aircraft and ramp equipment to and from the most convenient taxiway and terminal building. ARTICLE 4 ISSUANCE OF SPECIAL FACILITIES BONDS; PAYMENT OF COSTS OF THE LESSEE PROJECT COMPONENTS Section 4.01: Issuance of Series 2001 Bonds. Subject to the terms and conditions of this Agreement, the City shall diligently use its Best Efforts to issue, sell and deliver the Series 2001 Bonds in amounts sufficient to pay the Costs of the Lessee Project Components, which amounts shall be established in the Trust Indenture. The City shall have no obligations to sell, issue or deliver the Series 2001 Bonds if (i) there exists an Event of Default under this Agreement by Lessee, or (ii) Lessee has not given written approval of the Trust Indenture, or (iii) the Guaranty has not been executed and delivered to the Trustee. The City shall not authorize the sale of the Series 2001 Bonds or enter into any related supplement to the Trust Indenture until the terms of such Bonds and the form of such Trust Indenture have been approved in writing by Lessee in the manner provided in Section 12.04 hereof, including without limitation, the assumption of all arbitrage calculation, reporting and rebate obligations and requirements pursuant to Section 4.11 of the Trust Indenture and the affirmation and assumption of all federal tax covenants contained in the Trust Indenture (other than those which, by their nature, can only be satisfied by the City), which written approval, assumption and affirmation shall be conclusively binding upon Lessee. Section 4.02: Issuance of Additional Bonds and Additional Obligations. (a) The City, at the direction of Lessee, may issue Additional Bonds in amounts sufficient to pay (i) any part of the Costs of the Lessee Project Components not fully funded or provided for out of the proceeds of the Series 2001 Bonds, or (ii) the Costs of the Special Facilities for any additional Special Facilities approved pursuant to Section 5.05 hereof. The City agrees to use its Best Efforts to issue any Additional Bonds required under clause (i) above, and the Director shall cooperate in a reasonable manner with Lessee to request the City to issue Additional Bonds under clause (ii) above; however, no representation is made or assurance given or implied by the City that it will be able to sell, issue and deliver Additional Bonds on terms and conditions satisfactory to Lessee or that it will agree to issue Additional Bonds for any other purpose than as set forth above. Moreover, the issuance of Additional Bonds is made subject to the same conditions enumerated in Section 4.01 and the additional condition that, if deemed necessary by the City, there shall have been executed a supplement to this Agreement to provide for the manner of construction, acquisition and payment for any additional Special Facilities to be financed with such Additional Bonds and to provide for any other matters reasonably deemed necessary by the City in connection with such financing. All Additional Bonds shall be secured and payable as provided in the Trust Indenture. Upon the issuance of any Additional Bonds, the Special Facilities Payments payable hereunder shall automatically be increased in the amounts required to provide for the full and timely payment of all principal, interest, redemption premiums, Trustee charges and other related costs and expenses on all Bonds then outstanding, including the Additional Bonds to be issued. However, the City shall not authorize the issuance of Additional Bonds until the terms thereof and of the supplement to the Trust Indenture relating thereto have been approved in writing by Lessee, which written approval shall be conclusively binding upon Lessee. Lessee hereby grants such approval in advance for the issuance of Additional Bonds issued under Sections 6A.06 provided any such Additional Bonds have a final maturity and amortization schedule comparable to the Series 2001 Bonds unless otherwise agreed to by the Lessee and the City. (b) The City, without the consent or request of Lessee, shall use its Best Efforts to issue Additional Obligations secured by reletting revenues as provided in Section 6A.05 to finance unfunded Costs of Lessee Project Components in a Phase for which this Agreement has terminated. Section 4.03: Application of Proceeds; Insufficiencies. (a) Subject to the other terms and provisions hereof, the City hereby agrees to apply the proceeds of the Series 2001 Bonds (by depositing the proceeds into the "Construction Fund" and other funds and accounts as established, defined and provided in the Trust Indenture) and any Additional Bonds to pay (but only to the extent of such proceeds) the costs of the Special Facilities financed therewith. After all Costs of the Lessee Project Components have been funded or provided for, and the Lessee Project Components are Substantially Completed such that the Guaranty is in effect, any remaining surplus proceeds of the Series 2001 Bonds may be used to pay for any costs of such other Special Facilities related to the Lessee Project Components of the Terminal E Project as may be (subject to appropriate TEFRA approval) made subject to this Agreement by the City and Lessee upon such terms as they may mutually determine. (b) Proceeds of such Bonds and deposits, if any, shall be applied first to make any deposits required by the Trust Indenture authorizing the issuance of such Bonds, second to pay all costs of the Special Facilities incurred on behalf of the City, including the cost of issuance of such Bonds, and last to pay any costs of the Special Facilities. Any proceeds of the Bonds remaining after paying all costs of the Special Facilities shall be deposited into the Interest and Redemption Fund as provided under the Trust Indenture. (c) In the event proceeds of such Bonds and deposits, if any, are insufficient to pay all Costs of the Lessee Project Components, Lessee shall have no obligation to provide any of its own funds to cover such insufficiency, but may request the City to issue Additional Bonds for such purpose pursuant to Article 6A. (d) In the event it is reasonably determined at any time by the City Project Consultant that the proceeds of the Series 2001 Bonds (and any Additional Bonds issued for such purpose) shall be insufficient to pay all Costs of the Lessee Project Components for which such Bonds were issued and there shall not have been deposited into the Construction Fund amounts from any other source which, together with other amounts therein, shall be sufficient to pay all Costs of the Lessee Project Components, then in such event Lessee shall cooperate with the City Project Consultant to implement any reasonable value engineering for the Lessee Project Components (within recognized industry standards) that will enable the Lessee Project Components to be completed within a budget prescribed by the remaining available Bond proceeds and before the Completion Deadline, provided that in no event shall the scope or purpose of the Lessee Project Components be materially reduced. Section 4.04: Refunding Bonds. Lessee reserves the right to request the City from time to time to issue Refunding Bonds in any manner permitted by law for the purpose of refunding any of the Bonds from time to time outstanding. Although no representation is made or assurance given or implied by the City that it will agree to issue such Refunding Bonds or that it will be able to sell, issue and deliver such Refunding Bonds on terms and conditions satisfactory to the Lessee, the City agrees to use its Best Efforts to issue Refunding Bonds at Lessee's request provided they have a similar maturity pattern, similar redemption features and similar security. All Refunding Bonds, if any, shall be secured and payable as provided in the Trust Indenture, and the Special Facilities Payments payable hereunder shall automatically be adjusted to provide for the full and timely payment of all principal, interest, redemption premiums, Trustee charges and other related costs and expenses on all Bonds to be outstanding following the issuance of the Refunding Bonds. Notwithstanding the foregoing, the City shall not authorize the sale of any Refunding Bonds or authorize any supplement to the Trust Indenture for such purpose until the terms of such Refunding Bonds and the supplement to the Trust Indenture are approved in writing by Lessee in the manner provided in Section 12.04 hereof, and it is provided further that the City's receipt of such approval shall be conclusively binding upon Lessee. Section 4.05: Optional Redemption of Bonds. The City agrees that at the written request of Lessee, the City will exercise any reserved right of optional redemption for any of the Bonds, provided that Lessee makes such request in sufficient time as specifically set forth in the Trust Indenture to permit the City to give any notice required by the Trust Indenture and provided further that Lessee gives the City adequate assurances (i) that it will pay all additional Special Facilities Payments required to provide for the payment of the applicable redemption price for such Bonds, together with any related costs and expenses in connection with such redemption, or (ii) that Refunding Bonds will be issued to finance all such costs and expenses or (iii) any combination thereof. ARTICLE 5 DESIGN, CONSTRUCTION AND ACQUISITION OF THE TERMINAL E PROJECT SPECIAL FACILITIES Section 5.01: Lessee Project Components. The Lessee Project Components or any other Special Facilities shall be designed, procured, constructed and installed in accordance with the following provisions. (a) Lessee shall contract for and manage the selected Lessee Project Components design team and shall be responsible for providing all other services required for the Lessee Project Components. Reasonable measures shall be taken to proceed towards and achieve Substantial Completion of the Lessee Project Components in a reasonably expeditious manner and to ensure that the firms providing professional services for the Lessee Project Components provide adequate resources and technical expertise to perform the design and program management and construction management efforts successfully and in accordance with available funding resources. Lessee agrees to use its Best Efforts to cause this construction of the Lessee Project Components to be substantially completed by the end of the following estimated months (it being recognized that such substantial construction completion will not constitute Substantial Completion of the applicable Phase until the related City Project Components of such Phase are also Substantially Complete):     Element Outside Substantial Construction Completion Date South Concourse May 2004 Lessee=s Terminal C - East Garage ATO Facility May 2004 Lessee Central Ticketing Facility December 2004 Lessee=s Terminal E Baggage System Improvements December 2004 Lessee shall deliver to the Trustee and the Director on or before September 1, 2002, and each September 1 thereafter until Substantial Completion of all Lessee Project Components, a report certified by an officer of Lessee as to the status, in the opinion of Lessee, of construction and completion of the Lessee Project Components, including whether they are on schedule and within budget and a description of any material variations. (b) All plans and specifications for the design, procurement, construction and installation of any discrete element of the Lessee Project Components or any other Special Facilities, including any alteration or addition thereto, shall be submitted to and receive the written approval of the Director prior to the commencement of any such discrete element of procurement, construction, alteration or installation. The City acknowledges that time is of the essence in reviewing such plans and specifications and shall use its Best Efforts to review and respond to all submissions of plans and specifications within 15 days of receipt of design documents; provided that the City will continue its review to the extent practical, as determined by the City, while awaiting additional information it may have requested. The City's review and response shall be conducted to avoid material, adverse impacts to the most recently published construction schedule submitted to and approved by the City. It is acknowledged that the City cannot review and respond in such a timely manner unless complete and thorough submissions are made to the City for review. It is further acknowledged that timely review and response by the City requires reasonable responses by Lessee to requests of the City for additional information necessary to complete the City's review. (c) All such procurement, construction, alteration or installation of the Lessee Project Components or any other Special Facilities may be made only after obtaining any required building or construction licenses and permits, which the City agrees to use Best Efforts to expedite or to assist in obtaining, and, in addition to usual City inspection, shall be subject to inspection by the Director to see that the approved plans and specifications are being substantially followed; provided, however, that the City shall use reasonable efforts to eliminate or avoid any interference or interruption with the construction of the Lessee Project Components. (d) All such procurement, construction, alteration and installation shall be designed and carried out in accordance with the Department's Tenant Improvement Manual, which is incorporated herein by reference and a copy of which has been provided to Lessee, except to the extent inconsistent herewith, or as otherwise agreed by the Director and Lessee. All such procurement, construction, alteration or installation shall be carried out and completed substantially in accordance with the most recently published construction schedule submitted to and approved by the Director. Upon completion of construction, the Director shall be provided with as-built drawings of improvements all on CADD diskette. (e) Best Efforts shall be used to cause the Lessee Project Components or any other Special Facilities contractors to meet the City's overall M/WBE participation goals of 24% for design, 17% for construction and 11% for procurement, exclusive of sole-source procurement or other exceptions as may be provided for in City guidelines. Periodic reports shall be provided as may be reasonably required by the Director or the City's Director of Affirmative Action. The City shall have the right to audit compliance efforts under this subsection throughout the term of this Agreement in the same manner as it audits other City contractors. Best Efforts shall also be used to cause the Lessee Project Components or any other Special Facilities contractors to meet the City=s goal of 1% participation by firms owned by disabled persons as in effect on the effective date of this Agreement. (f) Lessee shall contractually require contractors for the Lessee Project Components or any other Special Facilities to supply services and/or labor in compliance with the City's drug free work place policy as set forth in City of Houston Executive Order 1-31, as amended. (g) Upon Substantial Completion of the Lessee Project Components (or any Segment) and any other Special Facilities, (i) there shall be submitted to the City an affidavit reasonably satisfactory to the Director certifying that the Lessee Project Components or any Segment, as applicable (or other Special Facilities), have been constructed in substantial accordance with the plans and specifications approved by the Director as provided in Section 5.01(b); all contractors, subcontractors, laborers, materialmen, architects, engineers, and all other parties who have performed work on or furnished materials for the construction, landscaping, fixturing and equipping the Lessee Project Components or any Segment, as applicable (or other Special Facilities), have been paid in full together with, when appropriate, executed and delivered releases of lien; the Lessee Project Components or any Segment, as applicable (or other Special Facilities), are fully equipped, furnished, and supplied and are ready for operation; and all necessary licenses, permits, and other authorization required as of such date have been obtained from all governmental authorities having jurisdiction, and (ii) the architect of the Lessee Project Components or any Segment, as applicable (or other Special Facilities), shall execute and deliver to the City an affidavit stating that the Lessee Project Components or any Segment, as applicable (or other Special Facilities) have been constructed and equipped substantially in accordance with the plans and specifications referred to in Section 5.01(b). (h) In the event of default of any contractor or subcontractor under any contract made in connection with the Lessee Project Components (or other Special Facilities) or in the event of breach of warranty with respect to any materials, workmanship, or performance guarantee, action shall promptly be initiated, either separately or in conjunction with the City, to exhaust the remedies against the contractor, subcontractor or supplier so in default and against the surety for the performance of such contract, to the extent of commercial practicability. The City shall be advised of the steps to be taken in connection with any such default. (i) The City shall be named as an additional insured on all insurance policies or OCIP programs with Lessee=s contractors for the Lessee Project Components. Additionally, Best Efforts shall be used to cause (i) the City to be contractually protected under any indemnification provisions with such contractors to the same extent as Lessee and (ii) all contractor warranties and guarantees to inure to the benefit of the City as well as to Lessee. (j) Lessee shall comply with Section 1503.703, Texas Government Code, with respect to prevailing wages and other statutory requirements. Section 5.02: City Project Components and City International Facilities Project. (a) The Lessee Project Components are being undertaken by Lessee in reliance upon the City=s commitment to design and construct the City Project Components and the City International Facilities Project. (b) The City represents to Lessee that the City has sufficient financial resources to finance the cost of the City Project Components and the City International Facilities Project through a combination of the City=s Airport System Revenue Bonds, government grants and internally generated funds. (c) The City agrees to use its Best Efforts to cause the City Project Components to be designed and constructed in accordance with the Program Definition Manual and to let contracts for and pursue construction diligently to Substantial Completion of the City Project Components so that the construction of the City Project Components will be substantially completed by the end of the following estimated months (it being recognized that such substantial construction completion will not constitute Substantial Completion of the applicable Phase until the related Lessee Project Components of such Phase are Substantially Complete):     Element Terminal E Apron Area Terminal E Fueling Facilities Terminal E Pedestrian Bridges Terminal E Utilities Shell for Central Ticketing Facility and Associated Ramp Baggage Tunnel       Contract Date January 2001 January 2001 January 2002 June 2001 January 2002 January 2002     Substantial Construction Completion Date October 2003 December 2002 July 2004 March 2002 September 2003 (Shell) January 2004 (Ramp) July 2002 (d) The City agrees to use its Best Efforts to cause the City International Facilities Project to be designed and constructed in accordance with the Program Definition Manual and to let contracts for, pursue construction diligently to Substantial Completion of the City International Facilities Project so as to Substantially Complete and place in service the following elements of the City International Facilities Project by the following dates:   Element Central FIS       Contract Date January 2002   Substantial Completion Date July 2004 (e) The City will award construction contracts for the City Project Components and the City International Facilities Project on the basis of competitive bidding and will take such reasonable, legally-permissible measures (such as the inclusion of liquidated damage clauses and early completion bonuses in construction contracts and certain "design to cost" clauses in design contracts) as it deems necessary to reduce potential cost overruns and schedule delays. The City shall maintain sufficient records of its expenditures on City Project Components in order to determine the costs thereof under generally accepted accounting principles. Section 5.03: Inventory of Special Facilities; Replacements. Upon completion of the Lessee Project Components, and upon the construction and acquisition of any additional Special Facilities, the Director shall be provided with a detailed written inventory of all furnishings, fixtures and equipment constituting a material part of such Special Facilities, certified to the reasonable satisfaction of the Director, which inventory shall include a complete description of each such item or class of items of such furnishings, fixtures and equipment including make, model and serial numbers, if any. From time to time, upon the reasonable request by Director, such inventory shall be updated and revised to reflect all replacements and substitutes of any such items; provided, however, that commercially fungible items in such inventory may be substituted for or replaced with substantially comparable items and Lessee may take the other actions permitted in Sections 8.01 and 8.04 hereof without notice. Section 5.04: Title to Lessee Project Components. In consideration for the City's issuance of Bonds to finance the Costs of the Lessee Project Components as provided herein, the City shall acquire title to the Lessee Project Components at the time of construction, acquisition or installation and from time to time during construction, acquisition and installation, subject to the terms and provisions of this Agreement and the leasehold estate herein created and such title shall automatically vest in the City immediately upon such construction, acquisition or installation without further notice or action. In this regard, there shall be executed and delivered to the City the Deed and Bill of Sale for Lessee Project Components, after completion thereof, as set forth in Exhibit "D" and such further documentation as shall be reasonably requested by the City to confirm and further evidence the City's acquisition of title to the Lessee Project Components in accordance with the terms of this Agreement. Section 5.05: Design, Construction and Acquisition of Additional Special Facilities. (a) From time to time hereafter, Lessee may request the City to undertake to issue Additional Bonds to finance additional Special Facilities. The Director shall use Best Efforts to cooperate with Lessee to request the City to provide such financing, and if consummated, then this Agreement shall be supplemented to provide for the design, construction and acquisition of such Special Facilities, for payment of the Costs of the Special Facilities related to such additional Special Facilities and any other matters deemed appropriate by the City and Lessee. (b) It is expressly acknowledged and understood by Lessee that this Agreement shall impose no obligation of any kind upon the City to issue or undertake to issue any Additional Bonds to finance additional Special Facilities except for the Best Efforts obligations set forth in Section 4.02. If the City elects not to issue Additional Bonds for such purpose, Lessee may (but shall not be obligated to) construct such improvements at its sole cost. Section 5.06: Personal Property Not Constituting Special Facilities. (a) Lessee's equipment, trade fixtures and personal property not financed with Bonds and not constituting a replacement, repair or substitution for Special Facilities under Section 8.04(b) may be located in Terminal E or in the Lessee Project Components or on the Easements or Ground Lease Properties without becoming Special Facilities and, unless the provisions of subsection (b) hereof apply, so long as no Event of Default by Lessee has occurred and is continuing hereunder, may be removed by Lessee provided that such removal will not damage or impair the Special Facilities or that Lessee at its expense restores the Special Facilities to the same or better condition than existed prior to such removal. Any and all such equipment, trade fixtures and personal property not removed by Lessee prior to the expiration of this Agreement, or if this Agreement ends by early termination, within 60 days after receipt by Lessee of a written notice issued by the Director to remove such property, shall thereupon become a part of the land upon which it is located and title thereto shall thereupon vest in the City, and City reserves the right to remove such property not so removed by Lessee, and if such removal is accomplished within the 30 day period after the expiration of this Agreement or the 60 day period referred to above (after the early termination of the Agreement), such removal by the City shall be at Lessee's expense. (b) City agrees that the Director, in his discretion, and subject to approval of the City Attorney, shall be permitted to, from time to time, execute any agreement providing for the subordination of any statutory or constitutional landlord's lien over any of Lessee's property (expressly excluding Special Facilities) acquired in connection with any bona fide, third party purchase money equipment (or other personal property) financing (whether through a sale leaseback financing or other equipment lease financing transaction), it being further agreed that the financing of costs expended by Lessee for the purchase of equipment or personal property (expressly excluding Special Facilities) within twelve (12) months prior to such financing transaction shall be considered purchase money financing hereunder; provided, however, that such subordination shall be limited to Lessee's property that is financed or refinanced in such transaction and shall expressly exclude the Lessee Project Components and all other Special Facilities. ARTICLE 6 SPECIAL FACILITIES PAYMENTS; OTHER RENT AND CHARGES Section 6.01: Special Facilities Payments While Bonds Outstanding. (a) Lessee shall pay to the City, by depositing directly with the Trustee for the account of the Interest and Redemption Fund, for so long as any Bonds remain Outstanding within the meaning of the Trust Indenture, the following amounts at the following times: (i) on or before each interest and/or principal payment date on the Bonds: (A) all interest payable on all Bonds on such date; plus (B) all principal (if any) payable on all Bonds on such date, whether payable at maturity or earlier redemption (regardless of whether such redemption is optional, extraordinary or mandatory); plus (C) all redemption premiums (if any) payable on all Bonds on such date. (ii) immediately upon receipt of written notice from the Trustee for the Bonds advising it that such amounts are due and payable: (A) all unpaid principal, accrued interest and redemption premiums on all Bonds which are declared due and payable under any extraordinary redemption or acceleration provision in the Trust Indenture. (iii) In addition to the above described Special Facilities Payments, there shall be paid as additional rent (x) directly to the Trustee, all Trustee charges and any other related costs and expenses in connection with the payment of principal, interest or redemption premiums on the Bonds in accordance with the Trust Indenture, (y) directly to the Trustee at such times and in such amounts, together with amounts available therefor under the Trust Indenture, so as to ensure compliance with the provisions of Section 148 of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder, and (z) directly to any bond insurer or other credit enhancer or provider of a reserve fund surety, all fees, charges, reimbursements, expenses and interest charges due in connection therewith; provided , however, that during the Construction Period for each Phase, Lessee's obligations with respect to an amount of Bonds equal to the Allocated Bond Amount for such Phase are subject to the limitations in Article 6A and, except for (i) Interim Special Facilities Payments that Lessee elects to pay under Section 3.06, (ii) portions of any Completion Payment made under Section 6A.06 representing interest and (iii) any Lessee Loss Payment(s) payable as provided in Article 6A, interest on (but not principal of) an amount of Bonds equal to the Allocated Bond Amount for such Phase during such period and all allocable charges and payments described in clause (iii) above during such period shall be payable directly by the Trustee from the appropriate account or subaccount for such Phase within the Construction Fund maintained under the Trust Indenture. (b) The Special Facilities Payments payable under subsection 6.01(a) of this Agreement shall be reduced by the total of any amounts then on deposit in the Interest and Redemption Fund in excess of the amount then needed for the purpose of paying previously matured interest, principal, matured or redeemed Bonds, and redemption premiums, if any, whether such excess amounts become available by reason of (i) amounts deposited in the Interest and Redemption Fund from the proceeds of the Bonds for the purpose of providing capitalized interest or otherwise, (ii) previous overpayments of Special Facilities Payments, (iii) surplus funds from proceeds of the Bonds deposited to the credit of such Interest and Redemption Fund at the end of the construction and acquisition of all of the Lessee Project Components as provided in Section 4.03(b), (iv) interest earnings from the investment or deposit of any amounts from time to time credited to the Interest and Redemption Fund as provided in the Trust Indenture, or (v) any other circumstance which results in funds being properly deposited in the Interest and Redemption Fund or in any other fund or account held by the Trustee under the Trust Indenture that are available for such purpose. The reductions in the Special Facilities Payments contemplated by this subsection 6.01(b) shall be made by applying such excess amounts as a credit(s) against the next Special Facilities Payments payment(s) due after such excess amounts have actually become available in the Interest and Redemption Fund, until such excess amounts are exhausted. The Trust Indenture shall require the Trustee to calculate such reductions and furnish them to Lessee and the City in a timely manner prior to the date on which the applicable Special Facilities Payment is payable. In the event the Trustee fails to furnish the amount of any such reduction, it shall not in any way affect or reduce the obligation to pay as Special Facilities Payments the full amount provided in subsection 6.01(a) hereof. After all Special Facilities Payments have been paid and no Bonds remain Outstanding within the meaning of the Trust Indenture and no amounts remain due and owing under the Trust Indenture, then, any amounts remaining in the Interest and Redemption Fund which are paid over to the City by the Trustee shall be deemed overpayments of Special Facilities Payments and paid over by the City to Lessee within 30 days of their receipt by the City. (c) For Lessee=s tax reporting purposes only, the Special Facilities Payments payable by Lessee pursuant to this Agreement shall be allocated to each calendar year over the term of this Agreement as set forth in Exhibit "E." Section 6.02: Obligation to Pay Special Facilities Payments Unconditional. It is understood and acknowledged that the Bonds will be sold to the purchasers thereof in reliance upon the commitment to make the payments of Special Facilities Payments provided in Section 6.01(a) above and elsewhere as provided herein, subject only to the reductions provided in Section 6.01(b) and the limitations in Article 6A. Accordingly, subject to the above-referenced limitations, the obligation to make the payments of Special Facilities Payments thus required shall be absolute and unconditional and so long as the Bonds remain Outstanding within the meaning of the Trust Indenture, but except as expressly provided in Article 6A, (i) there shall be no suspension or discontinuance of any payments of Special Facilities Payments provided herein or any offset against obligations to pay such amounts or recoupment of any amounts so paid, and (ii) there will be no termination of this Agreement or other effort to seek to avoid or to reduce the payment of Special Facilities Payments for any reason, including without limiting the generality of the foregoing, termination of the Use Agreement, failure to complete the Lessee Project Components, voluntary or involuntary bankruptcy of the City, any Event of Default hereunder, failure to complete the construction or acquisition of any other Special Facilities, failure of the City to pay or cause to be paid any Costs of the Special Facilities (but without limiting the City's obligations under Section 4.03 hereof) or any acts or circumstances that may constitute failure of consideration, destruction or damage to or condemnation of such facilities, or frustration of purpose, any change in the tax or other laws of the United States of America or the State of Texas, or any political subdivision of either thereof or any failure of the City to perform or observe any agreement, whether expressed or implied, or any duty, liability or obligation arising out of or connected with this Agreement. It is provided, however, that nothing contained in this Section shall be construed to release the City from the performance of any of the agreements on its part herein contained, and in the event the City should fail to perform such agreement, the Lessee may, without limitation of any other rights that the Lessee may then have, institute such actions against the City as it may deem necessary to compel the performance thereon, to seek damages or other relief or to restrain or enjoin forbidden acts provided that such institution of such actions shall not result in a reduction of the payment of Special Facilities Payments hereunder. Section 6.03: Pledge of Special Facilities Payments. It is expressly understood and agreed that the Special Facilities Payments payable hereunder shall be pledged to the payment of the Bonds and amounts due under the Trust Indenture in accordance with the Trust Indenture, and that, so long as any Bonds remain Outstanding, such Special Facilities Payments shall be paid in the amounts and manner herein specified. In the Trust Indenture the City shall covenant not to permit any modification of or amendment to Section 6.01 of this Agreement or to any other provision hereof that would have the effect of reducing, altering or modifying the obligations to pay Special Facilities Payments contained herein or would materially minimize, reduce or lessen the rights of the City after an Event of Default in the payment of Special Facilities Payments or would materially and adversely affect the security provided for the payment of the Bonds, and no such modification or amendment hereto shall be permitted while the Bonds remain Outstanding. Section 6.04: Operation and Maintenance and City Charges Relating to Lessee Project Components and Other Special Facilities. The Special Facilities Payments, which are pledged to the payment of the Bonds under the Trust Indenture, are intended to be a net return to the City. Accordingly, in addition to the payment of all Special Facilities Payments hereunder, except as expressly provided herein, following Substantial Completion of the Terminal E Project, Lessee shall pay all of the following additional amounts with respect to the Terminal E Project: (i) all operation and maintenance costs and expenses applicable to the Lessee Project Components and other Special Facilities, including, without limitation, utility costs, any insurance premiums applicable thereto, any and all ad valorem or other property taxes lawfully levied or assessed against the Lessee Project Components and other Special Facilities or Lessee's leasehold estate therein, any and all lawful excise and other types of taxes imposed on or in respect of such properties, the expenses of upkeep thereof of every kind and character, including the repair or ordinary restoration thereof, and every other item of expense imposed on Lessee pursuant to Section 8.01 and other provisions of this Agreement and (ii) all water, sewage, electricity, gas and other utility charges which may be charged to the Lessee for the use thereof. Section 6.05: Statistical Report. Lessee shall submit in writing to the Director on or before the 15th day of each month the following statistical information relative to its scheduled, nonscheduled and charter operations at the Airport for the immediately preceding calendar month, in a format consistent with that provided in Exhibit "I," attached hereto and by reference made a part hereof for all purposes: Total number of domestic enplaned and deplaned passengers, by terminal Total number of originating and connecting passengers, by terminal Total number of international enplaned and deplaned passengers Total number of landings by type of aircraft and maximum gross certificated landed weight by type of aircraft Total pounds of air cargo enplaned and deplaned Total pounds of air mail enplaned and deplaned The above statistical information shall be in addition to any other information elsewhere herein required to be submitted by the Lessee each month for City's use in calculating landing fees and other charges pertinent to Lessee's operations on the Airport. Section 6.06: Ground Rentals. (a) Lessee shall pay to the City as Ground Rentals for the Ground Lease Properties, subject to the special provisions set forth below, the following: (i) for the South Concourse footprint, $0.32 per square foot per year, beginning upon the date of Substantial Completion of the Central FIS, and escalating 15% on each succeeding fifth year anniversary thereof during the term of this Agreement, payable monthly in advance and (ii) for the footprint of Lessee=s Central Ticketing Facility, $0.32 per square foot beginning upon the date of Substantial Completion of the Central FIS, and escalating 15% on each succeeding fifth year anniversary thereof during the term of this Agreement payable monthly in advance. (b) Notwithstanding the foregoing, from the date of closing on the Series 2001 Bonds, until Substantial Completion of the Central FIS, the Ground Rentals payable under 6.06(a) shall be in an amount equal to 50% of the rate set forth above. (c) Commencing at the time that Lessee commences construction in such area as provided more specifically below in this Section 6.06(c), Lessee shall pay to the City as Ground Rentals for the use of the footprint of the Lessee's Terminal C-East Garage ATO Facility an amount equal to the product of (i) the then average daily parking space revenues per parking space for the Terminal C Garages (it being acknowledged that such parking revenues may increase or decrease after the date hereof if parking rates and parking utilization increase in the Terminal C Garages) multiplied by (ii) the number of parking spaces that are no longer available for parking use for such reason. Lessee shall not be required to commence paying the Ground Rental provided for in this Section 6.06(c) until the time that Lessee begins construction of its improvements in the Lessee's Terminal C-East ATO Facility and such parking spaces are no longer available for use. The Ground Rental payable under this Section 6.06(c) shall initially be based on average daily parking space revenues of $9.27 per day, and shall thereafter be adjusted annually as of July 1 based on the average daily parking space revenues derived by the City at such time in the Terminal C Garages (or the Terminal C-East Garage from and after the date the City is able to determine average parking space revenues for the Terminal C-East Garage only). Section 6.07: City Charges. The following provisions shall apply with respect to the various elements of City Charges payable with respect to the Terminal E Project based upon normal Airport-wide cost allocation methodology consistently applied on a Fiscal Year basis through December 31, 2017: A. City Charges Allocable to Terminal E. Following the Substantial Completion of each Phase of the Terminal E Project, Lessee shall pay the City monthly amounts sufficient to reimburse City for: 1. Direct and indirect City Operation and Maintenance Expenses allocable to such Phase of the Terminal E Project (other than the Terminal E Apron Area); provided that, it is acknowledged by the City that the only direct City Operation and Maintenance Expenses allocable to any Lessee Project Components shall be those City Operation and Maintenance Expenses, if any, as are incurred by the City for the sole benefit of such Lessee Project Components, such as, without limitation, any security personnel assigned thereto. 2. City Amortization of the unamortized costs of each City Capital Improvement allocable to such Phase (other than the Terminal E Apron Area) as of June 30, 1998 over the remaining useful life of the City Capital Improvement at the weighted City=s Cost of Capital for all City Capital Improvements at the Airport at that date. 3. City Amortization of the net cost of each City Capital Improvement placed in service on or after July 1, 1998, which is allocable to such Phase of the Terminal E Project (other than the Terminal E Apron Area). 4. Interest on the cost of land allocable to such Phase of the Terminal E Project (other than the Terminal E Apron Area) computed at City=s historical average City=s Cost of Capital. 5. Annual Systems Costs allocable to such Phase of the Terminal E Project. 6. Annual replenishment of the Renewal and Replacement Fund allocable to such Phase of the Terminal E Project (other than the Terminal E Apron Area), if necessary, as required by the City=s Airport System Revenue Bond ordinances. B. Terminal E Apron Area Charges. Following the Substantial Completion of the South Concourse Phase, Lessee shall pay the City monthly amounts sufficient to reimburse the City for: 1. Direct and indirect City Operation and Maintenance Expenses allocable to the Terminal E Apron Area. 2. City Amortization of the unamortized net cost of each City Capital Improvement allocable to the Terminal E Apron Area (including improvements associated with the Terminal E Fueling Facilities) as of June 30, 1998 over the remaining Useful Life of the City Capital Improvement at the weighted City=s Cost of Capital for all City Capital Improvements at the Airport as of that date. 3. City Amortization of the net cost of each City Capital Improvement placed in service allocable to the Terminal E Apron Area on or after July 1, 1998. 4. Interest on the cost of land allocable to the Terminal E Apron Area computed at the historical average of the City=s Cost of Capital. 5. Annual Systems Costs allocable to the Terminal E Apron Area. 6. Annual replenishment of the Renewal and Replacement Fund allocable to the Terminal E Apron Area, if necessary, as required by City's Airport System Revenue Bond ordinance. The annual Terminal E Apron Charges will then be calculated by dividing all of the foregoing costs allocable to the Terminal E Apron Area by the total square footage of pavement designated as the Terminal E Apron Area at South Concourse and multiplied by the total square footage of such pavement for which Lessee has preferential use rights. C. Automated People Mover System Charges. Following the Construction Period, but not until completion of the extension of the Automated People Mover currently operating between Terminals B and C at the Airport (the "APM") so that it provides service to the Terminal E Project, then Lessee shall pay the City monthly in advance amounts sufficient to reimburse the City for APM fixed costs and APM variable costs as follows: 1. Fixed Costs: Fixed costs shall include the costs of the guideway structures, control system and stations. Until extended to Terminal A, the costs of guideway structures and control systems shall be separately identified and tracked by link, and the cost of each link shall be allocated equally (50%/50%) between the two terminals served by the link, except for any link to an APM Maintenance Facility, which shall be allocated entirely to the APM Maintenance Facility. The fixed costs of each station shall be allocated to the terminal served by that station. Fixed costs associated with the APM Maintenance Facility, power distribution and central controls shall be allocated equally among terminals served by the system. The APM Maintenance Facility shall be amortized over 10 years if the City reasonably determines that it is an interim facility and 25 years if the City reasonably determines that it is a permanent facility. 2. Variable Costs: Variable costs shall include City Operation and Maintenance Expenses and annual Systems Costs allocable to the APM and amortization of the cost of vehicles (or, in the case of the original two vehicles for the Terminal B-C link, debt service on the Series 1997A Bonds or, if such Series 1997A Bonds are refinanced by the City, the debt service on such refunding bonds or other City funds allocable to those two vehicles). Until extended to Terminal A, variable costs shall be allocated in a two-step process. First, variable costs will be allocated to links between Terminals B and C and between Terminals C and D/E based on the number of vehicle-trips traversed on each link. (One vehicle moving from one terminal station to another terminal station is one vehicle-trip. APM control systems will be designed to account for vehicle trips by link). Second, variable costs allocable to each link will be further allocated equally (50%/50%) between the terminals served by each link. For this purpose, Terminals D and E will be considered a single terminal. 3. Assessment of APM Charges: APM charges will be assessed to the airlines whose passengers use the APM in the following manner: (a) The annual fixed and variable costs of the APM will be determined in accordance with paragraphs C.1 and C.2. (b) Total estimated APM costs will be allocated to terminals based on the allocation methods described in paragraphs C.1 and C.2 above. Within any terminal, total allocable APM costs will be further allocated to airlines based on passengers enplaning in such terminal. Within the Terminal D/E and Central FIS complex, 50% of APM costs will be allocated to the Central FIS and recovered through Central FIS charges, and the remaining 50% of the costs will be allocated based on total (international and domestic) enplaned passengers using Terminals D and E. (c) APM charges will be payable monthly. D. Other Charges. Following the Construction Period, City reserves the right to assess, and Lessee agrees to pay, reasonable charges for the use of City-provided facilities that benefit the Terminal E Project, including but not limited to: employee parking facilities; flight information display systems; public address systems; and issuance of security identification badges. E. City Charges Prior to Substantial Completion. It is agreed that prior to Substantial Completion of each Phase of the Terminal E Project, all City Charges allocable to the Lessee Project Components included in such Phase shall constitute Costs of the Lessee Project Components which, except as provided in Section 3.06, shall be payable from proceeds of the Bonds and other amounts in the Construction Fund. Section 6.08: Landing Fees. Commencing on the Substantial Completion of the Terminal E Project, Lessee agrees to pay the City monthly Landing Fees on Lessee=s total aircraft landed weight as reported under Section 6.05, which shall be calculated as follows through December 31, 2017: 1. The following Airfield Area costs will be added: a. Direct and indirect City Operation and Maintenance Expenses allocable to the Airfield Area. b. City Amortization of the unamortized net cost of each City Capital Improvement allocable to the Airfield Area as of June 30, 1998, over the remaining Useful Life of the City Capital Improvement at the weighted City=s Cost of Capital for all City Capital Improvements as of that date. c. City Amortization of the net cost of each City Capital Improvement placed in service allocable to the Airfield Area on or after July 1, 1998. d. Interest on the cost of land allocable to the Airfield Area computed at City's historical average of the City=s Cost of Capital. e. Annual Systems Costs allocable to the Airfield Area. f. Annual replenishment of the Renewal and Replacement Fund allocable to the Airfield Area, if necessary as required by City's Airport System Revenue Bonds ordinances. 2. The net costs of the Airfield Area will then be calculated by subtracting revenues from general aviation fuel flowage fees but only if and to the extent the City=s bond counsel is of the opinion such subtraction will not affect the tax exempt status of the City=s Airport System Revenue Bonds. 3. The Landing Fee rate will then be calculated by dividing the net costs of the Airfield Area by the total aircraft landed weight reported by all airlines using the Airport. The landed weight reported shall be the same as provided under the Continental Airport Use and Lease Agreement. The delayed effective date for Lessee=s obligation to pay Landing Fees under this Agreement shall not affect Lessee=s obligation to pay landing fees under the Continental Airport Use and Lease Agreement or any other agreement. Section 6.09: Payment Provisions. A. Security Deposit. In the event Lessee, at any time during the term of this Agreement, fails to make any of the payments required under this Article 6 when due (beyond all applicable notice and opportunity to cure periods), City reserves the continuing right to require a security deposit in an amount equal to six times Lessee's average monthly amount of rentals and fees payable under this Agreement, during the immediately succeeding six-month period. Such security deposit shall be provided to City by Lessee, as a letter of credit or in such other form specified by the Director, within thirty (30) days of written demand therefor by City and shall be held by City until Lessee has made timely payment of all rentals and fees payable under this Agreement for a period of twelve (12) consecutive months at which time such security deposit shall be returned to Lessee. B. Payment Provisions. The following provisions are not intended to apply to Special Facilities Payments, which are payable as provided in Section 6.01 or Article 6A. 1. Terminal E Project Rentals, Charges and Fees. All City Charges and other rentals, charges, fees and payments payable by Lessee for the Terminal E Project shall be due and payable on the first day of each month. Provided the City has delivered to Lessee a schedule of monthly payments, such amounts shall be payable monthly in advance without invoice from the City. If no such schedule has been provided, such amounts shall be due and payable within 30 days of the date of the invoice therefor. 2. Landing Fees. Landing fees for each month shall be due and payable without invoice from the City on or before the fifteenth (15th) day following the last day of the preceding month and shall be transmitted to City together with Lessee's monthly statistical report for the month as required in Section 6.05 hereof. 3. Other Fees. All other rentals, fees, and charges required hereunder shall be due and payable within thirty (30) days of the date of the invoice therefor. 4. Right of City to Verify Lessee's Payment. The acceptance of any payment made by Lessee shall not preclude City from verifying the accuracy of Lessee's report and computations or from recovering any additional payment actually due from Lessee or preclude Lessee from later demonstrating that Lessee's report or any invoice from the City was inaccurate and that a lesser amount was properly owed (and to recover any such overpayment). 5. Interest on Overdue Amounts. Any payment not received within five business days of the due date may accrue interest at the rate of 1.5% per month from the due date until the date when full payment is made. 6. Form of Payment. Payments shall be made to the order of "City of Houston Department of Aviation" and shall be sent to the Director's office or such other place as may be designated by the Director from time to time. City and Lessee shall cooperate in the development of a procedure for the electronic transfer of funds as the preferred method of payment. C. Mid-Year Rate Adjustments. In the event that, at any time during a Fiscal Year, the total costs of the City allocable to the Terminal E Project, or the Terminal E Apron Area, or the Airfield Area, or the APM, or the aggregate total landed weight of all airlines, is projected by City to vary ten percent (10%) or more from the estimates used in setting City Charges or Landing Fees, such rates and charges may be adjusted either up or down for the balance of such Fiscal Year, provided that such adjustment is deemed necessary by City. An upward adjustment shall only be used to ensure that adequate revenues will be available from such fees to recover the estimated total costs of the airline-supported cost centers. For each such adjustment, City shall provide Lessee with a written explanation of the basis for the rate adjustment(s) and will provide thirty (30) days advance written notice before putting such adjustment(s) into effect. Unless extraordinary circumstances warrant additional adjustments, City will seek to limit such rate adjustments to no more than once each Fiscal Year. D. City shall furnish Lessee by December 1 with an accounting of the costs and expenses actually incurred, revenues and other credits actually realized (reconciled to the audited financial statements of the Airport System), and actual enplaned passengers and landed weights during such Fiscal Year with respect to each of the components of the calculation of the charges, rates, apron fee rates, and the landing fee rate in this Article 6 and shall recalculate the rates, fees, and charges required for the Fiscal Year based on those actual costs and revenues. If requested by an airline, City shall convene a meeting of the airlines to discuss the calculation of the year-end settlement. In the event that Lessee's rentals, fees, and charges billed during the Fiscal Year were more than the amount of Lessee's rentals, fees, and charges required (as recalculated based on actual costs and revenues), such excess amount shall be paid in lump sum or issued as a credit to Lessee within sixty (60) days of the calculation of such final settlement. In the event that Lessee's rentals, fees, and charges billed during the Fiscal Year were less than the amount of Lessee's rentals, fees, and charges required (as recalculated based on actual costs and revenues), such deficiency shall be billed to Lessee and payable by Lessee within sixty (60) days of the date of invoice. However, in the event that the amount of the Lessee deficiency exceeds $350,000, Lessee may pay the deficiency to City in equal monthly installments without interest over the remaining months of the current Fiscal Year. Section 6.10: Conforming Adjustments After December 31, 2017. It is the intent of the City and Lessee that City shall charge Lessee, and Lessee shall pay to the City, City Charges and Landing Fees after December 31, 2017 on the same basis as such charges and fees are assessed to other airlines operating in a similar manner at the Airport. Accordingly it is the intention of the City and Lessee that all such provisions for City Charges, Landing Fees and their payment should be modified to conform to such standards and practices as are generally imposed at the Airport after such date. Section 6.11: No Other Fees. City agrees that it will not impose any rental, fee or charge, direct or indirect, on Lessee for the exercise and enjoyment of the rights and privileges granted herein except those rentals, fees and charges provided for in this Agreement, and such other rentals, fees and charges as are mutually agreed upon by City and Lessee; provided, however, there is excepted from this provision any and all fees and charges imposed or required by any rule, regulation or law of any governmental authority other than City. This provision is not intended to prevent City from making agreements concerning rentals, fees and charges with individuals or firms providing goods or services on the Airport who are tenants of City.     ARTICLE 6A SPECIAL LIMITATIONS ON LESSEE=S OBLIGATIONS DURING THE CONSTRUCTION PERIOD Section 6A.01: Special Provisions During Construction Period. (a) The Terminal E Project shall encompass two (2) distinct projects for accounting purposes, as follows: (i) The South Concourse Phase; and (ii) The International Ticketing Facility Phase. (b) The Lessee Project Components in both Phases shall be funded through the issuance of a single series of Series 2001 Bonds. However, the total principal amount of the Bonds shall be allocated between the Phases based on the relative amounts of the estimated construction costs and capitalized interest costs (net of expected investment earnings) of the Lessee Project Components of each Phase and allocated costs of issuance related thereto (as to each Phase, the "Allocated Bond Amount"). The initial Allocated Bond Amounts for the Series 2001 Bonds are set forth on Exhibit "H" attached hereto. Such initial Allocated Bond Amounts may be adjusted upon direction to the Trustee by the City and the Lessee as provided in the Trust Indenture. The sum of the Allocated Bond Amounts shall always equal the aggregate original principal amount of the Series 2001 Bonds plus any Additional Bonds. The initial Allocated Bond Amount for a Phase will be increased by the amount of any Additional Bonds issued to Substantially Complete the Lessee Project Components in such Phase. The Construction Fund created pursuant to the Trust Indenture shall initially contain two sub-accounts (the "Construction Accounts"), one for each Phase, into which the net proceeds of the Allocated Bond Amounts for the construction of the Lessee Project Components in each Phase shall be placed. In the event that funds remain in the Construction Account with respect to a Phase after the Lessee Project Components in such Phase are Substantially Completed and all Costs of the Lessee Project Components incurred in connection therewith have been paid, such funds shall either (a) be deposited in the Construction Account for the Lessee Project Components in the other Phase to be used for all purposes for which funds in such Construction Account may be used pursuant to this Agreement and the Indenture (including for application in accordance with Section 6A.06(e)), or (b) if the Lessee Project Components in such other Phase have been Substantially Completed without the occurrence of an Event of Phase Termination pursuant to Section 6A.06, be used by Lessee for any purposes permitted under this Agreement or the Indenture. (c) It is the intention of the City and Lessee that Lessee's obligations under this Agreement shall satisfy the requirements of Emerging Issues Task Force ("EITF") Issue No. 97-10 such that Lessee shall not be deemed the owner of any separate Phase comprising the Terminal E Project during the Construction Period with respect to such Phase. Toward that end, the City and Lessee have negotiated the special provisions and limitations contained in this Article 6A, which shall prevail and control over any other provisions of this Agreement to the contrary during, but only during, the respective Construction Periods. However, it is acknowledged that, at any time during the Construction Period of a Phase, and notwithstanding any other provision in this Agreement to the contrary, Lessee may elect, in lieu of performing any duty of Lessee set forth in this Article 6A, to irrevocably guarantee the payment of a proportionate principal amount of each Bond (and a like proportionate amount of the interest and any premium due on such Bond) equal to the ratio of the Allocated Bond Amount with respect to such Phase to the aggregate principal amount of Bonds Outstanding (or, if the Guaranty has previously become effective as to a proportionate amount of each Bond Outstanding, then the Guaranty shall become effective with respect to the remaining principal amount (and the allocable interest and premium, if any, due thereon) of all Outstanding Bonds) by irrevocably declaring its Guaranty to become immediately effective with respect to such Phase (such declaration to be evidenced by Lessee's delivery of a certificate to such effect to the City and the Trustee), in which case (i) any Construction Period Condemnation or Casualty Event (as hereinafter defined) or any Event of Phase Termination (as hereinafter defined) with respect to such Phase shall be deemed not to have occurred and (ii) this Agreement shall continue in full force and effect with respect to such Phase without the limitations or other provisions of this Article 6A. (d) The Construction Period with respect to each Phase shall end upon the Substantial Completion of such Phase. Upon the Substantial Completion of each Phase, Lessee shall be unconditionally obligated to make Special Facilities Payments based on the Allocated Bond Amount for that Phase, as provided in Section 6.01, which Special Facilities Payments shall, on such date of Substantial Completion, cease to be subject to the limitations in this Article 6A. Upon the Substantial Completion of each Phase, Lessee's Guaranty shall become effective with respect to a proportionate amount of each Bond (and a like proportionate amount of the interest and any premium due on such Bond) equal to the ratio of the Allocated Bond Amount for such Phase to the aggregate principal amount of Bonds Outstanding (or, if the Guaranty has previously become effective as to a proportionate amount of each Bond Outstanding, then the Guaranty shall become effective with respect to the remaining principal amount (and the allocable interest and premium, if any, due thereon) of all Outstanding Bonds). Section 6A.02: Insurance During Construction Period. (a) During the Construction Period with respect to each Phase, Lessee will maintain, or cause to be maintained, insurance as required in Article 9 hereof, including without limitation, "all risk" builder's risk property insurance (which shall name the City and the Trustee as additional insureds and loss payees) against physical damage to the Lessee Project Components included in that Phase in an amount equal to at least 100% of the full replacement cost of the Lessee Project Components, which shall at all times not be less than the Cost of the Lessee Project Components expended to date. Additionally, during the Construction Period with respect to each Phase, the City agrees to maintain, or cause to be maintained, "all risk" builder's risk property insurance (with insurers satisfying the standards described in Section 9.04B, except that the insurers of any such policy shall need to have a Best's rating of at least B+ as opposed to A-) against physical damage to the City Project Components included in that Phase in an amount equal to at least 100% of the full replacement cost of the City Project Components, which shall at all times not be less than the Costs of the City Project Components expended to date. (b) During the Construction Period with respect to each Phase, all costs incurred by Lessee with respect to the insurance policies which Lessee is required to maintain or cause to be maintained as described above will constitute Costs of the Lessee Project Components that are reimbursable to Lessee out of the Construction Account for such Phase. Section 6A.03: Indemnities for Environmental Matters during Construction Period. During the Construction Period with respect to each Phase, Lessee will indemnify the City for such environmental matters with respect to such Phase as are described and agreed to in Section 8.05K of this Agreement. Section 6A.04: Indemnities for Matters other than Environmental during Construction Period. (a) During the Construction Period with respect to each Phase, Lessee's indemnification of the City against costs, claims or liabilities with respect to such Phase for matters other than environmental matters shall be limited as provided in Section 9.01F. (b) During the Construction Period with respect to each Phase, in reliance upon Lessee's indemnity provided in Section 9.01, but only to the extent Lessee makes payments to the City in respect of any claims made against the Trustee, Bondholders, or underwriters of the Bonds, or any of them, the City will indemnify the Trustee, Bondholders and underwriters of the Bonds against all costs, claims or liabilities arising under any federal, state or local law, rule or regulation relating to the ownership, construction, financing or use of the Lessee Project Components with respect to such Phase, it being understood that the City's obligation hereunder is limited solely and exclusively to the proceeds of payments made to the City by Lessee as described in this Section 6A.04(b). Section 6A.05: Condemnation or Casualty during Construction Period. (a) An event of loss, theft, seizure, confiscation or damage to the Lessee Project Components of a Phase through a casualty occurrence, condemnation or taking that is not caused by the actions or failures to act of Lessee or Lessee's contractors or subcontractors (each a "Construction Period Condemnation or Casualty Event") during the Construction Period with respect to such Phase shall be governed by the provisions of this Section 6A.05. In the event of a loss, theft, seizure, confiscation or damage to the Lessee Project Components of a Phase through a casualty occurrence that (i) is caused by the actions or failures to act of Lessee or Lessee's contractors or subcontractors while Lessee is in control of the Lessee Project Components of such Phase, or (ii) would have been covered under the terms of the insurance policies that Lessee was required to maintain hereunder but was not covered because of the failure by Lessee to maintain such insurance, then in either case the provisions of Article 9 hereof (and not this Section 6A.05) shall apply. (b) In the event of a Construction Period Condemnation or Casualty Event with respect to a Phase, the Trustee shall receive and apply any insurance or condemnation proceeds received as provided in Section 9.05, subject to the provisions of this Section 6A.05 concerning application of such proceeds in the case of an Uncovered Condemnation or Casualty Event (as hereinafter defined). Without the express written consent of the other party (which shall not be unreasonably withheld), neither the City nor Lessee shall agree to a settlement of a casualty insurance claim if, as a result of such settlement, the amount of insurance proceeds together with other available amounts remaining in the applicable Construction Account will be insufficient to fund the Substantial Completion of the Phase which suffers the casualty in accordance with the plans and specifications therefor (as reasonably determined by Lessee and the City). If there are sufficient insurance or condemnation proceeds available in respect of the loss occasioned by the Construction Period Condemnation or Casualty Event such that, in combination with any other available amounts remaining in the Construction Account with respect to the applicable Phase, the Lessee Project Components can be Substantially Completed in accordance with the plans and specifications therefor (as reasonably determined by Lessee and the City), then the provisions of Article 9 hereof (and not this Section 6A.05) shall apply; provided, however, that unless the City agrees otherwise, Lessee shall cause the Lessee Project Components to be Substantially Completed in accordance with Section 9.05(ii) hereof. (c) In the event of any Construction Period Condemnation or Casualty Event with respect to a Phase as a result of which the Lessee Project Components cannot be Substantially Completed in accordance with the plans and specifications therefor without the expenditure of funds in excess of the combined sum of the insurance proceeds or condemnation award available in respect of, or other monies paid in connection with, such event and any other available amounts remaining in the Construction Account with respect to such Phase (as reasonably determined by Lessee and the City) (such a Construction Period Condemnation or Casualty Event being herein called an "Uncovered Construction Period Condemnation or Casualty Event"), then, in compliance with EITF Issue No. 97-10, Lessee will not be liable to fund any shortfall, or to pay any additional rentals or other additional sums in respect thereof, and, unless Lessee elects that the Guaranty become effective with respect to such Phase as provided in Section 6A.01(c) hereof, this Agreement shall terminate with respect to such Phase upon the occurrence of such Uncovered Construction Period Condemnation or Casualty Event and notice to the City and the Trustee from Lessee to such effect (without in any way affecting the effectiveness of this Agreement with respect to the other Phase). (d) If this Agreement terminates as to a Phase in accordance with Section 6A.05(c) hereof, then the remaining provisions of this Section 6A.05 shall apply with respect to such Phase. If any Bonds remain Outstanding: (i) the City shall be required to use its Best Efforts to issue Additional Obligations to fund the costs to complete construction of the Lessee Project Components of such Phase; (ii) the City shall (subject to the last sentence of this subsection) complete the City Project Components of such Phase; (iii) the City shall use all monies available in the Construction Account for such Phase under the Trust Indenture, as a result of the issuance of such Additional Obligations or otherwise, to complete the Lessee Project Components of such Phase, all in substantial accordance with the original plans and specifications therefor (together with any amendments or revisions thereto previously approved in accordance with this Agreement); and (iv) upon the completion of such Phase (or if there are not sufficient monies available under the Trust Indenture to complete such construction, at such time as the City is able to lease or operate such Phase as it then exists), the City shall undertake through the Department to (A) operate such Phase and impose rates and charges on airline lessees and other users of the applicable Phase or (B) lease such Phase on a net rent lease basis. In either of the events described in subclauses (A) or (B) above, the City shall use its Best Efforts to impose and collect rates and charges or rental rates sufficient to produce (net of Ground Rentals for such Phase, City Charges for such Phase and additional amounts, if any, expended by the City to Substantially Complete the Lessee Project Components of such Phase) amounts sufficient to pay all debt service when due with respect to an amount of Bonds represented by the Allocated Bond Amount with respect to such Phase plus any Additional Obligations issued for such Phase. The City hereby grants Lessee a right of first refusal in connection with any bona fide, written offer from a third party to lease such Phase or any part thereof (pursuant to which Lessee shall have ten days to agree to enter into a lease on the same terms and conditions as set forth in such offer, or in the case of any terms and conditions thereof that are not able to be matched by Lessee, their economic equivalent). Additionally, Lessee agrees that the City may require Lessee to lease such Phase on substantially the same terms and conditions as this Agreement (as reasonably determined by the City) for the remainder of what would have been the term under this Agreement, except that the provisions of this Article 6A shall not be effective and the rental rate shall be the fair market rental value (determined at the time by independent appraisal). Notwithstanding the foregoing, if the City reasonably determines that such Phase should not be completed as originally planned (together with any amendments to the plans and specifications previously approved in accordance with this Agreement), or if despite the use of Best Efforts the City is unable to issue Additional Obligations to Substantially Complete such Phase as originally planned (together with any such amendments or revisions), then the City shall have the right in such instances to make such changes to the design of such Phase as the City reasonably deems are necessary or advisable; provided however, if the design of such Phase is materially changed (it being agreed that the City may engage in reasonable value engineering as provided for in Section 4.03(d) hereof), or if the City fails to complete the same within three years after the date of termination of this Agreement with respect to such Phase (as extended for Force Majeure or as otherwise approved by the Lessee), then the Lessee shall not be obligated to lease such Phase as above provided, but the City's obligations described in subclauses (A) and (B) above shall continue to apply. (e) Proceeds derived by the City from any charges and/or rents relating to such Phase (net of Ground Rentals for such Phase and City Charges for such Phase to the extent attributable to the period to which such charges and/or rents relate, and additional amounts, if any, expended by the City to Substantially Complete the Lessee Project Components of such Phase) shall be applied by the City in accordance with the following order of priority: (i) first, to the Trustee to the extent necessary to pay current scheduled and past-due debt service on the Bonds and any Additional Obligations, (ii) second, to pay the City any unpaid Ground Rentals and City Charges to the extent attributable to any period prior to the reletting, (iii) third, any remaining amounts ("Excess Reletting Proceeds") shall be remitted to the Trustee for the redemption of any portion of the Bonds for which scheduled debt service payments are not required to be made by Lessee (or if an Event of Phase Termination has occurred for both Phases, to the full amount of all Bonds Outstanding), and (iv) fourth, after all required remittances to the Trustee required in clause (iii) have been made, to pay the balance to the City, to the extent all of the foregoing have been satisfied. (f) Any Additional Obligations issued pursuant to this Section 6A.05 shall be secured only by the reletting revenues to be received by the City as described herein and shall not be secured by the Guaranty. Lessee hereby grants its irrevocable, advance approval to the issuance of Additional Obligations issued pursuant to this Section 6A.05 and shall reasonably cooperate with the City in such regard. (g) In the event of a Construction Period Condemnation or Casualty Event with respect to a Phase where such Phase is incapable of being repaired because of a condemnation or other taking described in Section 9.06 hereof, then all proceeds payable in connection with such event with respect to the Lessee Project Components of such Phase shall be payable to the City (which proceeds the City shall assign to the Trustee under the Trust Indenture for deposit into the Construction Account with respect to such Phase) and, after payment of all Costs of the Lessee Project Components theretofore incurred, all remaining amounts in such Construction Account shall be transferred to the Extraordinary Redemption Account of the Interest and Redemption Fund and applied pursuant to the Trust Indenture to redeem Bonds to the maximum extent possible and this Agreement shall terminate with respect to such Phase. Section 6A.06: Phase Status Certifications and Resulting Actions by Lessee. (a) The "Initial Determination Date" shall be the date that seventy-five percent (75%) of the initial amount deposited into the Construction Account with respect to the Lessee Project Components in a Phase is spent. Within thirty (30) days prior to the estimated Initial Determination Date, Lessee shall certify in writing to the City and the Trustee, such certification to be supported by reasonable documentary evidence thereof submitted to the City, whether in Lessee=s reasonable judgment the Lessee Project Components (as modified based on a value engineering process initiated by Lessee (or by the City with Lessee=s approval) to enable Lessee to be able to make the certification hereafter described) in such Phase can be Substantially Completed and interest can continue to be paid when due on an amount of Bonds represented by the applicable Allocated Bond Amount until such Phase is expected to be Substantially Completed, with the remaining Bond proceeds on deposit in the Construction Account with respect to the Lessee Project Components in such Phase (together with investment earnings thereon) (such certification being a "Positive Certification" if Continental reasonably determines that such amounts will be sufficient for such purposes and a "Negative Certification" otherwise). (b) If Lessee makes a Negative Certification under the circumstances set forth in subparagraph (a) above, then Lessee may make a payment to the Trustee in an amount up to the shortfall between (i) the Bond proceeds remaining in the Construction Account with respect to such Phase and (ii) the estimated cost to complete the Lessee Project Components in such Phase and pay interest on an amount of Bonds represented by the Allocated Bond Amount until the Lessee Project Components in such Phase are expected to be Substantially Completed (the "Completion Amount"); the foregoing payment (a "Completion Payment"), which shall be deemed to be "interim rent" if required by EITF 97-10, shall be paid to the Trustee (with notice of such payment to the City) for deposit into the Construction Account with respect to such Phase to be made available to complete the Lessee Project Components in such Phase. (c) If Lessee makes a Negative Certification under the circumstances set forth in subparagraph (a) above and does not make a Completion Payment in the Completion Amount in accordance with subparagraph (b) above within five (5) days after the Initial Determination Date, then Lessee and the City shall use their Best Efforts to issue Additional Bonds (and to cooperate with each other in such regard) in an amount necessary to yield sufficient proceeds to satisfy the Completion Amount for the Lessee Project Components in such Phase (less any partial Completion Payment made by Lessee under subparagraph (b) above which is not intended to be reimbursed with Proceeds of such Additional Bonds) and such net proceeds of any Additional Bonds shall be paid to the Trustee for deposit into the Construction Account with respect to such Phase to be made available to complete the Lessee Project Components in such Phase. Lessee hereby grants its irrevocable, advance approval to the issuance of Additional Bonds pursuant to this subparagraph (c). If issued, such Additional Bonds shall be on a parity with the Series 2001 Bonds and they shall have a final maturity and amortization schedule comparable to the Series 2001 Bonds, unless otherwise agreed to by the City and the Lessee. (d) If, despite the Best Efforts of the City and Lessee, Additional Bonds have not been issued in accordance with subparagraph (c) above, or Lessee otherwise has not made the full Completion Payment in accordance with subparagraph (b) above (or any combination of issuance of Additional Bonds and payment of Completion Payment aggregating to the full Completion Amount has not occurred) within ninety (90) days after the Initial Determination Date (as such date may be extended by written notice to the Trustee by the City and the Lessee for up to 60 additional days if the City has entered into a binding agreement with one or more underwriters to issue and deliver Additional Bonds in the amount described in Section 6A.06(c) prior to such extension) (such 90-day period, as extended by such period of up to 60 days, the "Additional Bonds Deadline"), then Lessee may elect to terminate this Agreement with respect to such Phase, by paying to the Trustee in immediately available funds on any date that is prior to the date that is five (5) days after the Additional Bonds Deadline, an amount equal to 89.9% of the costs theretofore incurred (it being agreed that such costs shall not be limited to only those costs actually paid at such time, and may include costs to cancel any construction contracts), by Lessee and the City on their respective Lessee Project Components and City Project Components of the Phase to the extent that such costs are capitalized into the basis of the Phase in accordance with generally accepted accounting principles, less, to the extent required by EITF 97-10, (A) any Completion Payments previously made by Lessee pursuant to subparagraph (b) above and not intended to be reimbursed by Additional Bonds, (B) any interim rents paid by Lessee in respect of any Segment of such Phase of which Lessee took early occupancy in accordance with the terms of this Agreement, (C) any Ground Rentals theretofore paid by Lessee with respect to such Phase and (D) any other amounts previously paid by Lessee under any contracts with third parties relating to the approved design and construction of the Lessee Project Components of such Phase in accordance with this Agreement (to the extent Lessee has not been reimbursed in respect to any of the foregoing out of the proceeds of the Bonds) (such payment to the Trustee being the "Lessee Loss Payment" in respect of such Phase); in such event, this Agreement shall terminate with respect to such Phase upon receipt by the Trustee of the Lessee Loss Payment (an "Event of Phase Termination"). (e) An Event of Phase Termination with respect to one Phase shall not terminate this Agreement with respect to the other Phase. The Lessee Loss Payment, plus additional funds, if any, remaining in the Construction Account with respect to such Phase after the payment of all Costs of the Lessee Project Components in such Phase then incurred, shall be used, to the extent necessary, to redeem the maximum amount of Bonds possible up to a principal amount of Bonds equal to the Allocated Bond Amount with respect to such Phase. If the Lessee Loss Payment together with other remaining funds in the Construction Account with respect to such Phase is in excess of the amount necessary to redeem the Allocated Bond Amount of Bonds described in the foregoing sentence, the balance shall be retained in the Construction Account for the applicable Phase to be made available to Substantially Complete the Lessee Project Components in such Phase. If any funds remain in the Construction Account after the Substantial Completion of the Lessee Project Components in such Phase, such funds shall be transferred to the Construction Account for the other Phase to be used for all purposes for which such Construction Account may be used hereunder or under the Trust Indenture or, if the Lessee Project Components in the other Phase have already been Substantially Completed, such funds shall be applied as set forth in Section 4.7(e) of the Indenture. Notwithstanding the foregoing, if an Event of Phase Termination has occurred as to both Phases, then prior to using any remaining monies to complete the Lessee Project Components of the Phase as to which the Event of Phase Termination has last occurred, all Bonds, if any, that remain Outstanding shall first be redeemed to the extent of such remaining monies. (f) If Lessee does not exercise its election to cause an Event of Phase Termination by making the Lessee Loss Payment by the date prescribed pursuant to subparagraph (d) above, then this Agreement shall not terminate as to such Phase, and the Guaranty shall immediately and automatically become effective with respect to a proportionate amount of each Bond (and a like proportionate amount of the interest and premium, if any, due on such Bond) based upon the Allocated Bond Amount with respect to such Phase pursuant to Sections 6A.09(c) and 6A.10. (g) With respect to each Phase, if Lessee makes the Positive Certification set forth in subparagraph (a) above by the Initial Determination Date or if, after Lessee makes a Negative Certification set forth in subparagraph (a) above, the subsequent requirements of Section 6A.06 are met after such Initial Determination Date by virtue of Lessee's payment of the Completion Payment pursuant to subparagraph (b) and/or the issuance of Additional Bonds pursuant to subparagraph (c), then the provisions of this Section 6A.06 shall again be applicable when all of the funds in the corresponding Construction Account have been fully spent (the "Later Determination Date"), unless such Phase has been Substantially Completed on or before such date. In applying Section 6A.06 to a Later Determination Date, the term "Later Determination Date" shall be deemed substituted for "Initial Determination Date" anywhere that term appears. (h) Notwithstanding the foregoing provisions of this Section 6A.06, if on any date during the Construction Period for either Phase, there are insufficient funds on deposit in both the Capitalized Interest Sub-Account and the Construction Account created under the Trust Indenture with respect to such Phase to make full payment of interest and any principal installment when due on an amount of Bonds represented by the Allocated Bond Amount for such Phase (a "Potential Construction Period Bond Default Date"), then, on or before any date that is prior to the fifth calendar day following such Potential Construction Period Bond Default Date, Lessee shall make a Completion Payment to the Trustee in an amount equal to or greater than such insufficiency. Alternatively, Lessee may then elect to terminate this Agreement with respect to such Phase by paying to the Trustee in immediately available funds the then applicable Lessee Loss Payment for such Phase on any date that is on or prior to the fifth calendar day following such Potential Construction Period Bond Default Date. Section 6A.07: Redemption of Bonds after An Event of Phase Termination. The Trust Indenture shall provide that, upon Lessee's payment of the Lessee Loss Payment with respect to a Phase pursuant to Section 6A.06, the Trustee shall use such Lessee Loss Payment, together with the amounts available in the Interest and Redemption Fund and remaining amounts in the Construction Account relating to such Phase after the payment of all Costs of the Lessee Project Components then incurred, to redeem the maximum amount of Bonds possible, up to a principal amount of Bonds equal to the Allocated Bond Amount with respect to such Phase. If the Lessee Loss Payment, together with such other amounts, is in excess of the amount necessary to redeem such maximum amount of Bonds, the balance shall be used in accordance with Section 6A.06(e). Notwithstanding the foregoing, if an Event of Phase Termination has occurred as to both Phases, then prior to using any remaining monies to complete the Lessee Project Components of the Phase as to which the Event of Phase Termination has last occurred, all Bonds, if any, that remain Outstanding shall first be redeemed to the extent of such remaining monies. Section 6A.08: Actions by City Upon an Event of Phase Termination. (a) If this Agreement terminates with respect to a Phase in accordance with Section 6A.06 hereof, then the provisions of this Section 6A.08 shall apply. If any Bonds remain Outstanding (after application of the Lessee Loss Payment and other available funds under the Trust Indenture as described above), then the City shall (subject to the last sentence of this subsection) complete the City Project Components of such Phase and shall use all monies available under the Trust Indenture, as a result of the issuance of Additional Bonds, Additional Obligations or otherwise, to complete the Lessee Project Components of such Phase, all in substantial accordance with the original plans and specifications therefor (together with any amendments or revisions thereto previously approved in accordance with this Agreement). Upon the Substantial Completion of the Lessee Project Components in such Phase (or if there are not sufficient monies available under the Trust Indenture to Substantially Complete such construction, at such time as the City is able to lease or operate such Phase as it then exists), the City shall undertake through the Department to (A) operate such Phase and impose rates and charges on airline lessees and other users of such Phase or (B) lease such Phase on a net rent lease basis. In either of the events described in subclauses (A) or (B) above, the City shall use its Best Efforts to impose and collect rates and charges or rental rates sufficient to produce (net of Ground Rentals for such Phase, City Charges for such Phase and additional amounts, if any, expended by the City to Substantially Complete the Lessee Project Components of such Phase) amounts sufficient to pay all debt service when due with respect to an amount of Bonds represented by the Allocated Bond Amount with respect to that Phase. The City hereby grants Lessee a right of first refusal in connection with any bona fide, written offer from a third party to lease such Phase or any part thereof (pursuant to which Lessee shall have ten days to agree to enter into a lease on the same terms and conditions as set forth in such offer, or, in the case of any terms and conditions thereof that are not able to be matched by Lessee, their economic equivalent). Additionally, Lessee agrees that the City may require Lessee to lease such Phase on substantially the same terms and conditions as this Agreement (as reasonably determined by the City) for the remainder of what would have been the term under this Agreement, except that the provisions of this Article 6A shall not be effective and the rental rate shall be the fair market rental value (determined at the time by independent appraisal). Notwithstanding the foregoing, if the City reasonably determines that such Phase should not be completed as originally planned (together with any amendments or revisions to the plans and specifications previously approved in accordance with this Agreement), then the City shall have the right in such instances to make such changes to the design of such Phase as the City reasonably deems are necessary or advisable; provided however, if the design of such Phase is materially changed (it being agreed that the City may engage in reasonable value engineering as provided for in Section 4.03(d) hereof), or if the City fails to complete the same within three years after the date of termination of this Agreement with respect to such Phase (as extended for Force Majeure or as otherwise approved by the Lessee), then the Lessee shall not be obligated to lease such Phase as above provided, but the City's obligations described in subclauses (A) and (B) above shall continue to apply. (b) Proceeds derived by the City from any charges and/or rents relating to such Phase (net of Ground Rentals for such Phase and City Charges for such Phase to the extent attributable to the period to which such charges and/or rents relate, and additional amounts, if any, expended by the City to Substantially Complete the Lessee Project Components of such Phase) shall be applied by the City in accordance with the following order of priority: (i) first, to the Trustee to the extent necessary to pay current scheduled and past due debt service on the Bonds, (ii) second, to pay the City any unpaid Ground Rentals and City Charges to the extent attributable to any period prior to the reletting, (iii) third, any remaining amounts ("Excess Reletting Proceeds") shall be remitted to the Trustee for the redemption of any portion of the Bonds for which scheduled debt service payments are not required to be made by the Lessee, (iv) fourth, after all required remittances to the Trustee required in clause (iii) have been made, to reimburse Lessee for the amount of its Lessee Loss Payment and any Completion Payments, and (v) fifth, to pay the balance to the City, to the extent all of the foregoing have been satisfied. Section 6A.09: Guaranty Trigger Event During Construction Period. A "Guaranty Trigger Event" during the Construction Period with respect to a Phase shall occur if: (a) a Determination of Taxability (as defined in the Trust Indenture) with respect to the Bonds shall occur, it being acknowledged that a Determination of Taxability would occur only as a result of a fraudulent act, illegal act, misapplication of funds or willful misconduct on the part of Lessee and only after Lessee has had an adequate opportunity to contest the same through appropriate proceedings; (b) this Agreement shall be terminated by Lessee for any reason (other than pursuant to this Article 6A), or by the City; provided, however, that the City hereby agrees that it shall not terminate this Agreement during the Construction Period for a Phase except as a result of the fraudulent act, illegal act, misapplication of funds or willful misconduct on the part of Lessee (it being agreed and acknowledged by Lessee that the willful violation by Lessee of the covenants applicable to Lessee during the Construction Period as provided in Section 6A.11 hereof shall, after notice from the City of the breach thereof and the passage of such period of time to cure such breach as is prescribed in Section 10.01 for comparable breaches, constitute willful misconduct on the part of Lessee); (c) either (i) Lessee shall elect not to make the Lessee Loss Payment with respect to a Phase in the time period provided in Section 6A.06(d), where applicable or (ii) where applicable, Lessee shall fail to make a Completion Payment under Section 6A.06(h) and elect not to make the Lessee Loss Payment with respect to a Phase in the time period provided therein; (d) Lessee shall elect to declare the Guaranty to become effective in accordance with Section 6A.01(c) hereof; or (e) The date on which a Phase reaches Substantial Completion (unless this Agreement has earlier terminated as to such Phase pursuant to this Article 6A), as evidenced by the delivery of the certificates pertaining thereto as set forth in this Agreement. Section 6A.10: Results of Guaranty Trigger Event. Upon the occurrence of any Guaranty Trigger Event (i) Lessee shall be obligated to guarantee the payment of a proportionate amount of each Bond (and the allocable interest and premium, if any, due thereon) equal to the ratio of the Allocated Bond Amount with respect to the applicable Phase to the aggregate principal amount of Bonds Outstanding (or, if the Guaranty has previously become effective as to a proportionate amount of each Bond Outstanding, then the Guaranty shall become effective with respect to the remaining principal amount (and the allocable interest and premium, if any, due thereon) of all Outstanding Bonds) by having the Guaranty become immediately effective with respect to such Phase, and (ii) the rights and obligations of Lessee and the City with respect to such Phase under this Agreement shall continue in full force and effect (unless this Agreement already has been terminated with respect to such Phase in accordance with Section 6A.08 hereof), but without the benefit of any of the limitations or other provisions contained in this Article 6A. Section 6A.11: Covenants Applicable to Lessee during the Respective Construction Periods. The City and Lessee agree that, until the end of the Construction Period for a particular Phase, the only permitted use of the Lessee Project Components of such Phase (or the Ground Lease Properties or Easements relating to such Lessee Project Components) shall be for the purpose of designing, constructing, equipping, and installing such Lessee Project Components. Accordingly, the City and Lessee further agree that the only covenants hereof that shall apply with respect to a Phase during the Construction Period for such Phase shall be the covenants of Lessee contained within the following sections of this Agreement: Article 5, Section 6.04(v), Section 6.06, Article 6A (and, to the extent incorporated into Article 6A by reference, the other provisions of this Agreement referenced therein), Section 8.02(a), Section 8.03, Section 8.04 (a) and (c), Section 8.05, and Article 12. Notwithstanding the foregoing, after the Substantial Completion of any Segment and upon the commencement of use thereof by Lessee for business operations, then all of the other provisions of this Agreement, including without limitation, Section 3.06 hereof, shall become applicable to such Segment; provided that, notwithstanding the applicability of all other provisions of this Agreement, all of the provisions and limitations of this Article 6A shall continue to apply and govern, and the Guaranty shall not become effective, until all of the applicable Phase has been Substantially Completed or until any of the other Guaranty Trigger Events as to such Phase have occurred pursuant to Section 6A.09. ARTICLE 7 USE OF SPECIAL FACILITIES Section 7.01: Use of Airport. As long as it does so in accordance with the terms and provisions hereof, Lessee, in common with all other scheduled airlines using the Airport, may utilize the Airport (other than the exclusive space of other tenants) and its facilities for the purpose of conducting Lessee's business of a scheduled air carrier certificated or otherwise authorized by the United States Government to engage in the business of commercial air transportation of persons, property, cargo, and mail (hereinafter sometimes referred to as "air transportation business"). The privileges granted hereby, which shall apply to any Subsidiary of Lessee, shall include the following: (a) The use of landing field areas, aprons, roadways, runways, taxiways, runway and taxiway lights, beacons, facilities, equipment, improvements, services and other conveniences for flying, landing, taxiing and takeoffs of aircraft. (b) The landing, taking-off, flying, taxiing, towing, loading and unloading of aircraft and other equipment used by Lessee in its operation of its air transportation business. (c) The repairing, maintaining, conditioning, servicing, testing, including engine "runups" subject to Section 7.02(e) hereof, loading, unloading, parking and storing of aircraft or other equipment of Lessee in areas on the Airport designated by the City for such purposes. (d) The training of personnel in the employ of or to be employed by Lessee including employees of Lessee's contract service providers. (e) The installation, maintenance and operation, at Lessee's expense, by Lessee alone, or in conjunction with any other airline or airlines who are lessees at the Airport or through a nominee, of radio, telephone, and data communications equipment and meteorological and aerial navigation equipment and facilities in or on the Terminal E Project leased exclusively to Lessee for use by Lessee in the conduct of its air transportation business; provided, however, that any exterior installations shall be subject to the prior written approval of the Director. (f) The selling, exchanging or disposing of gasoline, oil, grease, lubricants, fuels, or propellants for use by Lessee in connection with the conduct of its air transportation business (in compliance with existing laws and any applicable agreement therefor). (g) The purchasing or otherwise obtaining of services or personal property of any nature including aircraft, engines, accessories, gasoline, oil, greases, lubricants, fuels, propellants, food, beverages, and other equipment or supplies necessary to Lessee in the conduct of its air transportation business and in the exercise of its rights and privileges herein granted and in the discharge of the obligations herein imposed upon Lessee. (h) The installing, maintaining, and operation, without cost to City, by Lessee alone or in conjunction with any other airline lessee or lessees on the Airport, of communication systems between suitable locations in the terminal area, subject to the approval of the Director as to location of the installation of said system. (i) The transporting, directly or through a nominee of Lessee's choice, of Lessee's employees, passengers, cargo, property (including baggage) and mail to, from and at the Airport. (j) Subject to the prior written approval of the Director, the installation and maintenance at Lessee's expense, in the Terminal E Project or under its control, of advertising or identifying signs representing its business. Such signs shall be uniform in size, type and location as approved by the Director and shall be consistent with published Department of Aviation signage criteria. (k) The conduct of any other operation or activity that is necessary for or related to Lessee's air transportation business, subject to the provisions of Section 7.02 hereof. (l) Lessee may contract for, or receive from other airlines serving the Airport or other companies, Ground Handling Services for Lessee's aircraft, provided that Lessee provides advance written notice to the Director (or his designated representative) of such arrangements and uses reasonable efforts to ensure that such other airline or other company shall have entered into an operating permit or agreement or other similar contract with City prior to commencing Ground Handling Services with Lessee. (m) Lessee may provide Ground Handling Services to aircraft of other airlines using the Airport provided that Lessee provides advance written notice to the Director (or his designated representative) of such arrangements and uses its best efforts to ensure that such other airline has entered into an operating permit or agreement or similar contract with City prior to conducting its operations at the Airport. Lessee's insurance, as required in this Agreement, shall provide insurance coverage for such Ground Handling Services. Section 7.02: Limitations of Use of Airport. (a) Use of Facilities. Lessee shall not knowingly permit any act or omission at or about the Airport that may interfere with the effectiveness or accessibility of the drainage and sewage system, electrical system, heating and air conditioning system, fire protection system, sprinkler system, alarm system, fire hydrants and hoses, and security systems, if any, installed or located on or within the Ground Lease Properties, the Special Facilities, the Lessee Project Components or the Airport. (b) Insurance Requirements Compliance. Lessee shall not knowingly permit any act upon the Airport that will invalidate or conflict with any fire or other casualty insurance policies (copies of which, together with premium schedules, shall be furnished to Lessee on request) covering the Airport or any part thereof. (c) Waste Disposal. Lessee shall not dispose of or knowingly permit disposal of any waste material taken from or products used (whether liquid or solid) with respect to its aircraft into the sanitary or storm sewers at the Airport unless such waste material or products shall first be properly treated by equipment installed for that purpose or otherwise disposed of pursuant to law. In addition to obtaining approval from the governmental agencies regulating equipment and disposal described in this paragraph, Lessee shall also obtain the approval of the Director. All such disposal shall comply with regulations of the United States Department of Agriculture and shall be in compliance with Section 8.03B of this Agreement. (d) Flammable Liquids. Lessee shall not keep or store, during any 24-hour period, flammable liquids within the enclosed portion of the Ground Lease Properties or Special Facilities in excess of Lessee's working requirements during said 24-hour period, except in storage facilities especially constructed for such purposes in accordance with standards established by the National Board of Fire Underwriters and approved by a governmental agency with authority to inspect such facilities for safety compliance. Any such liquids having a flash point of less than 100EF shall be kept and stored in safety containers of a type approved by the Underwriters Laboratories. (e) Engine Runups. Lessee shall perform aircraft engine runups only at locations and during time periods approved in writing in advance by the Director. (f) Other. Lessee's use of the Airport shall be limited to activities directly connected to the transportation of passengers, persons, property, cargo and mail by air, and, except as permitted herein, Lessee shall not enter into activities which compete with City in City's development of any revenue from Airport passengers, tenants, and other users. However, it is the intent of the foregoing that Lessee shall be permitted to continue to conduct any activity that Lessee was currently conducting as of July 1, 1996. (g) Public Access Rights Protected. To the extent that Lessee=s Central Ticketing Facilities or other Special Facilities overlie, adjoin or abut space designated as public space in the International Facilities Agreement, then such Special Facilities shall not be used or occupied by Lessee in any way that would impede or prevent public access to or enjoyment of such overlaid, adjoining or abutting public space as provided in the International Facilities Agreement. (h) Additional Public Access Rights Protected. To the extent that Lessee=s Terminal E Baggage System Improvements or other Special Facilities overlie, adjoin or abut space designated as public space or leased to any other lessee under any use agreement or other use and lease agreement relating to Terminal C, then such Special Facilities shall not be used or occupied by Lessee in any way that would impede or prevent public access to or enjoyment by any other Terminal C lessee of such overlaid, adjoining or abutting space as provided in such use agreement or other agreement. Section 7.03: Rights to Concessions. (a) Lessee shall derive the financial benefit of all "inside concessions" (as hereinafter defined) in the South Concourse and within Lessee=s Central Ticketing Facility. Lessee shall also derive the financial benefit from any advertising concessions and with the Director=s approval any other inside concessions in Lessee=s Terminal C East Garage ATO Facility. All other concession rights within the Terminal E Project are retained by the City. At Lessee=s option, either (i) the City will award concession privileges and manage concession operations and then credit to the order of the Lessee (subject to any applicable provisions of Section 6.01) the revenues derived from those concessions (less any incremental costs associated with managing the concessions) or (ii) Lessee may award the concession privileges directly and manage concession operations subject to the City=s current policies with respect to M/WBE participation, "street pricing", badging and hours of operation. The City agrees not to enter into future concession agreements that would limit or restrict the foregoing option. For purposes hereof, the term "inside concessions" includes food/beverage, news/gifts, other retail, duty-free merchandise, telephones, advertising and other miscellaneous concessions, but shall not include "outside concessions" such as parking, rental cars and ground transportation. (b) In that portion of the Central FIS area immediately outside of Lessee=s Central Ticketing Facility as shown in Exhibit F, Lessee shall operate all concessions provided that (i) all such concessions reasonably conform to a theme or program selected by Lessee (it being agreed though that the specific concessions shall be selected by the City), (ii) such concessions are operated at a level comparable with those in the South Concourse and (iii) all revenues (net of reasonable fees and charges contracted to be retained by the third party developer and/or manager thereof) derived from such concessions are paid to the City. Additionally, the City and Lessee agree that no duty free concession shall be located in the Central FIS, except that the City may locate a duty-free concession in the in-transit lounge. (c) Except as expressly provided above, the City shall retain all concession rights in the Terminal E Project. Section 7.04: Special Provisions with respect to South Concourse; Relationship with Terminal D. (a) The City and Lessee agree that Lessee (and its Subsidiaries) shall have the right of preferential use (defined in the Terminal D Assignment Policy as APreferential Gate Use@) of Terminal D, Gates 1, 2 and 3, as well as the right to use, on a restricted priority basis after Substantial Completion of the Central FIS, three other narrow body aircraft gates in Terminal D as provided in Subsection 7.04(c); provided that, as a condition to the enjoyment of such use rights during peak periods of international aircraft demand, Lessee shall (i) fully utilize Terminal D, Gates 1, 2 and 3 for arriving international flights during peak periods of international aircraft demand, and (ii) for its gates in the South Concourse, following Substantial Completion of the Central FIS and the planned renovation of Terminal C (currently scheduled for completion in December 2004, give priority to Lessee=s and its Subsidiaries= arriving international flights during peak periods of international aircraft demand at its gates in the South Concourse (except for those gates needed to accommodate aircraft operations displaced from Terminal C as a result of the 490D renovation project, which is expected to be completed by December 2004). (b) In Section 11.01, Lessee is granted certain rights to sublet and provide Ground Handling Services in Terminal E, subject to the limitations contained therein and herein. Lessee agrees that, without the Director=s prior written consent, it shall not provide Ground Handling Services or sublet space in the South Concourse (i) to any domestic airline with which Lessee does not have a formal code share relationship or (ii) to any foreign flag code-share airline during any period that the Agreed Terminal D Utilization Standard is applicable but is not achieved. The term "Agreed Terminal D Gate Utilization Standard" shall be applicable following completion of the planned renovation of Terminal C (currently scheduled for completion in December, 2004), and shall mean an average daily utilization of Terminal D by Lessee and any Subsidiary of 20 aircraft departures and 20 aircraft arrivals (as measured by the self reporting forms submitted monthly by Lessee and such Subsidiaries to the Houston Airport System), which shall be reduced by 1/6 for each of the three narrow body gates in Terminal D for which Continental relinquishes its "restricted priority basis" rights at the request of the City as provided in subsection (c) below. (c) After Substantial Completion of the Central FIS, three of Gates 4 through 12, including Gates 4A and 6A in Terminal D (classified as narrow body aircraft gates), will be assigned to Lessee on a restricted priority gate use basis (defined in the Department=s Terminal D Assignment Policy as "Restricted Priority Basis") for international arrivals. The specific three gates will be designated by the Department in a manner that maximizes the use of all gates consistent with the allocation concepts and processes defined in the Terminal D Assignment Policy. However, Lessee agrees to relinquish its restricted priority basis rights to any of such gates upon 60 days written request from the Director that the gate be relinquished for use by another airline or airlines if there are no other gates available in Terminal D for use by any such airline at the required time. Section 7.05: Right to Lease to United States Government. During time of war or national emergency, City shall have the right to lease the Airport landing area or any part thereof to the United States Government for use by the Armed Forces and, if any such lease is executed, the provisions of this Agreement insofar as they are inconsistent with the provisions of the lease to the Government shall be suspended; however, such suspension shall not extend the term of this Agreement or relieve Lessee of its obligation to pay Special Facilities Payments. If, as a result of any such lease, the rights or duties of Lessee hereunder are materially affected, then Lessee shall receive an equitable rental adjustment (except that its obligation to pay Special Facilities Payments will not be affected in any way). ARTICLE 8 LESSEE'S OBLIGATIONS AND CONDITIONS TO LESSEE'S USE OF SPECIAL FACILITIES Until Substantial Completion of each Phase of the Terminal E Project, the provisions in this Article (other than those contained in Section 8.04) shall be subject to the limitations contained in Article 6A with respect to such Phase. In the event of a conflict between this Article and Article 6A, the terms of Article 6A shall control. Section 8.01: Maintenance of Special Facilities and Terminal E Apron Area at Lessee's Expense. Subject to the other terms of this Agreement, Lessee shall throughout the term of this Agreement assume the entire responsibility, cost and expense for the operation and all repair and maintenance whatsoever of the Special Facilities, whether such repair or maintenance be ordinary or extraordinary, structural or otherwise. Additionally, without limiting the generality of the foregoing, Lessee shall: (a) Maintain at all times the Special Facilities in a good state of repair and preservation, excepting ordinary wear and tear and obsolescence in spite of repair. (b) Replace or substitute any furnishings, fixtures and equipment constituting a part of the Special Facilities which are reasonably considered by the Director to have become inadequate, worn out or unsuitable with furnishings, fixtures and equipment having a value at least as great as the original value of the furnishings, fixtures and equipment replaced or substituted; provided, however, that unencumbered title (free of all liens) to all replacement or substitute furnishings, fixtures and equipment, unless removable by Lessee in accordance with Section 5.06 hereof, automatically shall vest in the City as provided herein. (c) Keep at all times, in a clean and orderly condition and appearance, the Special Facilities which are open to or visible by the general public. (d) Lessee shall perform or cause to be performed such cleaning of the Terminal E Apron Area as shall be necessary to keep it in a clean, neat and orderly condition free of foreign objects and shall periodically on an as-needed basis remove grease, oil and fuel spills caused by Lessee with ramp scrubbing equipment and repair any foreign object damage. Section 8.01A: Maintenance of City Project Components and APM. (a) Lessee Project Components. For the Lessee Project Components, the City shall have no maintenance obligations. (b) Terminal E Apron Area. City shall provide structural maintenance for the Terminal E Apron Area. (c) City Project Components. City agrees to operate, maintain, keep in good repair and make any necessary replacements of the City Project Components in accordance with the practices of a reasonably prudent airport operator. (d) Certain Public Areas of Terminal E. If the term of this Agreement is extended pursuant to Section 3.02(b), the City will operate, maintain and keep in good, sanitary and neat condition and repair the public areas of the Terminal E Project (except for those areas therein leased to others for their exclusive use) and all additions, improvements and facilities now or hereafter provided by City at or in connection with the terminal buildings and for common use by all lessees and the public, excepting any improvements or facilities constructed or installed by Lessee, either individually or jointly with others, and those that Lessee has agreed under the provisions hereof to operate or maintain as aforesaid. City will keep the roof, structure and utility systems of the terminal buildings in good repair. City will keep the public areas in and around the terminal buildings adequately supplied, equipped and furnished to accommodate the public using same and will operate and maintain directional signs in said public areas, including by way of example, but not by way of limitation, signs indicating the location in the terminal buildings of public facilities provided by City on the Airport. City will use reasonable efforts to provide (1) sufficient heat and air conditioning to those areas on the Airport equipped for such service; (2) illumination and drinking water in the public areas in the terminal buildings; (3) adequate lighting for the public vehicular parking facilities and aircraft apron; and (4) such janitorial and cleaning services as necessary to keep the public areas of the terminal buildings and areas adjacent thereto in a reasonably presentable and usable condition at all times. (e) Automated People Mover System. Upon extension of the APM to serve the international facilities area, the City shall purchase, acquire, and/or assume Lessee's leasehold obligations for the Terminal B-C Link of the APM with respect to the Series 1997A Bonds and shall take over operating control of the APM and, unless otherwise mutually agreed, assume such responsibility for operating and maintaining the APM and use its best efforts to cause the APM to be operated so as to provide the same or substantially similar levels of service (based on frequency and capacity) to the international facilities area as was provided to Terminals B and C prior to such date. (f) Insurance. Following Substantial Completion of the City Project Components for each Phase, such City Project Components will be insured by the City under a policy of fire and extended coverage insurance to the extent of not less than 80% of the insurable value of such property if such coverage is available. Insurance proceeds received on account of the damage to or destruction of such property will be applied by the City to the repair, construction or replacement of such damaged or destroyed property. Premiums paid by the City for such insurance will constitute City Operation and Maintenance Expenses. Section 8.02: Taxes, Charges, Utilities, Liens. (a) Lessee shall pay all taxes that may be levied, assessed or charged upon the Special Facilities or Lessee's leasehold estate therein by the State of Texas or any of its political subdivisions or municipal corporations, and shall obtain and pay for all licenses and permits required by law. However, Lessee shall have the right to contest, in good faith, the validity or application of any such tax, license or permit and shall not be considered in default hereunder as long as such contest is in progress and diligently prosecuted. City agrees to cooperate with Lessee in all reasonable ways in connection with any such contest other than a contest of any tax, permit or license of the City. (b) Lessee shall pay for all water, heat, electricity, chilled water, sewer rents and other utilities to the extent that such utilities are furnished to the Special Facilities other than those provided pursuant to (and for which Lessee pays, or is not required thereunder to pay for such items) the Use Agreement. (c) Lessee shall neither cause or permit any laborers, mechanics, builders, carpenters, materialmen, contractors, or other liens or encumbrances (including judgment and tax liens) against the Special Facilities or any City property by virtue of the construction, repair or replacement of the Special Facilities; provided, however, that Lessee may at its own expense in good faith contest the validity of any alleged or asserted lien and may permit any contested lien to remain unsatisfied and undischarged during the period of such contest and any appeal therefrom unless by such action any part of the Special Facilities may be subject to a material risk of loss or forfeiture, in any of which events such lien shall be promptly satisfied or bonded around in accordance with Texas law. Section 8.03: Compliance with Airport Rules and Regulations and Law; Nondiscrimination. A. Rules and Regulations. From time to time the Director may adopt and enforce rules and regulations with respect to the occupancy and use of the Airport, its services and facilities, by persons, vehicles, aircraft and equipment that in his opinion will reasonably ensure the safe, efficient, and economically practicable operation thereof and provide for the safety and convenience of those using the Airport, and to protect the Airport and its facilities and the public from damage or injury resulting from operations on, into and from the Airport. Lessee agrees to observe and obey any and all rules and regulations as are currently in place and as may be reasonably established from time to time, and to require its officers, agents, employees, contractors, and suppliers, to observe and obey the same. City reserves the right to deny access to the Airport or its facilities to any person, firm or corporation that fails or refuses to obey and comply with such rules and regulations. Such rules and regulations of City will not be inconsistent with the terms of this Agreement or with valid rules, regulations, orders and procedures of the Federal Aviation Administration or any other government agency duly authorized to make or enforce rules and regulations for the operation of the Airport and the operation of aircraft using the Airport. Lessee at all times shall be furnished (at the notice address provided herein and to Lessee's on-Airport manager) a current copy of any such City rules or regulations and any amendments thereto, and Lessee reserves the right to contest any such rules and regulations which it believes to be unreasonable. B. Compliance with Law. 1. General. Lessee shall not use the Airport or any part thereof, or knowingly permit the same to be used by any of its employees, officers, agents, subtenants, contractors, invitees, or licensees for any illegal purposes and shall, at all times during the term of this Agreement, comply with all applicable regulations, ordinances, and laws of the City, the State of Texas, or the Federal Government, and of any governmental bodies which may have jurisdiction over the Airport. Nothing in this Section 8.03B shall modify the provisions of Section 8.03A or limit Lessee's rights thereunder. 2. Compliance with Statutes, Ordinances and Regulations. At all times during the term of this Agreement, Lessee shall, in connection with its activities and operations at the Airport: a. Comply with and conform to all applicable present and future statutes and ordinances, and regulations promulgated thereunder, of all Federal, State, and other government bodies of competent jurisdiction that apply to or affect, either directly or indirectly, Lessee or Lessee's operations and activities under this Agreement. Lessee shall comply with all applicable provisions of the Americans with Disabilities Act of 1990 (42 U.S.C. Section 12101), as the same may be amended from time to time, and federal regulations promulgated thereunder that may be made applicable as a result of construction activities conducted by Lessee. b. As respects the City, be and remain an independent contractor with respect to all installations, construction, and services performed by or on behalf of Lessee hereunder. C. Nondiscrimination. 1. General. In the use and occupation of the Airport, Lessee shall not unlawfully discriminate against any person or class of persons by reason of race, color, religion, sex, national origin or ancestry, age, or physical or mental handicap. 2. Civil/Human Rights Laws. In its operations at the Airport and in its use of the Airport, Lessee shall not, on the grounds of race, color, religion, sex, national origin or ancestry, or age, discriminate or permit discrimination against any person or group of persons in any manner prohibited by Part 21 of the Federal Aviation Regulations, the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1963, the Rehabilitation Act of 1973, and Section 15-17 of the City's Code of Ordinances. Without limiting the generality of the foregoing, Lessee agrees to not discriminate against any employee or applicant for employment because of race, color, religion, sex, national origin or ancestry, or age. Lessee agrees to take affirmative action to ensure that applicants are employed, and that employees are treated during employment without regard to their race, color, religion, sex, national origin or ancestry, age, or physical or mental handicap. Such action shall include, but not be limited to: employment, upgrading, demotion, or transfer; recruitment or recruitment advertising; layoff or termination; rates of pay or other forms of compensation; selection for training; and disciplinary actions and grievances. Lessee agrees to post, in conspicuous places available to employees and applicants for employment, notices to be provided setting forth the provisions of this nondiscrimination clause. 3. USDOT Requirements. Lessee, for itself, its successors in interest, and assigns, as a part of the consideration of this Agreement, does hereby covenant and agree that, in the event improvements are constructed, maintained, or otherwise operated on the Airport for a purpose for which a United States Department of Transportation program or activity is extended or for another purpose involving the provision of similar services or benefits, Lessee shall maintain and operate such improvements and services in compliance with all other requirements imposed pursuant to 49 CFR, Part 21 (Non-discrimination in Federally Assisted Programs of the Department of Transportation), as said regulations may be amended. Lessee, for itself, its heirs, personal representatives, successors in interest, and assigns, as a part of the consideration of this Agreement, does hereby covenant and agree that: (1) no person on the grounds of race, color, religion, sex, national origin or ancestry, or age, shall be excluded from participation in, denied the benefits of, or otherwise be subjected to discrimination in the use of said improvements; (2) that in the construction of any improvements on, over, or under such land and the furnishing of services thereon, no person on the grounds of race, color, religion, sex, national origin or ancestry, or age, shall be excluded from participation in, denied the benefits of, or otherwise be subjected to unlawful discrimination; (3) that Lessee shall use the Airport facilities in compliance with all other requirements imposed by, or pursuant to, 49 C.F.R., Part 21 (Non-discrimination in Federally Assisted Programs of the Department of Transportation), as said regulations may be amended; and (4) Lessee assures that it will undertake an affirmative action program as required by 14 C.F.R., Part 152, Subpart E, Non-discrimination Airport in Aid Program, to ensure that no person shall on the grounds of race, color, religion, national origin or ancestry, sex, age, or physical or mental handicap be excluded from participating in any employment activities covered in 14 CFR, Part 152, Subpart E, or such employment activities covered in Section 15-17 of the City's Code of Ordinances. Lessee assures that no person shall be excluded on these grounds from participating in or receiving the services or benefits of any program or activity covered by this Section 8.03C. Lessee assures that it will require that any covered suborganization similarly will undertake affirmative action programs and that the suborganization will require assurance from the suborganization's suborganization, as required by 14 CFR., Part 152, Subpart E, to the same affect. Section 8.04: Compliance with Tax Law. With respect to the Special Facilities, Lessee hereby covenants and agrees as follows: (a) Lessee shall comply or cause to be complied with all tax covenants with respect to the Special Facilities and the Bonds contained in the Trust Indenture; (b) Lessee shall continuously repair, preserve, replace or substitute, as needed, all Special Facilities, at its expense, to the extent necessary to maintain and/or extend the reasonably expected economic life of the Special Facilities to satisfy the tax covenant contained in the Trust Indenture. All property for which replacements or substitutions are made by Lessee as provided herein shall become Lessee's property (and such replacement or substituted property shall become the City's property); (c) Lessee hereby elects not to claim depreciation or an investment credit for federal income tax purposes with respect to any portion of the Special Facilities; Lessee will take all actions necessary to make this election binding on all its successors in interest under this Agreement; and this election shall be irrevocable. Section 8.05: Environmental Matters. A. Lessee shall comply with all federal, state and local statutes, ordinances, regulations, rules, policies, codes or guidelines now or hereafter in effect, as the same may be amended from time to time, which govern Hazardous Materials (as hereinbelow defined) or relate to the protection of human health, safety or the environment and which are applicable to the conduct of Lessee's business operations from the Special Facilities, including but not be limited to: the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. Section 136 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300(f) et seq.; the Oil Pollution Control Act of 1990, 33 U.S.C. Section 270 et seq.; the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq., and as amended by the Superfund Amendments and Reauthorization Act of 1986, Pub. Law No. 99-499, 100 Stat. 1613; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; the Clean Air Act as amended, 42 U.S.C. Section 7401 et seq.; the Clean Water Act, 33 U.S.C. Section 1251, et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C., Section 6901 et seq.; and those substances defined as hazardous waste or as hazardous substances under the laws of Texas and/or the United States or in regulations promulgated pursuant to such laws (collectively, "Environmental Laws"). B. Any fines or penalties that may be levied against the City by the Environmental Protection Agency or the Texas Natural Resource Conservation Commission or any other governmental agency for Lessee's failure to comply with the Environmental Laws as required by Section 8.05(A) hereof shall be reimbursed to the City by Lessee within ten (10) days of receipt of an invoice from City for such fines or penalties. C. Lessee shall prevent the presence, use, generation, release, omission, discharge, storage, disposal or transportation of any Hazardous Materials on, under, in, above, to or from facilities subject to this Agreement by Lessee, other than in strict compliance with all Environmental Laws. For purposes of this Section, "Hazardous Materials" shall be interpreted in the broadest sense to include any and all substances, materials, wastes, pollutants, oils, or governmental regulated substances or contaminants as defined or designated as hazardous, toxic, radioactive, dangerous, or any other similar term in or under any of the Environmental Laws, including but not limited to, asbestos and asbestos containing materials, petroleum products including crude oil or any fraction thereof, gasoline, aviation fuel, jet fuel, diesel fuel, lubricating oils and solvents, urea formaldehyde, flammable explosives, PCBs, radioactive materials or waste, or any other substance that, because of its quantity, concentration, physical, chemical, or infectious characteristics may cause or threaten a present or potential hazard to human health or the environment when improperly generated, used, stored, handled, treated, discharged, distributed, disposed or released. Hazardous Materials shall also mean any and all hazardous materials, hazardous wastes, toxic substances, or regulated substances under any Environmental Laws. D. Lessee acknowledges that the Airport is subject to the National Pollution Discharge Elimination System Program ("NPDES") and its regulations relating to stormwater discharges, 40 CFR Part 122, for operations that occur at the Airport. Lessee further acknowledges that it is familiar with these NPDES stormwater regulations and that it will conduct operations at the Special Facilities subject to 40 CFR Part 122 as it may be amended from time to time. E. City and Lessee both acknowledge that close cooperation is necessary to ensure compliance with any NPDES stormwater discharge permit, as well as to ensure safety and to minimize costs. Lessee acknowledges that it may be necessary to undertake to minimize the exposure of stormwater to significant materials generated, stored, handled or otherwise used by Lessee at the Special Facilities as defined in the federal stormwater regulations, by implementing and maintaining "Best Management Practices" as defined in 40 CFR, Part 122.2, as it may be amended from time to time. F. Lessee acknowledges that City's NPDES stormwater discharge permit, to the extent affecting the Special Facilities, is incorporated by reference into this Agreement and any subsequent amendments, extensions or renewals. Lessee agrees to be bound by all applicable portions of said permit. City shall promptly notify Lessee of any changes to any portions of said permit applicable to, or that affect, Lessee's operations. G. City shall provide Lessee with written notice of those NPDES stormwater discharge permit requirements that Lessee shall be obligated to perform from time to time at the Special Facilities, including, but not limited to: certification of non-stormwater discharges; collection of stormwater samples; preparation of stormwater pollution prevention or similar plans; implementation of "good housekeeping" measures or Best Management Practices; and maintenance of necessary records. Such written notice shall include applicable deadlines. Lessee, within 15 days of receipt of such written notice, shall notify City in writing if it disputes any of the NPDES stormwater discharge permit requirements it is being directed to undertake. If Lessee does not provide such timely notice, it is deemed to assent to undertake such requirements. If Lessee provides City with written notice, as required above, that it disputes such NPDES stormwater discharge permit requirements, City and Lessee agree to negotiate a prompt resolution of their differences. Lessee warrants that it will not object to City notices required pursuant to this paragraph unless Lessee has a good faith basis to do so. H. City and Lessee agree to provide each other upon request, with any non-privileged information collected and submitted to any governmental entity(ies) pursuant to applicable NPDES stormwater regulations applicable to the Special Facilities. I. Lessee agrees to participate in any reasonable manner requested by the City in any City organized task force or other work group established to coordinate stormwater activities at the Airport. J. All such remedies of City with regard to environmental requirements as set forth herein shall be deemed cumulative in nature and shall survive termination of this Agreement. K. LESSEE SHALL PROTECT, DEFEND, INDEMNIFY AND HOLD HARMLESS THE CITY AND ITS OFFICERS, AGENTS AND EMPLOYEES FROM AND AGAINST ANY LOSS, COST, CLAIM, DEMAND, PENALTY, FINE, SETTLEMENT, LIABILITY AND EXPENSE (INCLUDING BUT NOT LIMITED TO REASONABLE ATTORNEYS' AND CONSULTANTS' FEES, COURT COSTS AND LITIGATION EXPENSES) RELATED TO (1) LESSEE'S USE OF HAZARDOUS MATERIALS OF WHATEVER KIND OR NATURE, KNOWN OR UNKNOWN, ON THE SPECIAL FACILITIES; (2) ANY ACTUAL, THREATENED OR ALLEGED CONTAMINATION BY HAZARDOUS MATERIALS ON THE GROUND LEASE PROPERTIES, EASEMENTS OR SPECIAL FACILITIES BY LESSEE OR ITS AGENTS; (3) THE DISPOSAL, RELEASE OR THREATENED RELEASE OF HAZARDOUS MATERIALS BY LESSEE OR ITS AGENTS AT THE GROUND LEASE PROPERTIES, EASEMENTS OR SPECIAL FACILITIES THAT IS ON, FROM OR AFFECTS THE SOIL, AIR, WATER, VEGETATION, BUILDINGS, PERSONAL PROPERTY, OR PERSONS; (4) ANY PERSONAL INJURY, DEATH OR PROPERTY DAMAGE (REAL OR PERSONAL) ARISING OUT OF OR RELATED TO HAZARDOUS MATERIALS USED BY LESSEE AT THE GROUND LEASE PROPERTIES, EASEMENTS OR SPECIAL FACILITIES; OR (5) ANY VIOLATION BY LESSEE OF ANY ENVIRONMENTAL LAWS AT THE GROUND LEASE PROPERTIES, EASEMENTS OR THE SPECIAL FACILITIES; PROVIDED HOWEVER, THAT NONE OF THE FOREGOING INDEMNITY SHALL BE APPLICABLE TO LOSSES, COSTS, EXPENSES, CLAIMS, DEMANDS, PENALTIES, FINES, SETTLEMENTS, LIABILITIES AND EXPENSES WHICH RESULT FROM CONDITIONS EXISTING AS OF THE EFFECTIVE DATE OF THIS AGREEMENT OR WHICH RESULT FROM THE ACTION OF THE CITY OR ITS AGENTS. Section 8.06: City's Right To Maintain or Repair Special Facilities. In the event Lessee fails (i) to commence within thirty (30) days after written notice from the Director to do any maintenance or repair work to the Special Facilities required to be done under the provisions of this Agreement, other than preventive maintenance; (ii) to commence such maintenance or repair work within a period of ninety (90) days if such notice specifies that the work to be accomplished by the Lessee involves preventive maintenance only; or (iii) to diligently continue to completion any such maintenance or repair work as required under this Agreement; then, the Director or the City may, at its option, and in addition to any other remedies which may be available to it, enter the Special Facilities, without such entry causing or constituting a cancellation of this Agreement or an interference with the possession of the Special Facilities, and repair, maintain, replace, rebuild or paint all or any part of the Special Facilities and do all things reasonably necessary to accomplish the work required, and the reasonable cost and expense thereof shall be payable to the City by Lessee on written demand; provided, however, if in the reasonable opinion of the Director or the City, the Lessee's failure to perform any such repair or maintenance endangers the safety of the public, the employees or other tenants at the Airport, and the Director or the City so states same in its notice to Lessee, the Director or the City may perform such maintenance at any time after the giving of such notice, and Lessee agrees to pay to City the reasonable cost and expense of such performance on demand. In the event of the performance by City of any maintenance or repair work on the Special Facilities, City shall use all reasonable efforts to minimize any interference with or interruption of Lessee's business operations. Section 8.07: Termination Procedures. Upon the expiration or termination of this Agreement pursuant to any terms hereof, Lessee shall surrender the Special Facilities to the City in a good state of repair and preservation, excepting (i) ordinary wear and tear and obsolescence in spite of repair, unless otherwise permitted in Article 9 hereof, (ii) the effects of condemnation and (iii) any casualty damage which Lessee is not required to repair or restore hereunder. ARTICLE 9 LIABILITY, INSURANCE AND CONDEMNATION Until Substantial Completion of the Lessee Project Components for each Phase of the Terminal E Project, as applicable, the provisions in this Article shall be subject to the limitations contained in Article 6A with respect to such Phase. In the event of a conflict between this Article and Article 6A, the terms of Article 6A shall control. Section 9.01: Release and Indemnification of City and Trustee. A. THE LESSEE, ITS SUCCESSORS AND ASSIGNS OF THIS AGREEMENT (IN THIS SECTION, THE "AIRLINE") HEREBY RELEASE, RELINQUISH AND DISCHARGE THE CITY, ITS PREDECESSORS, SUCCESSORS, ASSIGNS, LEGAL REPRESENTATIVES AND ITS COLLECTIVE FORMER, PRESENT AND FUTURE AGENTS, EMPLOYEES AND OFFICERS (COLLECTIVELY IN THIS SECTION "CITY") FROM ANY LIABILITY OF THE CITY (i) FOR ANY DAMAGE TO PROPERTY OF AIRLINE OR (ii) FOR CONSEQUENTIAL DAMAGES SUFFERED BY AIRLINE, WHERE ANY SUCH DAMAGE IS SUSTAINED IN CONNECTION WITH OR ARISING OUT OF THE PERFORMANCE OF THIS AGREEMENT. B. WITH NO INTENT TO AFFECT AIRLINE'S ENVIRONMENTAL INDEMNIFICATION SET FORTH IN SECTION 8.05(K), AIRLINE, EXPRESSLY AGREES TO PROTECT, DEFEND, INDEMNIFY AND HOLD THE CITY COMPLETELY HARMLESS FROM AND AGAINST (BUT SUBJECT TO SECTIONS D, E AND F HEREOF): (I) ANY AND ALL LIABILITIES, LAWSUITS, CAUSES OF ACTION, LOSSES, CLAIMS, JUDGMENTS, DAMAGES, FINES OR DEMANDS ARISING BY REASON OF OR IN CONNECTION WITH THE ACTUAL OR ALLEGED ERRORS, OMISSIONS, OR NEGLIGENT ACTS OF AIRLINE OR OF THE CITY OR IN CONNECTION WITH THE CITY=S OBLIGATIONS UNDER SECTION 6A.04(b), IN CONNECTION WITH OR ARISING OUT OF THE PERFORMANCE OF THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO, BODILY INJURY, ILLNESS, PHYSICAL OR MENTAL IMPAIRMENT, DEATH OF ANY PERSON, OR THE DAMAGE TO OR DESTRUCTION OF ANY REAL OR PERSONAL PROPERTY; AND (II) ALL COSTS FOR THE INVESTIGATION AND DEFENSE OF ANY AND ALL LIABILITIES, LAWSUITS, CAUSES OF ACTION, LOSSES, CLAIMS, JUDGMENTS, DAMAGES, FINES OR DEMANDS REFERRED TO IN THE PRECEDING CLAUSE (I) INCLUDING, BUT NOT LIMITED TO, REASONABLE ATTORNEY FEES, COURT COSTS, DISCOVERY COSTS, AND EXPERT FEES. SUBJECT TO SUBSECTIONS D, E AND F HEREOF, AIRLINE'S AGREEMENT TO PROTECT, DEFEND, INDEMNIFY AND HOLD HARMLESS THE CITY EXPRESSLY EXTENDS TO THE ACTUAL OR ALLEGED JOINT OR CONCURRENT NEGLIGENCE OF CITY AND AIRLINE. C. UPON THE FILING BY ANYONE OF ANY TYPE OF CLAIM, CAUSE OF ACTION, OR LAWSUIT AGAINST THE CITY FOR ANY TYPE OF DAMAGES ARISING OUT OF INCIDENTS FOR WHICH CITY IS TO BE INDEMNIFIED BY AIRLINE PURSUANT TO THIS SECTION 9.01, THE CITY SHALL, WITHIN 45 DAYS OF CITY BECOMING AWARE THEREOF, NOTIFY AIRLINE OF SUCH CLAIM, CAUSE OF ACTION OR LAWSUIT. IN THE EVENT THAT AIRLINE DOES NOT SETTLE OR COMPROMISE SUCH CLAIM, CAUSE OF ACTION, OR LAWSUIT AT ITS OWN COST, TO THE EXTENT AIRLINE IS REQUIRED TO INDEMNIFY CITY PURSUANT TO THIS SECTION 9.01, THEN AIRLINE SHALL UNDERTAKE THE LEGAL DEFENSE OF SUCH CLAIM, CAUSE OF ACTION, OR LAWSUIT AT ITS OWN COST THROUGH COUNSEL OF RECOGNIZED CAPACITY OR OTHERWISE NOT REASONABLY DISAPPROVED BY THE CITY BOTH ON BEHALF OF ITSELF AND ON BEHALF OF CITY UNTIL FINAL DISPOSITION, INCLUDING ALL APPEALS. THE CITY MAY, AT ITS SOLE COST AND EXPENSE, PARTICIPATE IN THE LEGAL DEFENSE OF ANY SUCH CLAIM, CAUSE OF ACTION, OR LAWSUIT BY AIRLINE TO DEFEND AGAINST SUCH CLAIM, CAUSE OF ACTION OR LAWSUIT. ANY FINAL JUDGMENT RENDERED AGAINST CITY FOR ANY CAUSE FOR WHICH CITY IS TO BE INDEMNIFIED AGAINST PURSUANT TO THIS SECTION 9.01 SHALL BE CONCLUSIVE AGAINST AIRLINE AS TO LIABILITY AND AMOUNT UPON THE EXPIRATION OF THE TIME FOR ALL APPEALS. D. THE PROVISIONS OF SECTION 9.01B AND C HEREOF SHALL NOT APPLY TO ANY CLAIM OR DEMAND (I) ARISING AT ANY TIME WHEN THE CITY IS OPERATING THE LESSEE PROJECT COMPONENTS OR OTHER SPECIAL FACILITIES (OR IS RESPONSIBLE FOR THE OPERATION THEREOF PURSUANT TO ANY SUBLEASE OR OTHER AGREEMENT), (II) ARISING SOLELY FROM THE NEGLIGENCE OF THE CITY OR SOLELY FROM THE BREACH OF THE CITY'S EXPRESS OBLIGATIONS HEREUNDER, OR WHEN THE CITY IS MORE THAN 50% LIABLE, (III) IF SUCH CLAIM OR DEMAND RELATES TO ANY ACT OR OMISSION OCCURRING OUTSIDE THE PREMISES LEASED EXCLUSIVELY OR PREFERENTIALLY TO AIRLINE UNDER THIS AGREEMENT, UNLESS AIRLINE IS MORE LIABLE FOR (I.E., IS MORE AT FAULT FOR) SUCH CLAIM OR DEMAND THAN EACH OTHER PARTY TO SUCH CLAIM OR DEMAND, OR (IV) TO THE EXTENT THE CLAIM OR DEMAND IS COVERED UNDER THE INSURANCE CARRIED PURSUANT TO SECTIONS 9.02 AND 9.03 HEREOF; PROVIDED, THAT, IF (a) A CLAIM OR DEMAND IS MADE AGAINST AIRLINE BY A THIRD PARTY FOR WHICH AIRLINE HAS INSURANCE COVERAGE PURSUANT TO SECTIONS 9.02 AND 9.03 HEREOF, AND (b) THERE IS A DEDUCTIBLE CARRIED BY AIRLINE APPLICABLE TO SUCH CLAIM OR DEMAND (OR AIRLINE, THROUGH SELF-INSURANCE OR OTHER SELF-FUNDED INSURANCE PROGRAM, BEARS THE FINANCIAL RISK OF ANY PORTION OF SUCH CLAIM OR DEMAND AS TO THE DEDUCTIBLE ONLY), THEN THE PROVISIONS OF SECTION 9.01B AND C (AND BY REFERENCE, SUBSECTIONS D AND E HEREOF) SHALL APPLY TO SUCH PORTION OF THE CLAIM OR DEMAND THAT IS SUBJECT TO SUCH DEDUCTIBLE OR SELF-INSURANCE OF THE DEDUCTIBLE OR OTHER SELF-FUNDED INSURANCE PROGRAM AS TO THE DEDUCTIBLE (AND TO ANY OTHER PORTION OF THE CLAIM OR DEMAND AS TO THE CITY THAT IS NOT SATISFIED WITH INSURANCE PROCEEDS). FOR PURPOSES OF THIS SECTION, LESSEE STIPULATES THAT AS TO EACH CLAIM OR DEMAND THAT MAY BE SUBJECT TO THE PROVISIONS HEREOF, THE DEDUCTIBLE AMOUNT SHALL NEVER BE DEEMED TO BE GREATER THAN $1,000,000. E. NOTWITHSTANDING ANYTHING IN THIS SECTION TO THE CONTRARY, THE LIABILITY OF THE AIRLINE UNDER SECTION 9.01.B AND C SHALL NOT EXCEED $1,000,000 PER OCCURRENCE. F. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT OR ANY OTHER AGREEMENT, DURING THE CONSTRUCTION PERIOD OF EACH PHASE, AIRLINE SHALL NOT BE REQUIRED TO INDEMNIFY OR DEFEND THE CITY FROM AND AGAINST ANY CLAIM OR OTHER MATTER THAT IS NOT CAUSED BY THE ACTIONS OR FAILURES TO ACT OF AIRLINE OR ANY OF AIRLINE=S CONTRACTORS OR SUBCONTRACTORS WHILE AIRLINE (OR ITS CONSTRUCTION AGENT) IS IN CONTROL, OR POSSESSION, OF THE CONSTRUCTION OF THE LESSEE PROJECT COMPONENTS INCLUDED IN SUCH PHASE, EXCEPT TO THE EXTENT THAT ANY SUCH CLAIM OR MATTER IS COVERED BY AIRLINE=S INSURANCE. FOR THE AVOIDANCE OF DOUBT, IT IS ACKNOWLEDGED THAT THE FOREGOING INDEMNITY OBLIGATIONS OF AIRLINE UNDER THIS ARTICLE 9 (INCLUDING THIS SUBSECTION F) SHALL ALSO APPLY IN THE EVENT OF ANY ACTUAL OR ALLEGED ERRORS, OMISSIONS, OR NEGLIGENT ACTS OF THE CITY WHEN THE LIABILITY, LAWSUIT, CAUSE OF ACTION, LOSS, CLAIM, JUDGMENT, DAMAGE, FINE OR DEMAND ARISES FROM THE ACTIONS OR THE FAILURES TO ACT OF AIRLINE OR ANY OF AIRLINE=S CONTRACTORS OR SUBCONTRACTORS WHILE AIRLINE (OR ITS CONSTRUCTION AGENT) IS IN CONTROL, OR POSSESSION, OF THE CONSTRUCTION OF THE LESSEE PROJECT COMPONENTS. IN THIS REGARD, AIRLINE ACKNOWLEDGES THAT PURSUANT TO THIS AGREEMENT, AIRLINE OR ITS CONSTRUCTION AGENT WILL BE IN CONTROL, OR POSSESSION, OF THE CONSTRUCTION OF THE LESSEE PROJECT COMPONENTS AT ALL TIMES DURING THE TERM HEREOF. G. THE PROVISIONS OF SUBSECTIONS 9.01.B, C, D AND E SHALL BE INDEPENDENT OF ANY INDEMNITIES TO WHICH THE CITY MAY BE ENTITLED UNDER THE PROVISIONS OF ANY USE AGREEMENT OR ANY OTHER AGREEMENT. H. LESSEE FURTHER AGREES, SUBJECT TO THE FOLLOWING PROVISO, TO INDEMNIFY THE TRUSTEE, ITS SUCCESSORS, OFFICERS, DIRECTORS AND EMPLOYEES, FOR AND TO HOLD THEM HARMLESS AGAINST ANY LOSS, LIABILITY OR EXPENSES INCURRED WITHOUT NEGLIGENCE, BAD FAITH, FRAUD, THEFT OR WILLFUL MISCONDUCT ON THEIR PART ARISING OUT OF OR IN CONNECTION WITH THE ACCEPTANCE AND ADMINISTRATION OF THE TRUST IMPOSED BY THE TRUST INDENTURE, INCLUDING THE COSTS AND EXPENSES OF DEFENDING THEMSELVES AGAINST ANY CLAIM OR LIABILITY IN CONNECTION WITH THE EXERCISE OR PERFORMANCE OF ANY OF THE POWERS OR DUTIES OF THE TRUSTEE UNDER THE TRUST INDENTURE; PROVIDED, HOWEVER, THAT PRIOR TO THE SUBSTANTIAL COMPLETION OF THE TERMINAL E PROJECT THIS OBLIGATION SHALL BE OF NO FORCE AND EFFECT. Section 9.02: General Insurance Requirements. With no intent to limit Lessee's liability or the indemnification provisions herein, Lessee shall provide and maintain certain insurance in full force and effect at all times during the term of this Agreement and all extensions thereto, as set forth in Section 9.03 below. If any of the insurance is written as "claims made" coverage, then Lessee agrees to keep such claims made insurance in full force and effect by purchasing policy period extensions for at least three years after the expiration or termination of this Agreement. Section 9.03: Risks and Minimum Limits of Coverage. Worker's Compensation: Statutory Employer's Liability: Bodily injury by accident - $1,000,000 (each accident) Bodily injury by disease - $1,000,000 (policy limit) Bodily injury by disease - $1,000,000 (each employee) Commercial General Liability: (including broad form coverage, Combined single limit of: contractual liability, bodily and $100,000,000 per occurrence/aggregate personal injury, and products Products and Completed operations and completed operations) $10,000,000 aggregate All Risk (Covering each Phase or Replacement value of each Phase (or Segment) Segment of the Special Facilities of the Special Facilities following its Substantial Completion, including fire, lightning, vandalism, and extended coverage perils) Automobile Liability Insurance: (For automobiles used by Lessee $5,000,000 combined single limit per occurrence in the course of its performance under this Agreement, including Lessee's non-owned and hired autos) In connection with the design, construction, procurement and installation of the Special Facilities, Lessee shall contractually require its principal construction contractors and architects/engineers contracting with Lessee (as the case may be) to carry the following additional coverages and limits of liability, unless Lessee carries policies of insurance covering such risk (provided, however, if reasonable under the circumstances, Lessee may, with the concurrence of the Director, require lower limits of liability): Professional Liability: $2,000,000 per occurrence/aggregate (in the case of architects and engineers) Builders Risk: Replacement value of each Phase of the Special (in the case of contractors) Facilities up to an aggregate amount not less than the amount of expended Bond proceeds (Aggregate limits are per 12-month period unless otherwise indicated.) Section 9.04. Other Provisions. A. Form of Policies. The insurance carried by Lessee may be in one or more policies of insurance, the form of which shall be reasonably satisfactory to the Director. Nothing the Director does or fails to do shall relieve Lessee from its duties to provide the required coverage hereunder (unless specifically provided otherwise in such action), and the Director's actions or inactions shall not be construed as waiving the City's rights hereunder. B. Issuers of Policies. The issuer of any policy carried by Lessee shall have a Certificate of Authority to transact insurance business in the State of Texas and have a Best's rating of at least A- and a Best's Financial Size Category of Class VI or better, according to the most current edition of Best's Key Rating Guide, Property-Casualty United States. Each issuer must be responsible and reputable, must have financial capability consistent with the risks covered, and shall be subject to approval by the Director. C. Insured Parties. Each policy carried by Lessee, except those for Workers Compensation, Professional Liability and Employer's Liability, shall name the City (and its officers, agents, and employees) as Additional Insured parties on the original policy and all renewals or replacements during the term of this Agreement. The City, the Trustee and Lessee shall be named joint Loss Payees on All Risk and Builders Risk coverages, subject to distribution of proceeds as provided elsewhere herein. D. Deductibles. Subject to Section 9.01(D) herein, Lessee shall assume and bear any claims or losses to the extent of any deductible amounts (or deductible amounts that are self-insured by Lessee) and waives any claim it may ever have for the same against the City, its officers, agents, or employees. E. Cancellation. Each policy carried by Lessee shall expressly state that it may not be canceled, materially modified or not renewed unless the insurance company gives thirty (30) days' advance written notice in writing to the Director. F. Aggregates. Lessee shall give written notice to the Director within five (5) days of the date upon which total claims by any party against Lessee reduce the aggregate amount of coverage below the amounts required by this Agreement. In the alternative, the policy may contain an endorsement establishing a policy aggregate for the particular project or location subject to this Agreement. G. Subrogation. Each policy carried by Lessee shall contain an endorsement to the effect that the issuer waives any claim or right in the nature of subrogation to recover against the City, its officers, agents, or employees. H. Endorsement of Primary Insurance. Each policy hereunder except Worker's Compensation and Professional Liability shall be primary insurance to any other insurance available to the Additional Insured and Loss Payee with respect to claims arising hereunder. I. Liability for Premium. Lessee shall be solely responsible for payment of all insurance premiums for the policies required to be maintained by Lessee hereunder, and the City shall not be obligated to pay any premiums. J. Contractors and Subcontractors. Lessee shall contractually require all its contractors, and all its contractors to require its subcontractors, to carry insurance naming the City and the Trustee as an additional insured; however, contractual liability shall be limited to the extent of such contractor's or subcontractor's indemnification obligations under the applicable contract. Such insurance shall meet all of the above requirements as Lessee can successfully require such contractors or subcontractors to meet, except amount. The amount shall be commensurate with the amount of the contract. Lessee shall provide copies of such insurance certificates to the Director. K. Proof of Insurance. Within five (5) days of the effective date of this Agreement and at any time during the term of this Agreement, Lessee shall furnish the Director with certificates of insurance, along with an affidavit from Lessee confirming that the certificates accurately reflect the insurance coverage that will be available during the term. If requested in writing by the Director, Lessee shall furnish the City with certified copies of Lessee's insurance policies. Notwithstanding the proof of insurance required to be carried by Lessee as set forth above, it is the intention of the parties hereto that Lessee, continuously and without interruption, maintain in force the required insurance as set forth above. Lessee agrees that the City shall never be argued to have waived or be estopped from asserting its right to terminate this Agreement hereunder because of any acts or omissions by the City regarding its review of insurance documents provided by Lessee, its agents, employees, or assigns. Section 9.05: Disposition of Insurance Proceeds. In the event all of the Special Facilities or any part thereof is damaged or destroyed by an insured casualty and any Bonds remain Outstanding, then, notwithstanding any provision to the contrary herein or elsewhere (other than Article 6A), the following provisions shall be applicable to the expenditure of any insurance proceeds relating to such Special Facilities: (i) If either (A) the insurance proceeds (less the cost of removing the debris resulting from such casualty) together with any moneys in the Interest and Redemption Fund are sufficient to pay all of the interest, principal and other obligations accrued and to accrue on said Bonds until they are fully and finally paid and all other amounts due under the Trust Indenture and the Lessee requests that the Special Facilities not be repaired or rebuilt, or (B) the insurance proceeds (less the cost of removing the debris resulting from such casualty) together with any moneys available in the Interest and Redemption Fund are insufficient for such purpose and the Lessee agrees to pay the deficiency and requests that the Special Facilities not be repaired or rebuilt, then in either case the Lessee may, if the casualty loss is substantial and if the Bonds are redeemed or defeased in whole, together with any unpaid but accrued interest, elect to terminate this Agreement and be released from all unaccrued obligations hereunder; provided that the insurance proceeds (less the cost of removing the debris resulting from such casualty) and the deficiency payments, if any, paid by the Lessee shall be deposited into the Interest and Redemption Fund for the Bonds and the moneys therein shall be applied to pay the obligations with respect to the Outstanding Bonds and other amounts due under the Trust Indenture. If the said proceeds and funds are in excess of the amount then necessary to pay the obligations with respect to the Outstanding Bonds and other amounts due under the Trust Indenture, any such excess after payment or provision for the payment of the Bonds within the meaning of the Trust Indenture and other amounts due under the Trust Indenture has been made shall be divided between the City and the Lessee as their respective interests appear at the time of such damage or destruction; or (ii) If all Bonds are not repaid as provided in clause (i) above, Lessee agrees to cause such insurance proceeds to be deposited in the Construction Fund under the Trust Indenture (to be disbursed as provided therein) and to promptly repair and rebuild the Special Facilities with the insurance proceeds, and if such proceeds are insufficient for such purposes, the Lessee shall pay the deficiency. If such proceeds are in excess of the amount necessary for such purposes, any such excess shall be transferred by the Trustee to the Interest and Redemption Fund as a credit to the next due payments of Special Facilities Payments, with such credit to continue until the amount thereof is exhausted and if the Special Facilities Payments is paid in full, thereafter, any excess proceeds paid to Lessee. The repair or restoration of the Special Facilities shall either be in accordance with the original plans and specifications, together with alterations or modifications made or agreed upon prior to the casualty, or in accordance with new or modified plans and specifications, the alternative to be determined by the mutual agreement of the City and Lessee. Before any reconstruction or repair under this paragraph, Lessee shall submit plans and specifications to the Director for approval and such reconstruction or repair shall be substantially in accordance therewith subject to such changes as may be reasonably requested by Lessee and approved by the City. Section 9.06: Condemnation. In the event that the Special Facilities or any part thereof shall be taken or condemned in any eminent domain, condemnation, compulsory acquisition or like proceeding by any competent authority or conveyed under threat thereof for any public or quasi-public use or purpose and at such time Bonds remain Outstanding within the meaning of the Trust Indenture or any other amounts remain due under the Trust Indenture, then, notwithstanding any provision to the contrary herein or elsewhere (other than Article 6A), the condemnation proceeds shall be applied as follows: (i) If all or a substantial part of the Special Facilities is taken and either (A) the condemnation proceeds attributable to the Special Facilities, together with any moneys in the Interest and Redemption Fund, are sufficient to pay all of the interest, principal and other obligations accrued and to accrue on the Bonds until they are fully and finally paid and all other amounts due under the Trust Indenture and the Lessee requests that the Special Facilities not be rebuilt elsewhere, or (B) the condemnation proceeds attributable to the Special Facilities, together with any moneys available in the Interest and Redemption Fund, are insufficient to pay all of the interest, principal and other obligations accrued and to accrue on the Bonds until they are fully and finally paid and all other amounts due under the Trust Indenture and the Lessee agrees to pay the deficiency and requests that the Special Facilities not be rebuilt elsewhere or terminal facilities suitable for such purpose are not available elsewhere, the City will terminate this Agreement and release the Lessee from all unaccrued obligations hereunder, provided that the condemnation proceeds attributable to the Special Facilities and deficiency, if any, paid by Lessee shall be deposited into the Interest and Redemption Fund for the Bonds and moneys therein shall be applied to pay the obligations with respect to the Outstanding Bonds and all other amounts due under the Trust Indenture. If the said proceeds and funds are in excess of the amount then necessary to pay the obligations with respect to the Outstanding Bonds and all other amounts due under the Trust Indenture, any such excess after payment or provision for the payment of the Bonds and all other amounts due under the Trust Indenture within the meaning of the Trust Indenture has been made shall be divided between the City and the Lessee as their respective interests appear at the time of the taking. (ii) If all or a substantial part of the Special Facilities is taken and the Lessee requests that the Special Facilities be rebuilt elsewhere, the Special Facilities shall be rebuilt elsewhere and paid for with the condemnation proceeds attributable to the Special Facilities, and if such proceeds are insufficient for such purposes the Lessee shall pay the deficiency. If such proceeds attributable to the Special Facilities are in excess of the amount necessary for such purpose, any such excess shall be paid to the City and deposited by it into the Interest and Redemption Fund for said Bonds as a credit to the next due payments of Special Facilities Payments, with such credit to continue until the amount thereof is exhausted and, thereafter, any excess proceeds paid to Lessee. (iii) In the event that title to or use of less than a substantial part of the Special Facilities is taken by the power of eminent domain (that is, if the primary use of the Special Facilities is not substantially impaired by deletion of the part taken) the Lessee shall determine whether any rebuilding is necessary. Any condemnation proceeds attributable to the Special Facilities that are not used for the purposes of rebuilding shall be assigned to the City and deposited into the Interest and Redemption Fund and applied to redeem as many Bonds as may be redeemed at the next available redemption date. Section 9.07: Reconstruction or Repair. The rebuilding of the Special Facilities under Sections 9.05 or 9.06 shall be either in accordance with the original plans and specifications, together with alterations or modifications made or agreed upon prior to the casualty or taking, or in accordance with new or modified plans and specifications, the alternative to be determined by the mutual agreement of the Lessee and the Director. ARTICLE 10 EVENTS OF DEFAULT AND REMEDIES Section 10.01: Events of Default. The following shall be Events of Default as to the Lessee under this Agreement: (a) Failure to pay any Special Facilities Payments required to be paid under Article 6 hereof within 5 calendar days of their due date. (b) Failure by the Lessee to observe and perform any covenant, condition or agreement on its part to be observed or performed under this Agreement, other than as referred to in subsection (a) above, for a period of thirty (30) days after written notice, specifying such failure and requesting that it be remedied, is given to the Lessee by the City (except (i) if any insurance required to be maintained by Lessee is to be canceled or not renewed, such notice and the period for remedy by Lessee shall be limited to the period ending on the date on which such cancellation or nonrenewal is scheduled to occur and (ii) where fulfillment of another obligation requires activity over a period of time, and the Lessee shall commence to perform whatever may be required for fulfillment within thirty (30) days after the receipt of notice and shall diligently continue such performance without interruption, except for causes beyond its control). (c) Any material lien shall be filed against the Special Facilities or Ground Lease Properties or Lessee's interest therein or any part thereof in violation of this Agreement by a party other than the City and shall remain unreleased (or not bonded around) for a period of sixty (60) days from the date of such filing unless within said period the Lessee is contesting in good faith the validity of such lien in accordance with Section 8.02(c) hereof. (d) Whenever an involuntary petition shall be filed against Lessee under any bankruptcy or insolvency law or under the reorganization provisions of any law of like import or a receiver of Lessee for all or substantially all of the property of Lessee shall be appointed without acquiescence and such petition or appointment is not discharged or stayed within ninety (90) days after its filing. (e) The dissolution or liquidation of the Lessee or the filing by the Lessee of a voluntary petition in bankruptcy, or failure by the Lessee within ninety (90) days to lift or obtain a stay of any execution, garnishment or attachment of such consequence as will impair its ability to carry on its operations at the Special Facilities, or a general assignment by the Lessee for the benefit of its creditors, or the entry by the Lessee into an agreement of composition with its creditors, or the approval by a court of competent jurisdiction of a petition applicable to the Lessee in any proceeding for its reorganization or liquidation instituted under the provisions of the federal bankruptcy laws, or under any similar laws which may hereafter be enacted. The term "dissolution or liquidation of the Lessee," as used in this subsection, shall not be construed to include the cessation of the corporate existence of the Lessee resulting either from a merger or consolidation of the Lessee into or with another corporation or a dissolution or liquidation of the Lessee following a transfer of all or substantially all of its assets as an entirety, under the conditions permitting such actions contained in Section 12.01 hereof. (f) Whenever Lessee shall fail to provide adequate assurance (i) that Lessee will promptly cure all defaults hereunder, if any; (ii) that Lessee will compensate, or provide adequate assurance that Lessee will promptly compensate, the City for any actual pecuniary loss to the City resulting from any Event of Default hereunder; and (iii) of future performance by Lessee of the terms and conditions of this Agreement, each within thirty (30) days after (1) the granting of an Order for Relief with respect to Lessee pursuant to Title XI of the United States Code; (2) the initiation of a proceeding under any bankruptcy or insolvency law or the reorganization provisions of any law of like import; or (3) the granting of the relief sought in an involuntary proceeding against the Lessee under any bankruptcy or insolvency law. As used in this Agreement, adequate assurance of future performance of this Agreement shall include, but shall not be limited to, adequate assurance (1) of the source of Special Facilities Payments and other consideration due hereunder and (2) that the assumption or assignment of this Agreement will not breach any provision, such as a use, management, or ownership provision, in this Agreement, any other material lease, any financing agreement, or master agreement relating to the Special Facilities, including the Lessee Project Components. Section 10.02: Remedies on Default. Whenever any Event of Default referred to in Section 10.01 hereof shall have happened and continue to exist, then, subject to the limitations in Article 6A, the City may take any one or more of the following remedial steps as against the Lessee: (a) The City may, and upon a payment default under Section 10.01(a) or 3.06(b)(iii)(X) shall, re-enter and take possession of the Special Facilities and the Ground Lease Properties without terminating this Agreement and use its Best Efforts to (i) complete construction and equipping of the Special Facilities (and apply proceeds of the Bonds for such purpose) and (ii) either (x) operate the Special Facilities and impose rates and charges on airline tenants, as appropriate, for their availability, operation and maintenance or (y) sublease the Special Facilities and Ground Lease Properties on a net rent lease basis, provided further that in either event the City shall use its Best Efforts to impose and collect rates and charges or rental rates sufficient to provide for City Charges and Ground Rentals to the same extent as Lessee is obligated to do so and to provide additional amounts equal to the Special Facilities Payments set forth in Section 6.01, all for the account of the Lessee, holding the Lessee liable for the difference between the rents and other amounts payable by the Lessee hereunder and the charges received from airline tenants and/or the rents and other amounts received from any sublessee with respect to the Special Facilities. All gross proceeds derived by the City from any charges and/or rents (net of City Charges and any Ground Rent attributable to the period after such reletting commences, and up to the amount of all Special Facilities Payments payable hereunder) shall be remitted to the Trustee for deposit in the Interest and Redemption Fund to support repayment of the Bonds. (b) The City may terminate this Agreement, exclude the Lessee from possession of the Special Facilities and the Ground Lease Properties and use its Best Efforts to (i) complete construction and equipping of the Special Facilities (and apply proceeds of the Bonds for such purpose) and (ii) either (x) operate the Special Facilities and impose rates and charges on airline tenants for their availability, operation and maintenance; or (y) lease the same on a net rent lease basis, provided further that in either event the City shall use its Best Efforts to impose and collect rates and charges or rental rates sufficient to provide for City Charges and Ground Rentals to the same extent as Lessee is obligated to do so and to pay the Special Facilities Payments set forth in Section 6.01, all for the account of the Lessee, holding the Lessee liable for all rents and other amounts due under this Agreement and not received by the City from charges or rents with respect to the Special Facilities. All gross proceeds derived by the City from any charges and/or rents (net of City Charges and any allocable Ground Rentals attributable to the period after such reletting commences, and up to the amount of all Special Facilities Payments payable hereunder) shall be remitted to the Trustee for deposit in the Interest and Redemption Fund to support repayment of the Bonds. (c) The City may take whatever other action at law or in equity as may appear necessary or desirable to collect the rent then due and thereafter to become due, or to enforce performance and observance of any obligation, agreement or covenant of the Lessee under this Agreement. The City shall use its Best Efforts to cause the Special Facilities to be either operated or leased on a net rent lease basis for the account of Lessee as provided in clauses (a) and (b) above after an Event of Default by Lessee, whether or not City retakes possession of the Special Facilities or terminates this Agreement. (d) In connection with any reletting of the Special Facilities and Ground Lease Properties, the City agrees to use its Best Efforts to relet such Special Facilities. It is recognized that such tenant(s) will also be required to pay the City Ground Rentals and City Charges in connection with the use and occupancy of such Special Facilities. In connection with a reletting of the Special Facilities, the City agrees not to charge such tenant(s) Ground Rentals in excess of those charged (or that would be charged) to Lessee for the areas in such Special Facilities. (e) In connection with any reletting by the City during the original term of this Agreement, Lessee shall be subrogated to the right of the Trustee to receive payments hereunder to support repayment of the Bonds to the extent that Lessee has made payments on the Bonds under the Guaranty. Section 10.03: Additional Remedy. In addition to the other remedies herein provided, the City may, in the case of an Event of Default under Section 10.01(b), enter the Special Facilities and Ground Lease Properties (without such entering causing or constituting a termination of this Agreement or an interference with the possession of the Special Facilities and Ground Lease Properties by Lessee) and do all things reasonably necessary to cure such Event of Default, charging to Lessee the reasonable cost and expense thereof and Lessee agrees to pay to City upon demand such charge in addition to all other amounts payable by Lessee hereunder. Section 10.04: No Remedy Exclusive. No remedy herein conferred upon or reserved to the City is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or hereafter existing under law or in equity (to the extent not inconsistent with the terms hereof). No delay or omission to exercise any right or power accruing upon any Event of Default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the City to exercise any remedy reserved to it in this Article, it shall not be necessary to give any notice, unless such notice is herein expressly required or is required by law. Section 10.05: Agreement to Pay Attorneys' Fees and Expenses. In the event there should be an Event of Default under any of the provisions of this Agreement and the City should determine that the services of an attorney are required or the City incurs other expenses for the collection of rent or the enforcement of performance or observance of any obligation or agreement on the part of Lessee, the Lessee agrees that it will on demand therefor pay to the City the reasonable, just and necessary fee of such attorneys and other reasonable expenses so incurred. Section 10.06: No Additional Waiver Implied by One Waiver. In the event any covenant contained in this Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. Failure of either party hereto to insist on the strict performance of any of the agreements herein or to exercise any rights or remedies accruing hereunder upon an Event of Default or failure of performance shall not be considered a waiver of the right to insist on, and to enforce by any appropriate remedy, strict compliance with any other obligation hereunder or to exercise any right or remedy occurring as a result of any future default or failure of performance. Section 10.07: Enforcement by City Attorney. The City Attorney or his or her designee shall have the right to enforce all legal rights and obligations under this Agreement without further authorization. Lessee covenants to provide to the City Attorney all documents and records within Lessee's possession that the City Attorney reasonably deems necessary to assist in determining Lessee's compliance with this Agreement, with the exception of those documents made confidential by federal or state law or regulation and provided that the provision of such documents and records by Lessee shall further be limited in any respect that the provision of any documents or records by the City pertaining to this Agreement would be limited pursuant to Chapter 552, Texas Government Code, as amended, or otherwise. ARTICLE 11 ASSIGNMENTS, SUBLETTING AND TERMINATION BY LESSEE Section 11.01: Assignments and Subletting by Lessee. (a) This Agreement may not be assigned or otherwise transferred in whole or in part by Lessee (except pursuant to Section 12.01 hereof) without the prior written consent of the Director; provided, however, that, unless permitted by Section 7.6(b) of the Trust Indenture or Sections 11.02 and 12.01 hereof, the City will not consent to any assignment by Lessee of its rights hereunder without first obtaining a written agreement from the Lessee that Lessee shall remain primarily liable for Special Facilities Payments hereunder. Lessee may, upon giving notice to the Director, sublet to concessionaires authorized pursuant to Section 7.03, and may sublet to or provide Ground Handling Services to Subsidiaries and to other domestic code-share affiliates of Lessee or a foreign flag code-share affiliate subject to the limitations in Section 7.04(b). Lessee may also sublet the Special Facilities or any part thereof to any other party, subject to the condition that in either instance Lessee first obtains the written consent of the Director to such subletting and all the terms thereof, unless such subletting is expressly authorized herein. (b) If Lessee sublets all or any part of the Special Facilities or if all or any part of the Special Facilities are occupied (pursuant to a written consent from the Director) by anyone other than Lessee (including any Subsidiary of Lessee, a domestic code-share affiliate of Lessee or a foreign flag code-share affiliate subject to the limitations in Section 7.04(b)), the City may, if an Event of Default shall have occurred hereunder and be continuing, collect rent or Special Facilities Payments from such sublessee or occupant and the City shall apply the amount collected to the extent possible to satisfy the obligations of Lessee hereunder, but no such collection shall be deemed a waiver by the City of the covenants contained herein or an acceptance by the City of any such sublessee, claimant or occupant as a successor Lessee, nor a release of Lessee by the City from the further performance by the Lessee of the covenants imposed upon Lessee herein. (c) NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, SO LONG AS ANY BONDS REMAIN OUTSTANDING NO SUCH SUBLEASE OR ASSIGNMENT SHALL BE AUTHORIZED IF IN ANY WAY IT RELEASES LESSEE FROM ITS PRIMARY OBLIGATIONS HEREUNDER, INCLUDING ITS OBLIGATION TO PAY SPECIAL FACILITIES PAYMENTS. Section 11.02: Termination of Agreement by Lessee. Except as permitted in Article 6A, Lessee shall not terminate this Agreement for any reason whatsoever as long as any of the Bonds remain Outstanding within the meaning of the Trust Indenture or any other amounts are due and owing under the Trust Indenture. ARTICLE 12 MISCELLANEOUS Section 12.01: Lessee to Maintain Its Corporate Existence. The Lessee shall throughout the term hereof maintain its corporate existence, will not dissolve or otherwise dispose of all or substantially all of its assets and will not consolidate with or merge into another entity or permit one or more other entities to consolidate with or merge into it; provided, that the Lessee may, without violating the agreement contained in this Section, consolidate with or merge into another entity, or permit one or more other entities to consolidate with or merge into it, or sell or otherwise dispose of all or substantially all of its assets as an entirety and thereafter dissolve, provided, if Lessee is not the surviving corporation, the surviving, resulting or transferee corporation, as the case may be, (i) assumes in writing all of the obligations of the Lessee herein and (ii) qualifies or is qualified to do business in Texas. Section 12.02: Exempt Facilities. In order to assure that interest on the Bonds shall be exempt from federal income taxation, the Lessee covenants and agrees that it shall not, and it shall not permit or allow any other person to, construct, acquire, use, employ, modify, rebuild or repair the Lessee Project Components or any Special Facilities in any manner that would cause or allow it or them to be or become facilities which are not included within those set forth and described in Sections 142(a)(1) and (c) of the Internal Revenue Code of 1986, as amended, and the regulations prescribed thereunder, and the City covenants and agrees that it will not permit or allow any of the foregoing to occur. The Lessee hereby makes an irrevocable election, which it shall cause to be binding on all successors in interest under this Agreement, not to claim for federal income tax purposes depreciation or investment credit with respect to the Special Facilities or any component thereof. It is further agreed and acknowledged by Lessee that the City shall never be required or requested hereunder to issue any Bonds or expend any proceeds thereof to pay any Costs of the Special Facilities that would have the effect of causing interest on any of the Bonds not to be exempt from federal income taxation. Section 12.03: Notices. Unless otherwise provided herein, all notices required or permitted to be given hereunder to the City, the Trustee or Lessee, as the case may be, shall be given in writing (unless expressly provided otherwise herein) and shall be deemed sufficiently given if in writing and sent either by Registered Mail or Certified Mail, postage prepaid, by hand delivery, telecopy or other electronic means which produces evidence of transmission, in each instance to be effective upon receipt, addressed as follows: To the City : Director, Department of Aviation City of Houston P. O. Box 60106 Houston, Texas 77205 Attention: Director Telephone: (281) 233-3000 Telecopier: (281) 230-1864 and City of Houston P. O. Box 1582 Houston, Texas 77001 Attention: City Attorney, City Secretary and City Controller Telephone: (713) 247-2000 Telecopier: (713) 247-1017   To the Trustee : The Chase Manhattan Bank Attention: Institutional Trust Services 600 Travis Street, Suite 1150 Houston, Texas 77002 Telephone (713) 216-0944 Telecopier (713) 577-5200   To Lessee : Continental Airlines, Inc. 1600 Smith, Department HQS-FN Houston, Texas 77002 Attention: Managing Director Corporate Finance Telephone (713) 324-5297 Telecopier (713) 324-2447 copy to: Continental Airlines, Inc. 1600 Smith, Department HQS-LG Houston, Texas 77002 Attention: General Counsel Telephone (713) 324-5207 Telecopier (713) 324-5161 or to such other address as the City, the Trustee or the Lessee may designate from time to time by written notice to the other parties. All computations for the expiration of time periods required by this Agreement shall be computed from the date such notice is deposited in the United States mail, as set forth above; provided, however, that should the last day of the period fall on a Saturday, Sunday or legal holiday, the period shall run until the end of the next day which is neither a Saturday, Sunday nor legal holiday. Section 12.04: Consents and Approvals. (a) With respect to the approvals herein required of the Lessee, Lessee shall from time to time furnish to the City a certificate signed by its Secretary or an Assistant Secretary, and such certificate shall set forth the officers or representatives of Lessee who are authorized to grant such approvals and to bind the Lessee thereto; and the City and all third parties affected by any such approvals, including the holders of Bonds, may rely upon any writing purporting to grant such approvals signed by any officer or representative thus certified as being conclusively binding upon Lessee, and any such writing shall itself constitute conclusive evidence that any and all corporate actions necessary to be taken with respect to the matter thus approved by such officer or representative to have been so taken by the corporation, and that the approval therein given has been authorized by the corporation. (b) Any consent or approval herein required of the City may be given by the City's Director of the Department of Aviation unless otherwise provided. (c) All consents or approvals of the City, or any department thereof, or Lessee when required herein shall not be unreasonably withheld or delayed. (d) All consents and approvals required or permitted herein by either party shall be given in writing. (e) An approval by the Director, or by any other instrumentality of the City, of any part of Lessee's performance shall not be construed to waive compliance with this Agreement except as expressly set forth in such approval or to establish a standard of performance other than required by this Agreement or by law. Section 12.05: Rights Reserved to City. Nothing contained herein shall unlawfully impair the right of City to exercise its governmental or legislative functions. This Agreement is made subject to the Constitution and laws of the State of Texas and to the provisions of the Airport Improvement Program Grant Agreements applicable to the Airport and its operation, and the provisions of such agreements, insofar as they are applicable to the terms and provisions of this Agreement, shall be considered a part hereof to the same extent as though copied herein at length to the extent, but only to the extent, that the provisions of any such agreements are required generally by the United States at other civil airports receiving federal funds. To the best of City's knowledge, nothing contained in such laws or agreements conflicts with the express provisions of this Agreement. Section 12.06: Force Majeure. Neither the City nor Lessee shall be deemed in violation of this Agreement if it is prevented from performing any of the obligations hereunder by reason of strikes, boycotts, labor disputes, embargoes, shortage of material, acts of God, acts of the public enemy, acts of superior governmental authority, weather conditions, floods, riots, rebellion, sabotage, war, or any other circumstances for which it is not responsible or which is not in its control, and the time for performance shall be automatically extended by the period the party is prevented from performing its obligations hereunder; provided, however, that these provisions shall not apply to any failure by the Lessee to pay the rentals and other charges pursuant to Article 6 hereof, expressly including the Special Facilities Payments payable thereunder, except as may be provided in Article 6A. Section 12.07: Severability Clause. If any word, phrase, clause, paragraph, section or other part of this Agreement shall ever be held to be invalid or unconstitutional by any court of competent jurisdiction, the remainder of this Agreement and the application of such word, phrase, clause, sentence, paragraph, section or other part of this Agreement to any other person or circumstance shall not be affected thereby and it is expressly agreed and understood that the obligation of Lessee to make the rental payments to City required under the provisions of Article 6 hereof shall continue to remain in full force and effect. Section 12.08: Place of Performance; Laws Governing. This Agreement shall be performable and enforceable in Harris County, Texas, and shall be construed in accordance with the laws of the State of Texas, the City Charter and Ordinances of the City of Houston, Federal law and all applicable State and Federal regulations. Lessee acknowledges that, to the extent the City's Charter or Texas law requires any expenditure of funds that may be contemplated to be made by the City herein to be prefunded to be valid, then such expenditure shall be subject to City Council approval; provided, that, the City agrees to use its Best Efforts to obtain such approval. Section 12.09: Brokerage. The Lessee and the City each represents and warrants to the other that no brokers have been concerned on their behalf in the negotiation of this Agreement and that there are no such brokers who are or may be entitled to be paid commissions in connection therewith. The Lessee and the City shall indemnify and save harmless each other of and from any claim for commission or brokerage made by any such brokers when such claims are based in whole or in part upon any acts or omissions of the Lessee or the City as applicable. Section 12.10: Individuals Not Liable. No director, officer, agent or employee of the City or Lessee shall be charged personally or held contractually liable by or to the other party under any term or provision of this Agreement or of any supplement or amendment hereto because of any breach thereof or because of his or their execution of same. Section 12.11: Binding Nature of Agreement; Benefits of Agreement. This Agreement shall inure to the benefit of, and be binding upon, the City and Lessee, and their respective legal representatives, successors and assigns. This Agreement is not made for the benefit of, nor may it be relied upon by, any third party other than the holders of the Bonds and any bond insurer, unless expressly herein provided. Section 12.12: Ambiguities. In the event of any ambiguity in any of the terms of this Agreement, it shall not be construed for or against any party hereto on the basis that such party did or did not author the same. Section 12.13: Survival. Lessee and the City shall remain obligated to the other party hereto under all clauses of this Agreement that expressly or by their nature extend beyond the expiration or termination of this Agreement, including but not limited to the indemnity provisions hereof. Section 12.14: No Merger of Title. There shall be no merger of this Agreement (or of the leasehold estate created by this Agreement) with the ownership of any portion of or interest in the Special Facilities or Ground Lease Properties by reason of the fact that the same person or entity may acquire, own or hold, directly or indirectly, this Agreement (or the rights and interests created by this Agreement) together with an ownership, leasehold or other right or interest in the Special Facilities or Ground Lease Properties; and no such merger shall occur unless and until the City and all persons and entities holding (a) the rights and interest created by this Agreement and (b) the ownership, leasehold or other rights or interest in the Special Facilities and Ground Lease Properties or any part thereof shall join in a written instrument expressly effecting such merger. Without limiting the generality of the foregoing, it is agreed that no merger of title shall arise if the City becomes a sublessee hereunder. Section 12.15: Most Favored Nation. Lessee shall have the same rights and privileges and pay the same City-established fees and charges, not to exceed those established under the provisions of this Agreement as periodically revised under the terms hereof, with respect to the use of the Airport as are granted to or charged any other airline executing a use and lease agreement with City for use of the Airport. It is understood that ground rentals and lease rentals are set by City Council, as provided by City Charter, and to the extent permitted under applicable Federal law therefore may vary between lessees on account of the different premises to be leased at the time thereof. It is further understood that lease rentals and charges in terminal buildings, flight stations and associated aircraft apron areas constructed in the future and not described in this Agreement may vary from the lease rentals and charges established herein for the facilities, depending upon the capital cost and financing arrangements involved and, therefore may be more or less than the lease rentals established herein for similar facilities. Section 12.16: Operation of Airport. City agrees to maintain and operate the Airport in accordance with all applicable standards, rules and regulations of the Federal Aviation Administration or its successor. City shall exercise its rights hereunder and otherwise operate the Airport with due regard for the operational requirements and long-term interests of the airlines and the interests of traveling public, in a manner that is consistent with applicable law, federal aviation regulation, federal grant assurances, and City airport revenue bond ordinances. Section 12.17: Entire Agreement. This Agreement, together with the Trust Indenture, constitutes the entire agreement between the City and Lessee pertaining to the subject matter hereof. IN WITNESS WHEREOF, this Agreement has been entered into and effective as of the date first above written, and executed in multiple counterparts by the respective officers of the parties hereto. ATTEST: CITY OF HOUSTON By City Secretary Mayor APPROVED AS TO FORM COUNTERSIGNED BY   ______________________________________ Senior Assistant City Attorney City Controller APPROVED Director, Department of Aviation CONTINENTAL AIRLINES, INC. ATTEST: By: Title:   Title: THE STATE OF TEXAS ' COUNTY OF HARRIS ' BEFORE ME, the undersigned authority, a Notary Public in and for Harris County, Texas, on this day personally appeared LEE BROWN, Mayor of the CITY OF HOUSTON, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, as the act and deed of the CITY OF HOUSTON, the said municipal corporation, and in the capacity therein stated. GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ______ day of _______________, 2001. Notary Public in and for Harris County, Texas THE STATE OF TEXAS ' COUNTY OF HARRIS ' BEFORE ME, the undersigned authority, on this day personally appeared _______________, ___________________ of Continental Airlines, Inc., a corporation, known to me to be the person and officer whose name is to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, in the capacity therein stated, and as the act and deed of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the _______ day of ___________________, 2001. Notary Public in and for Harris County, Texas EXHIBITS TO BE ATTACHED Exhibit "A" Description of Terminal E Project Exhibit "A-1" South Concourse Exhibit "A-2" Lessee=s Central Ticketing Facility Exhibit "A-3" Lessee=s Terminal C-East Garage ATO Facility Exhibit "A-4" Lessee=s Terminal E Baggage System Improvements Exhibit "A-5" Terminal E Apron Area Exhibit "A-6" Terminal E Fueling Facilities Exhibit "A-7" Terminal E Pedestrian Bridges Exhibit "A-8" Terminal E Utilities Exhibit "A-9" Shell for Central Ticketing Facility and Associated Ramp Exhibit "A-10" Baggage Tunnel Exhibit "B" Description of Easements Exhibit "C" Description of Location of Lessee Project Components Exhibit "D" Deed and Bill of Sale for Lessee Project Components Exhibit "E" Schedule of Special Facilities Payments for Lessee=s Tax Reporting Purposes Exhibit "F" Central FIS Area Subject to Lessee Concessions Exhibit "G" Illustrative Calculation of Terminal E Apron Area Charges Exhibit "H" Allocated Bond Amounts Exhibit "I" Form of Statistical Report Exhibit "J" Form of Agreement of Responsibility Exhibit "K" Form of Acknowledgment and Reporting Agreement EXHIBIT "A" DESCRIPTION OF TERMINAL E PROJECT The Terminal E Project shall be comprised of the Lessee Project Components and the City Project Components described herein. The Terminal E Project shall include two Phases, the South Concourse Phase and the International Ticketing Facility Phase. DESCRIPTION OF LESSEE PROJECT COMPONENTS All properties, facilities, structures, equipment, fixtures, furnishings, finishes and appurtenances to be acquired, constructed, fabricated and/or installed in, on, as a part of or around the Ground Lease Properties and the Easements that are financed with proceeds of the Series 2001 Bonds and leased to the Lessee pursuant to the Special Facilities Lease Agreement, including without limitation the following: 1. South Concourse (S): Exhibit A-1 2. Lessee=s Central Ticketing Facility (I): Exhibit A-2 3. Lessee=s Terminal C-East Garage ATO Facility (S): Exhibit A-3 4. Lessee=s Terminal E Baggage System Improvements (I): Exhibit A-4   DESCRIPTION OF CITY PROJECT COMPONENTS All properties, facilities, structures, equipment, fixtures, furnishings, finishes and appurtenances to be acquired, constructed, fabricated and/or installed by the City as a part of the Terminal E Project, including without limitation, the following: 1. Terminal E Apron Area (S): Exhibit A-5 2. Terminal E Fueling Facilities (S): Exhibit A-6 3. Terminal E Pedestrian Bridges (I): Exhibit A-7 4. Terminal E Utilities (S): Exhibit A-8 5. Shell for Central Ticketing Facility and Associated Ramp (I): Exhibit A-9 6. Baggage Tunnel (I): Exhibit A-10 The Components marked (S) shall be included in the South Concourse Phase; those marked (I) in the International Ticketing Facility Phase. EXHIBIT "A-1" SOUTH CONCOURSE The Terminal E South Concourse is expected to be an approximately 590,000 square foot - three level International and Domestic passenger concourse facility. This facility will be capable of simultaneous domestic and international operations through the functional design of the passenger boarding and departure corridors. The aircraft gates are designed to accommodate aircraft ranging in size from regional jets to the Boeing 777/747 "wide wing" aircraft. The ramp operations and support facilities are expected to be located on the ramp level. Passenger hold rooms, Lessee-managed concessions and other amenities are expected to be located on the second or concourse level. The third level corridor with moving sidewalks will provide sterile passage for international arriving passengers to the Central FIS building (being constructed by the City) for processing into the country. The program includes an approximately 15,000 square foot Presidents Club to be constructed at the mezzanine level. Please refer to the attached drawing for a further description of the South Concourse. The attached drawing will be superceded by final, as-built drawings upon completion of the Lessee=s Project Components. EXHIBIT "A-2" LESSEE=S CENTRAL TICKETING FACILITY Central Ticketing is expected to be an approximately 60,000 square foot facility (approximately 48,000 square feet of ticketing hall area and approximately 12,000 square feet of mezzanine level support space) comprised of passenger queuing area, International ticketing and baggage check-in, and Lessee operations support facilities. There are expected to be 48 ticketing positions for passenger processing. The check-in will be supported by over-size baggage conveyor belts to transport baggage to the International Bag Room. The security checkpoint is expected to be equipped with three sets of passenger and baggage screening devices. The base building shell and infrastructure are being constructed by the City. Please refer to the attached drawing for a further description of the Lessee=s Central Ticketing Facility. The attached drawing will be superceded by final, as-built drawings upon completion of the Lessee=s Project Components. EXHIBIT "A-3" LESSEE=S TERMINAL C-EAST GARAGE ATO FACILITY This facility is expected to provide 16 check-in counters located in the second level of the existing Terminal C parking garage. The facility will be connected to the west end of the new South Concourse via an elevated bridge walkway over South Terminal Road. This will provide a shorter path of travel for departing passengers and for arriving passengers who need to go to baggage claim. The travel time is expected to be further reduced by including moving walkways. Please refer to the attached drawing for a further description of the Lessee=s Terminal C-East Garage ATO Facility. The attached drawing will be superceded by final, as-built drawings upon completion of the Lessee=s Project Components. EXHIBIT "A-4" LESSEE=S TERMINAL E BAGGAGE SYSTEM IMPROVEMENTS The baggage conveyance system will originate in the lobby of the new Lessee Central Ticketing Facility and will transport checked and rechecked luggage from the Lessee Central Ticketing Facility to the expanded portion of the Terminal C bag room located on the first level of the existing Terminal C Parking Garage. The new bag room is expected to house an 11-pier tilt tray sortation system for processing outbound international baggage. The system is expected to be like the existing domestic baggage sortation system located in the adjacent Terminal C domestic bag room. The design is expected to accommodate normal and oversized bags and the expedited processing of "hot-bags". The system is further expected to include transfer capability to accommodate bags checked in at Terminal C for flights departing from the South Concourse and vice versa. Please refer to the attached drawing for a further description of the Lessee=s Terminal E Baggage System Improvements. The attached drawing will be superceded by final, as-built drawings upon completion of the Lessee=s Project Components. EXHIBIT "A-5" TERMINAL E APRON AREA Area consists generally of pavement as indicated on the next page. Refer to construction documents for HAS Project 554 for pavement details. EXHIBIT "A-6" TERMINAL E FUELING FACILITIES Facilities include fuel mains, laterals, pits, and associated valves, controls, cathodic protection, and Emergency Fuel Shut-off System (EFSO) for Terminal E. With exception of some EFSO components, facilities are located within the Terminal E apron area as indicated by the drawing on the next page. Some EFSO components, such as pull stations, controls, and related wiring, fall within the footprint of Terminal E. Refer to construction documents for HAS Project 554 for fueling facility details. EXHIBIT "A-7" TERMINAL E PEDESTRIAN BRIDGES Refer to drawing on next page and to construction documents for HAS Project 500F. EXHIBIT "A-8" TERMINAL E UTILITIES Terminal E utilities include: an underground utility tunnel from the existing ITT tunnel to the south curb of South Terminal Road. telecommunications cable ways and HVAC piping, for Terminal E, within the utility tunnel and the ITT tunnel. Relocation of existing Southwestern Bell Telephone (SWBT) duct banks for Terminal E and construction of new SWBT ducts for Terminal E. Work necessary to bring primary power, water, sewer, natural gas and storm water to Terminal E. Refer to drawing on next page and to construction documents for HAS Project 500J. EXHIBIT "A-9" SHELL FOR CENTRAL TICKETING FACILITY AND ASSOCIATED RAMP The Central Ticketing Facility will include: About 48,000 SF ticketing facility, plus a mechanical mezzanine. Associated departures curb side, up ramp and down ramp. Structure and architectural treatments on arrivals curb side to accommodate Continental=s bag conveyors from Central Ticketing. Finishes on walls and ceilings in lobby area of Central Ticketing. Mechanical rooms on the mechanical mezzanine, and HVAC distribution for the lobby area and IDF rooms and electrical rooms on the mechanical mezzanine. IDF rooms on the mechanical mezzanine. Electrical rooms on the mechanical mezzanine. Power and distribution panel in Continental portion of each IDF on the mechanical mezzanine. In-floor cable tray under ticketing counters. Power, cable pathways, cabling, and field devices from security checkpoint and CTX machines to IDF rooms. Power, data, and related cable pathways to Continental FIDS. Other work as may be determined practicable to be constructed by the City. Refer to drawing on the next page and to construction documents for HAS Project 500F. EXHIBIT "A-10" BAGGAGE TUNNEL The baggage tunnel will consist of a basement beneath baggage recheck in the FIS building. The basement will feed into a baggage tunnel that traverses from the FIS to the future Terminal C East Garage toll plaza. Refer to drawing on the next page and to construction documents for HAS Project 500E and Project 500J. EXHIBIT "B" DESCRIPTION OF EASEMENTS The Easements shall consist of the following: All reasonably necessary easements within the Airport to permit the extension of water, sanitary sewer, electric power, gas and telephone service to the Ground Lease Properties and the Special Facilities located thereon. Such easements shall be provided by the City to the Lessee by the time or times needed by Lessee to extend such services. EXHIBIT "C" DESCRIPTION OF GROUND LEASE PROPERTIES Lessee's Project Components shall be located in the shaded areas depicted in the diagrams attached to Exhibits A-1 through A-4, or such other areas as shall be proposed by Lessee and approved in writing by the Director. EXHIBIT "D" DEED AND BILL OF SALE THE STATE OF TEXAS ' ' KNOW ALL MEN BY THESE PRESENTS: COUNTY OF HARRIS ' THAT CONTINENTAL AIRLINES, INC., a corporation (hereinafter called "Grantor"), for and in consideration of the sum of Ten and No/100 Dollars ($10.00) cash and other good and valuable considerations to it in hand paid by the CITY OF HOUSTON, TEXAS, a municipal corporation and home-rule City situated principally in Harris County, Texas (hereinafter called "Grantee"), the receipt and sufficiency of which are here acknowledged and confessed, has GRANTED, BARGAINED, SOLD AND CONVEYED and by these presents does hereby confirm that it has GRANTED, BARGAINED, SOLD AND CONVEYED unto the Grantee those certain airport Special Facilities more fully described in Exhibit "A" attached hereto located in and at George Bush Intercontinental Airport/Houston in leased space and/or in the easements leased or granted to Grantee by Grantor which leased space and/or easements are more fully described in Exhibit "B" attached hereto. It is acknowledged and agreed that Grantor has already conveyed the Special Facilities herein described to Grantee pursuant to the Terminal E Lease and Special Facilities Lease Agreement dated as of August 1, 2001, and that this Deed and Bill of Sale is being delivered solely to further confirm the conveyance therein made. TO HAVE AND TO HOLD the aforesaid Special Facilities, together with all and singular the rights and appurtenances thereto in any way belonging unto Grantee, its successors and assigns forever; and it is hereby agreed that Grantor, its successors and legal representatives are hereby bound to WARRANT AND FOREVER DEFEND, all and singular, said property unto Grantee, its successors and assigns against every person whosoever lawfully claiming or to claim the same, or any part thereof, by, through or under Grantor, but not otherwise. THE EXECUTION, delivery and acceptance of this conveyance is made pursuant to the terms of that certain Special Facilities Lease Agreement dated as of August 1, 2001, by and between Grantor and Grantee. EXECUTED as of the _______ day of ________, 2001. CONTINENTAL AIRLINES, INC.   By Title: ATTEST: Assistant Secretary THE STATE OF TEXAS ' COUNTY OF HARRIS ' BEFORE ME, the undersigned authority, on this day personally appeared ____________________, ______________________________ of the CONTINENTAL AIRLINES, INC., a corporation, known to me to be the person and officer whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, in the capacity therein stated, and as the act of said corporation. GIVEN UNDER MY HAND AND SEAL OF OFFICE this _______ day of _______, 2001. Notary Public in and for Harris County, Texas (SEAL) EXHIBIT "E" SCHEDULE OF SPECIAL FACILITIES PAYMENTS FOR LESSEE'S TAX REPORTING PURPOSES EXHIBIT "F" CENTRAL FIS AREA SUBJECT TO LESSEE CONCESSIONS EXHIBIT "G" ILLUSTRATIVE CALCULATION OF TERMINAL E APRON AREA CHARGES EXHIBIT "H" ALLOCATED BOND AMOUNTS South Concourse: $270,800,000 International Ticketing: $52,700,000 EXHIBIT "I" FORM OF STATISTICAL REPORT EXHIBIT "J" FORM OF AGREEMENT OF RESPONSIBILITY [to be retyped on Lessee=s letterhead]   Director Department of Aviation City of Houston P. O. Box 60106 Houston, Texas 77205 Re: [Name of Subsidiary] (the "Subsidiary") Dear _____________: Pursuant to the terms of that certain Terminal E Lease and Special Facilities Lease Agreement dated as of August 1, 2001, in particular, the definition of "Subsidiary", the undersigned Continental Airlines, Inc. (the "Lessee") is afforded the opportunity for any Subsidiary that was wholly owned on or after August 1, 2001, and which ceases thereafter to be wholly owned by the Lessee, to continue to be considered a Subsidiary with respect to certain of its operations upon satisfaction of certain conditions. The purpose of this letter is to satisfy one of such conditions. The undersigned hereby agrees that with respect to all operations of the Subsidiary that are conducted [under Lessee=s name or (insert Lessee=s derivative name)] [Lessee may designate which specific derivative names the Subsidiary may conduct operations under], the Lessee hereby agrees to be responsible for all such operations of (including the payment of any activity fees and charges incurred by) such Subsidiary to the same extent as if the Subsidiary continued to be wholly owned by the undersigned. Very truly yours,     EXHIBIT "K" FORM OF ACKNOWLEDGMENT AND REPORTING AGREEMENT [to be retyped on Subsidiary=s letterhead] Director, Department of Aviation City of Houston P. O. Box 60106 Houston, Texas 77205 Re: Acknowledgment and Reporting Agreement Dear _____________: The undersigned entity is an entity [or a successor to an entity] that was formerly a wholly owned subsidiary of Continental Airlines, Inc. The undersigned wishes to qualify for continuing treatment as a "Subsidiary" of Continental Airlines, Inc., under that certain Terminal E Lease and Special Facilities Lease Agreement dated as of August 1, 2001 (the "Lease"), between the City and Continental Airlines, Inc. ("Continental"), as Lessee. Accordingly, the undersigned hereby acknowledges and agrees as follows: 1. The undersigned acknowledges its understanding that, upon ceasing to be wholly owed by Continental Airlines, Inc., it will cease to enjoy any of the contractual and leasehold privileges that it formerly enjoyed under the Lease with respect to its operations at and use of George Bush Intercontinental Airport/Houston, except as provided below. 2. The undersigned may continue to operate at George Bush Intercontinental Airport/Houston under the Lease and enjoy all rights conferred thereunder without the payment of any additional fees or premiums with respect to those operations that it conducts under Continental=s name or a derivative thereof if (i) Continental agrees to be responsible for such operations to the same extent as if the Subsidiary continued to be wholly owned by Continental and (ii) the undersigned executes this letter and agrees to the reporting requirements set forth below. 3. So long as the undersigned continues to operate as a "Subsidiary" of Continental within the meaning of the Lease, the undersigned agrees to report to the Director all of its operations at George Bush Intercontinental Airport/Houston, all of the statistical information required by Section 6.05 of the Lease, which shall be reported separately based on its operations for (i) Continental, (ii) any other airline, and (iii) for itself. Very truly yours,

  CHANGE IN CONTROL EMPLOYMENT AGREEMENT This Agreement is made as of this 25th of June, 2001, by and between Tellabs, Inc., a Delaware corporation (the "Corporation") and _______________ (the "Executive"). WITNESSETH : WHEREAS, the Corporation wishes to attract and retain well-qualified executive and key personnel and to assure both itself and the Executive of continuity of management in the event of any actual or threatened Change in Control (as defined in Paragraph 2) of the Corporation; and WHEREAS, to achieve this purpose, the Board of Directors of the Corporation considered and approved this agreement to be entered into with the Executive as being in the best interests of the Corporation and its shareholders; NOW, THEREFORE, in consideration of the premises and mutual covenants set forth herein, the parties hereto agree as follows: 1. Operation of Agreement The "effective date of this Agreement" shall be the date on which a Change in Control occurs, and this Agreement shall not have any force or effect whatsoever prior to that date. This Agreement shall supersede, in its entirety, any previously existing Change in Control Agreement between Executive and the Corporation. 2. Change in Control For the purposes of this Agreement, a "Change in Control" means the first of the following events to occur: (a)Any "person" (as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), excluding for this purpose, the Company or any subsidiary of the Company, or any employee benefit plan of the Company or any subsidiary of the Company, or any person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan which acquires beneficial ownership of voting securities of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities; provided, however, that no Change in Control will be deemed to have occurred as a result of a change in ownership percentage resulting solely from an acquisition of securities by the Company; and provided further that no Change in Control will be deemed to have occurred if a person inadvertently acquires an ownership interest of 20% or more but then promptly reduces that ownership interest below 20%; (b) During any two consecutive years (not including any period beginning prior to June 30, 2000), individuals who at the beginning of such two-year period constitute the Board and any new director (except for a director designated by a person who has entered into an agreement with the Corporation to effect a transaction described elsewhere in this definition of Change in Control) whose election by the Board or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved (such individuals and any such new director, the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; (c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Corporation (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners of outstanding voting securities of the Corporation immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the Corporation resulting from such Business Combination (including, without limitation, a Corporation which as a result of such transaction owns the Corporation or all or substantially all of the Corporation's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the outstanding voting securities of the Corporation; (ii) no person (excluding any Corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Corporation or such Corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then combined voting power of the then outstanding voting securities of such Corporation except to the extent that such ownership existed prior to the Business Combination; and (iii) at least a majority of the members of the board of directors of the Corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; (d) Approval by the stockholders of the Corporation of a complete liquidation or dissolution of the Corporation; or (e) A tender offer (for which a filing has been made with the Securities and Exchange Commission "SEC") which purports to comply with the requirements of Section 14(d) of the Securities Exchange Act of 1934 and the corresponding SEC rules) is made for the stock of the Corporation, then the first to occur of: (i) Any time during the offer when the person making the offer owns or has accepted for payment stock of the Corporation with 25% or more of the total voting power of the Corporation's securities, or (ii) Three business days before the offer is to terminate unless the offer is withdrawn first if the person making the offer could own, by the terms of the offer plus any shares owned by this person, stock with 50% or more of total voting power of the Corporation's securities when the offer terminates.   3. Employment The Corporation hereby agrees to continue the Executive in its employ and/or the employ of one or more of its subsidiaries and the Executive hereby agrees to remain in the employ of the Corporation and/or such subsidiaries, for the period commencing on the effective date of this Agreement and ending on the second anniversary of such date (the "employment period"), to exercise such authority and perform such executive duties as are commensurate with the authority being exercised and duties being performed by the Executive immediately prior to the effective date of this Agreement, which services shall be performed at a location within the metropolitan area in which the Executive was employed immediately prior to the effective date of this Agreement. The Executive agrees that during the employment period he/she shall devote his/her full business time exclusively to his/her executive duties and shall perform such duties faithfully and efficiently. 4. Compensation, Compensation Plans, Benefits and Perquisites During the employment period, the Executive shall be compensated as follows: (a) He/she shall receive an annual salary at a rate which is not less than his/her rate of annual salary immediately prior to the effective date of this Agreement, with the opportunity for increases from time to time thereafter which are in accordance with the Corporation's regular practices. (b) He/she shall be eligible to participate on a reasonable basis in the Corporation's stock option plans, the annual incentive bonus program and any other bonus and incentive compensation plans (whether now or hereinafter in effect) in which executives with comparable duties are eligible to participate, which plans must provide opportunities to receive compensation which are at least as great as the opportunities under the plans in which the Executive was participating immediately prior to the effective date of this Agreement. (c) He/she shall be entitled to receive employee benefits and perquisites which are the greater of the employee benefits and perquisites provided by the Corporation to executives with comparable duties or the employee benefits and perquisites to which he/she was entitled immediately prior to the effective date of this Agreement. Such benefits and perquisites shall include, but not be limited to, the benefits and perquisites included under the Tellabs Advantage Program, and the Tellabs, Inc. Employee Welfare Benefits Plan. 5. Termination Following Change in Control (a) For purposes of this Agreement, the term "termination" shall mean (i) termination by the Corporation of the employment of the Executive with the Corporation and all of its subsidiaries for any reason other than death, disability or "cause" (as defined below), or (ii) resignation of the Executive for "good reason" (as defined below). (b) The term "good reason" shall mean (i) a significant change in the nature or scope, or the location for the exercise or performance, of the Executive's authority or duties from those referred to in Section 3, a reduction in total compensation, compensation plans, benefits or perquisites from those provided in Section 4, or the breach by the Corporation of any other provision of this Agreement; or (ii) a reasonable determination by the Executive that, as a result of a Change in Control and a change in circumstances thereafter significantly affecting his/her position, he/she is unable to exercise the authorities, powers, function or duties attached to his/her position and contemplated by Section 3 of the Agreement. (c) The term "cause" means (i) the willful and continued failure by the Executive to substantially perform his/her duties with the Corporation and/or, if applicable, one or more of its subsidiaries (other than any such failure resulting from his/her incapacity due to physical or mental illness) after a demand for substantial performance is delivered to him/her by the Board of Directors of the Corporation which specifically identifies the manner in which the Board believes the Executive has not substantially performed his/her duties, (ii) the willful engaging by the Executive in gross misconduct materially and demonstrably injurious to the property or business of the Corporation or any of its subsidiaries, or (iii) fraud, misappropriation or commission of a felony. For purposes of this paragraph, no act or failure to act on the Executive's part will be considered "willful" unless done, or omitted to be done, by him/her in bad faith and without reasonable belief that his/her action or omission was in the interests of the Corporation or not opposed to the interests of the Corporation. 6. Confidentiality The Executive agrees that during and after the employment period, he/she shall retain in confidence any confidential information known to him/her concerning the Corporation and its subsidiaries and their respective businesses for as long as such information is not publicly disclosed. 7. No Obligation to Mitigate Damages The Executive shall not be obligated to seek other employment in mitigation of amounts payable or arrangements made under the provisions of this Agreement and the obtaining of any such other employment shall in no event effect any reduction of the Corporation's obligations under this Agreement. 8. Severance Allowance (a) In the event of termination of the Executive during the employment period, the Executive shall be entitled to receive a lump sum severance allowance within five days of such termination, in an amount which is equal to the sum of the following: (i) The amount equivalent to salary payments for 24 calendar months, at the rate required by paragraph 4(a) and in effect immediately prior to termination, plus a pro rata share of the estimated amount of any bonus which would have been payable for the bonus period which includes the termination date; and (ii) The amount equivalent to 24 calendar months of bonus at the target rate, which includes his/her termination date. (b)In addition to such amount under paragraph (a) above, the Executive shall also receive in cash the value of the incentive compensation (including, but not limited to, employer contributions to the Tellabs Advantage Program and the right to receive stock awards and to exercise stock options and other bonus and similar incentive compensation benefits) to which he/she would have been entitled under all incentive compensation plans maintained by the Corporation if he/she had remained in the employ of the Corporation for 24 months after such termination. The amount of such payment shall be determined as of the date of termination and shall be paid as promptly as practicable and in no event later than 30 days after such termination. (c)The Corporation shall maintain in full force and effect for the Executive's continued benefit (and, to the extent applicable, the continued benefit of his dependents) all of the employee benefits (including, but not limited to, coverage under any medical and insurance plans, programs or arrangements) to which he/she would have been entitled under all employee benefit plans, programs or arrangements maintained by the Corporation if he/she had remained in the employ of the Corporation for 24 calendar months after his/her termination, or if such continuation is not possible under the terms and provisions of such plans, programs or arrangements, the Corporation shall arrange to provide benefits substantially similar to those which the Executive (and, to the extent applicable, his/her dependents) would have been entitled to receive if the Executive had remained a participant in such plans, programs or arrangements for such 24-month period, as the case may be. 9. Adjustments in Case of "Excess Parachute Payments" If any payments or benefits received or to be received by the Executive in connection with the Executive's employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Corporation, or any person affiliated with the Corporation) (the "Payments"), will be subject to the tax (the "Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") (or any similar tax that may hereafter be imposed), the Corporation shall pay at the time specified below, an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive, after deduction of any Excise Tax on the Payments and any federal, state and local income or other applicable tax and Excise Tax upon the payment provided for by this paragraph, shall be equal to the Payments. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at the Executive's highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the Executive's highest marginal rate of taxation in the state and locality of the Executive's residence on the date on which the Excise Tax is determined, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. The computations required by this paragraph shall be made by the independent public accountants then regularly retained by the Corporation, in consultation with tax counsel selected by them and acceptable to the Executive. The Corporation shall provide the Executive with sufficient tax and compensation data to enable the Executive or his/her tax advisor to verify such computations and shall reimburse the Executive for reasonable fees and expenses incurred with respect thereto. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder, the Executive shall repay to the Corporation at the time that the amount of such reduction in Excise Tax is finally determined the portion of the Gross-Up Payment attributable to such reduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax and federal and state and local income tax imposed on the Gross-Up Payment being repaid by the Executive) plus interest on the amount of such repayment from the date the Gross-Up Payment was initially made to the date of repayment at the rate provided in Section 1274(b)(2)(B) of the Code (the "Applicable Rate"). In the event that the Excise Tax is determined by the Internal Revenue Service or by such independent public accountants to exceed the amount taken into account hereunder (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Corporation shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties, fines or additions to tax payable with respect to such excess) at the time that the amount of such excess if finally determined. Any payment to be made under this paragraph shall be payable within five (5) days of the determination of the accountants that such a payment is required hereunder and, if applicable, within five (5) days of such determination that the Excise Tax is greater or less than initially calculated but, in no event, later than thirty (30) days after the Executive's receipt of the Payments resulting in such Excise Tax. 10. Interest; Indemnification (a)In the event any payment to Executive under this Agreement is not paid within five business days after it is due, such payment shall thereafter bear interest at the prime rate from time to time as published in The Wall Street Journal, Midwest Edition. (b)The Corporation hereby indemnifies the Executive for all legal fees and expenses incurred by Executive in contesting any action of the Corporation with respect to this Agreement, including the termination of Executive's employment hereunder, or incurred by Executive in seeking to obtain or enforce any right or benefit provided by this Agreement. 11. Notices Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and if sent by registered or certified mail to the Executive at the last address he/she has filed in writing with the Corporation or, in the case of the Corporation, at its principal executive offices. 12. Arbitration of Disputes and Reimbursements of Legal Costs. Any controversy or claim arising out of or relating to this Agreement (or the breach thereof) shall be settled by final, binding and non-appealable arbitration in Chicago, Illinois by three arbitrators. Subject to the following provisions, the arbitration shall be conducted in accordance with the rules of the American Arbitration Association (the "Association") then in effect. One of the arbitrators shall be appointed by the Corporation, one shall be appointed by the Executive, and the third shall be appointed by the first two arbitrators. If the first two arbitrators cannot agree on the third arbitrator within 30 days of the appointment of the second arbitrator, then the third arbitrator shall be appointed by the Association and shall be experienced in the resolution of disputes under employment agreements for executives of major corporations. Any award entered by the arbitrators shall be final, binding and nonappealable and judgment may be entered thereon by either party in accordance with applicable law in any court of competent jurisdiction. This arbitration provision shall be specifically enforceable. The arbitrators shall have no authority to modify any provision of this Agreement or to award a remedy for a dispute involving this Agreement or to award a remedy for a dispute involving this Agreement other than a benefit specifically provided under or by virtue of the Agreement. If the Executive prevails on any material issue which is the subject of such arbitration or lawsuit, the Corporation shall be responsible for all of the fees of the American Arbitration Association and the arbitrators and any expenses relating to the conduct of the arbitration (including the Corporation's and the Executives' reasonable attorneys' fees and expenses). Otherwise, each party shall be responsible for its own expenses relating to the conduct of the arbitration (including reasonable attorneys' fees and expenses) and shall share the fees of the American Arbitration equally. 13. Non-Alienation The Executive shall not have any right to pledge, hypothecate, anticipate or in any way create a lien upon any amounts provided under this Agreement; and no benefits payable hereunder shall be assignable in anticipation of payment either by voluntary or involuntary acts, or by operation of law, except by will or the laws of descent and distribution. 14. Governing Law The provisions of this Agreement shall be construed in accordance with the laws of the State of Illinois. 15. Amendment This Agreement may be amended or canceled by mutual agreement of the parties in writing without the consent of any other person and, so long as the Executive lives, no person, other than the parties hereto, shall have any rights under or interest in this Agreement or the subject matter hereof. 16. Successor to the Corporation This Agreement shall be binding upon and inure to the benefit of the Corporation and any successor of the Corporation. 17. Severability In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect.   IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to the authorization from its Board of Directors, the Corporation has caused this Agreement to be executed in its name on its behalf, and its corporate seal to be hereunto affixed and attested by its Secretary, all as of the day and year first above written.   ________________________________________ Executive   TELLABS, INC., a Delaware corporation By:_____________________________________ President and Chief Executive Officer   ATTEST:   ____________________________________ Secretary     (Seal)

EXHIBIT 10.38 AMENDMENT NO. 2 TO AMENDED AND RESTATED AGREEMENT (U.S. and Canada)) This AMENDMENT NO. 2 TO AMENDED AND RESTATED AGREEMENT (the "Amendment"), is entered into as of February 23, 2001 by and among, on the one hand, HOFFMANN-LA ROCHE INC., a New Jersey corporation having offices at 340 Kingsland Street, Nutley, New Jersey 07110 ("Roche- Nutley") and F. HOFFMANN-LA ROCHE LTD of Basel, Switzerland ("F. Roche") (Roche-Nutley and F.Roche are hereinafter individually and collectively referred to as "Roche") and, on the other hand, PROTEIN DESIGN LABS, INC., a Delaware corporation having offices at 34801 Campus Drive, Fremont, California 94555, U.S.A. ("PDL") and amends that certain Amended and Restated Agreement dated October 20, 1999, as amended (the "Agreement"). Except as expressly provided herein, capitalized terms shall have the meaning set forth in the Agreement. RECITALS A. WHEREAS, Roche and PDL are parties to the Agreement; and B. WHEREAS, Roche and PDL have previously amended the Agreement by letter amendment dated June 2, 2000 with respect to certain manufacturing matters. C. WHEREAS, Roche and PDL desire to amend the Agreement to clarify that asthma is included in the definition of Autoimmune Indications under Section 1.16 of the Agreement. AGREEMENT NOW THEREFORE, the parties agree as follows: Except as expressly set forth herein, capitalized terms and references to Sections, Exhibits and Articles shall be deemed references to the Agreement. 1. AMENDMENT OF AGREEMENT. Section 1.16 is amended to add "asthma," where indicated by underlining below and to read in full as follows: 1.16 "Autoimmune Indications" means (1) asthma and (2) all indications that involve pathogenic consequences, including tissue injury, produced by autoantibodies or autoreactive T lymphocytes interacting with self epitopes, i.e., autoantigens. Autoimmune Indications shall include, without limitation, psoriasis, rheumatoid arthritis, systemic lupus erythematosus, scleroderma, juvenile rheumatoid arthritis, polymytosis, Type I diabetes, sarcoidosis, Sjogrens syndrome, chronic active non-pathogenic hepatitis, non-infectous uveitis (Behcets), aplastic anemia, regional non-pathogenic enteritis (including ulcerative colitis, Crohn's Disease and inflammatory bowel disease), Kawasaki's disease, post-infectious encephalitis, multiple sclerosis, and tropic spastic paraparesis. 2. NO OTHER CHANGES. On and after the date hereof, each reference in the Agreement to "this Amended and Restated Agreement," "hereunder," "hereof," or words of like import referring to the Agreement, shall mean and be a reference to the Agreement as amended hereby. Except as specifically amended above, the Agreement is and shall continue to be in full force and effect. IN WITNESS WHEREOF, the parties have executed this Amendment through their duly authorized representatives as of the date first set forth above. Protein Design Labs, Inc. F. Hoffmann-La Roche Ltd By By Title Title Hoffmann-La Roche Inc. By Title --------------------------------------------------------------------------------

RATIFICATION OF GUARANTY         This Ratification of Guaranty (this “Ratification”) is made and entered into as of the _____ day of January, 2001 by and between ENSCO INTERNATIONAL INCORPORATED (the “Guarantor”), in favor of THE UNITED STATES OF AMERICA, represented by the SECRETARY OF TRANSPORTATION, acting by and through the MARITIME ADMINISTRATOR (the “Secretary”). For and in consideration of the mutual covenants and agreements herein contained, the Guarantor hereby ratifies as of the date of this Ratification that certain Guaranty (the “Guaranty”), as amended, executed by Guarantor in favor of the Secretary dated as of December 15, 1999.   A. WHEREAS, the Guarantor is the ultimate parent of ENSCO OFFSHORE COMPANY, a Delaware corporation (the "Shipowner"); and   B. WHEREAS, the Shipowner, in connection with the financing of the Vessel, issued a floating rate promissory note to Citibank International, plc as Facility Agent (the "Govco Note"); and   B. WHEREAS, pursuant to Title XI of the Merchant Marine Act, 1936, as amended, the Secretary authorized a guarantee to be endorsed upon the Govco Note and any Obligations issued in replacement thereof (the "Guarantee"); and   C. WHEREAS, the Shipowner, pursuant to the terms and provisions of the Security Agreement dated December 15, 1999, between the Shipowner and the Secretary (the “Security Agreement”), issued and delivered to the Secretary a promissory note in the original principal amount of $194,855,000 (said promissory note, as amended, modified, supplemented or endorsed, herein called the “Secretary’s Note”), in consideration of the issuance of the Guarantee by the Secretary of the payment of the unpaid interest on, and the unpaid balance of the principal of the Obligations issued by the Shipowner; and   D. WHEREAS, on the date hereof, the Shipowner has issued its United States Government Guaranteed Ship Financing Bond, 7500 Series (the "Bond"), to, among other things, refinance the Govco Note; and   E. WHEREAS, the Secretary requires, as a condition to authorizing the endorsement of Guarantee upon the Bond that the Guarantor ratify its obligations under the Guaranty.   NOW THEREFORE, the parties agree as follows:                 1.      The Guarantor agrees that the terms, conditions, representations and warranties of the Guaranty shall remain unchanged, and the terms, conditions, representations, warranties and covenants of the Guaranty are true as of the date hereof, are ratified and confirmed in all respects and shall be continuing and binding upon the Guarantor and the Guaranty shall be fully applicable to the obligations to the Secretary made by Shipowner under the Secretary’s Note, as the Secretary’s Note may be amended or restated from time to time, notwithstanding the issuance by the Shipowner of the Bond and refinancing of the Govco Note.                 2.     All capitalized terms used in this Ratification and not defined herein are used with the meanings given to them in the Security Agreement.                 3.     This Ratification shall be deemed to be a contract under and subject to, and shall be construed for all purposes by the federal law of the United States of America or in the absence of applicable federal law by the laws of the State of Texas.                  IN WITNESS WHEREOF, the parties have executed this Ratification to be executed as of the ______ day of January, 2001.       ENSCO INTERNATIONAL INCORPORATED           BY:                                                         NAME:                                                    TITLE:                                                         CONSENT:                      The Secretary hereby consents to this Ratification of Guaranty. ATTEST:   UNITED STATES OF AMERICA, SECRETARY OF TRANSPORTATION                                                 BY:  MARITIME ADMINISTRATION By:                                                          Secretary            Maritime Administration       --------------------------------------------------------------------------------   Document 8.01 GUARANTY AGREEMENT IN FAVOR OF THE UNITED STATES         This Guaranty Agreement (the “Guaranty Agreement”) dated this __th day of December, 1999 by ENSCO INTERNATIONAL INCORPORATED, a Delaware corporation (the “Guarantor”), to the United States of America, represented by the Secretary of Transportation, acting by and through the Maritime Administrator (the “Secretary”). RECITALS:         A.   WHEREAS, the Guarantor is the owner of 100% of the shares of ENSCO OFFSHORE COMPANY, a Delaware corporation (the "Shipowner'); and         B.   WHEREAS, the Shipowner, in connection with the financing of the cost of construction of the ENSCO 7500, wholly owned by the Shipowner (the “Vessel”), on the date hereof, borrowed certain funds and created and authorized the issuance of obligations (1) designated “United States Government Guaranteed Ship Financing Note, 1999 Series” (the “Notes”, consisting on the date hereof of $194,855,000 aggregate principal amount of the Notes, bearing interest at the rate specified therein and issued under a trust indenture (the “Indenture”) between the Shipowner and Bankers Trust Company, a New York corporation (the “Indenture Trustee”) as trustee, dated as of the date hereof, said Notes constituting the legal, valid and binding obligations of the Shipowner and (2) designated “United States Government Guaranteed Ship Financing Bonds, 7500 Series” (the “Bonds,” and together with the Notes, the “Obligations”), to be issued upon delivery of the Vessel and repayment of the Notes; and         C.   WHEREAS, the Shipowner, on the date hereof, accepted the Secretary’s Commitment to Guarantee Obligations (the “Commitment”) pursuant to Title XI of the Merchant Marine Act, 1936, as amended (the “Act”), whereby the Secretary authorized a guarantee to be endorsed upon each of the Obligations (the “Guarantees”); and         D.   WHEREAS, the Shipowner has, in consideration of the issuance of the Guarantees by the Secretary of the payment of the unpaid interest on, and the unpaid balance of the principal of the Obligations issued by the Shipowner in the aggregate principal amount of $194,855,000, pursuant to the terms and provisions of the Security Agreement dated the date hereof, between the Shipowner and the Secretary (the “Security Agreement”), issued and delivered to the Secretary a promissory note in the principal amount of $194,855,000 (said promissory note, as originally executed and as the same may hereafter be amended, modified, supplemented or endorsed, herein called the “Secretary’s Note”).         E.   WHEREAS, the Secretary has required this Guaranty Agreement from the Guarantor as an integral part of the consideration offered by or on behalf of the Shipowner as a condition of the Secretary’s decision to enter into the Commitment to issue the Guarantees, and the Guarantor has agreed to enter into this Guaranty Agreement for the purpose of guaranteeing the Shipowner’s obligations to the Secretary under the Secretary’s Note.         NOW THEREFORE, in consideration of the premises, and of other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Guarantors hereby agree as follows:         1.   Definitions. Unless otherwise specifically defined herein, the capitalized terms used herein which are defined in Schedule X to the Security Agreement, dated the date hereof and any reference therein to other instruments shall have the respective meanings stated in Schedule X of the Security Agreement or such other instruments.          2.   Guarantee.              a)  (i)   The Guarantor hereby absolutely, irrevocably and unconditionally guarantees the due and punctual payment of the principal of and the interest on the Secretary’s Note. The Guarantor shall be required to make said payments under this Guaranty Agreement upon receipt of a written notice from the Secretary which states that the Shipowner has not promptly, completely or effectively made said payments. The failure of Guarantor to receive such a written notice or the failure of the Secretary to send said notice shall not relieve the Guarantor of its obligations under this Guaranty Agreement. The Guarantor shall immediately pay to the Secretary or its designee in immediately available funds such payments guaranteed herein.              (ii)   The Guarantor further guarantees that the Guarantor shall provide sufficient capital to the Shipowner to insure that (A) the Shipowner is able to satisfy its current liabilities (as determined in accordance with generally accepted accounting principles) as they become due, including without limitation all payments required in respect of the Obligations, and (B) the Shipowner maintains a positive level of Working Capital.            b)   The Guarantor hereby consents and agrees that its obligations under this Guaranty Agreement will not be discharged by any act or omission to act of any kind by the Secretary or any other person or any other circumstances whatsoever (including, but not limited to, any extension, rearrangement or renewal with respect to any indebtedness or other obligation of the Shipowner with or without notice to the Guarantor, any waiver of any right of the Secretary under the terms of the Secretary’s Note, the Security Agreement, the Mortgage or this Guaranty Agreement, any release of security, any transfer or assignment of rights or obligations accruing to the Secretary under the Secretary’s Note, the Security Agreement, the Mortgage or this Guaranty Agreement, any corporate reorganization, dissolution, merger, acquisition of or by or other alteration of the corporate existence or structure of the Shipowner or the Guarantor, discharge of the Shipowner in bankruptcy, the invalidity, illegality or unenforceability of the Secretary’s Note, the Security Agreement, the Mortgage or this Guaranty Agreement or the absence of any action to enforce the obligations of the Shipowner) which might constitute a legal or equitable discharge of the Guarantor; it being the intention of the Guarantor that this Guaranty Agreement be absolute, continuing and unconditional and the guarantee hereunder shall only be discharged by the payment in full of all sums so guaranteed hereunder.              c)   The Guarantor hereby irrevocably and unconditionally waives: (i) notice of any of the matters referred to in this Guaranty Agreement and any action by the Secretary in reliance thereon; (ii) all notices which may be required by statute, rule of law or otherwise to preserve any rights against the Guarantor hereunder, including without limitations, any demand, protest, proof of notice of non-payment of all sums payable under the Secretary’s Note or any notice of any failure on the part of the Shipowner to perform or comply with any covenant, term or obligations of any agreement to which it is a party; (iii) any requirement for the enforcement, assertion or exercise of any right, remedy, power or privilege under or with respect to the Mortgage, the Security Agreement or the Secretary’s Note; (iv) any requirement of diligence; (v) any requirement that the Shipowner be joined as a party to any proceedings for the enforcement of any provision of this Guaranty Agreement or that the Secretary proceed against any other guarantor executing this Guaranty Agreement or any other guaranty agreement; (vi) any and all defenses to payment hereunder, except the defense of payment already made; (vii) presentment, demand, protest, notice of protest and dishonor, notice of intent to accelerate and notice of acceptance; or (viii) the right to require the Secretary to pursue any remedy in the Secretary’s power whatsoever.              d)  The Guarantor hereby agrees that this Guaranty Agreement shall continue to be effective or shall be reinstated, as the case may be, if at any time payment of any sum hereby guaranteed is rescinded or must be otherwise restored or returned by the Secretary, upon the insolvency, bankruptcy or reorganization of the Shipowner, or otherwise, all as though such payment had not been made. The Guarantor further agrees that if the maturity of any obligations guaranteed herein be accelerated by bankruptcy or otherwise, such maturity shall also be deemed accelerated for the purpose of this Guaranty Agreement without demand or notice to the Guarantor.              e)   Any amount payable hereunder shall not be subject to any reduction by reason of any counterclaim, set-off, deduction, abatement or otherwise.              f)   The Guarantor shall pay all reasonable costs and expenses (including, without limitation, attorneys’ fees and expenses) incurred in connection with the enforcement of the obligations of the Guarantor under this Guaranty Agreement.              g)   The Secretary's Note may be amended, modified or endorsed without the consent of the Guarantor.              h)   The Secretary may enforce the Guarantor’s obligations hereunder without in any way first pursuing or exhausting any other rights or remedies which the Secretary may have against the Shipowner or any other person, firm or corporation or against any security the Secretary may hold.         3.   Secretary’s Rights. The Guarantor authorizes the Secretary, without notice or demand and without affecting the Guarantor’s liability hereunder, to take and hold security for the payment of this Guaranty Agreement and/or any of the obligations guaranteed herein and exchange, enforce, waive and release any such security; and to apply such security and direct the order or manner of sale thereof as the Secretary in his discretion may determine; and to obtain a guarantee of any of the obligations guaranteed herein from any one or more persons, corporations or entities whomsoever and at any time or times to enforce, waive, rearrange, modify, limit or release such other persons, corporations or entities from their obligations under such guarantees.         4.   Primary Liability. It is expressly agreed that the liability of the Guarantor for the payment of the obligations guaranteed herein shall be primary and not secondary.         5.   Representations and Warranties. The Guarantor represents and warrants as follows:              a)   The Guarantor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has full power and authority (corporate, legal and other) to execute, deliver and carry out the terms of this Guaranty Agreement;              b)   This Guaranty Agreement has been duly authorized, executed and delivered by the Guarantor and constitutes the legal, valid and binding obligation of the Guarantor enforceable against the Guarantor in accordance with its terms;              c)   The execution, delivery and performance the Guarantor of this Guaranty Agreement does not require the approval or consent of its shareholders or of any governmental authority and does not contravene either of the Guarantors’ Certificate of Incorporation or any mortgage, indenture or other agreement binding upon it, or any law, regulation, order, judgment or decree applicable to the Guarantor; and              d)   The Guarantor's guarantee pursuant to this Guaranty Agreement may be expected to benefit, directly or indirectly, the Guarantor.              e)  The Guarantor has fully adequate financial resources, funds, and assets to satisfy its obligations under this Guaranty Agreement, and the Guarantor will in the future retain financial resources, funds, and assets to fully satisfy its obligations under this Guaranty Agreement.         6.   Continuing Guarantee. This Guaranty Agreement is a continuing guarantee of payment and collectibility and shall:              a)   Remain in full force and effect so long as any obligation of the Shipowner to the Secretary referred to herein exists;              b)   Be binding upon the Guarantor, its successors and assigns; and              c)   Be executed and issued for the sole and exclusive benefit of the United States, and no other party shall be permitted to claim any benefit, direct or indirect, therefrom. This Guaranty Agreement is nonassignable, any assignment thereof shall be null and void and have no legal effect whatsoever.              d)   Inure to the benefit of, and be enforceable by the Secretary, his successors and assigns.         7.   Default. A default under the terms of this Guaranty Agreement shall be deemed to occur if the Guarantor fails to make any payments guaranteed hereunder.         8.   Notices. All communications may be made or delivered in person or by certified or registered mail, postage prepaid, addressed to the Guarantor or the Secretary as provided below or to such other address as the Guarantor or the Secretary may hereafter specify in a written notice to the other and all notices or other communications shall be in writing so addressed and shall be effective upon receipt by the addressee thereof:                 Guarantor:   ENSCO INTERNATIONAL INCORPORATED 2700 Fountain Place 1445 Ross Avenue Dallas, Texas 75202-2792 Attention: General Counsel                 Secretary:   SECRETARY OF TRANSPORTATION c/o Maritime Administrator Maritime Administration U.S. Department of Transportation 400 Seventh Street, SW Washington, DC 20590 Attention: Chief, Division of Ship Financing Contracts             9.   Amendments and Supplements. No agreement shall be effective to change or modify, supplement, amend or discharge in whole or in part this Guaranty Agreement unless such agreement is in writing, signed by the Guarantor and the Secretary.         10.   Governing Law. This Guaranty Agreement shall be governed by the federal law of the United States of America or in the absence of applicable federal law by the laws of the State of Texas.         11.   Counterparts. This Guaranty Agreement may be executed in one or more counterparts. All such counterparts shall be deemed to be originals and shall together constitute but one and the same instrument.         IN WITNESS WHEREOF, this Guaranty Agreement has been executed on the day and year first above written.       ENSCO INTERNATIONAL INCORPORATED           BY:                                                         NAME:                                                    TITLE:                                                   Attest:                                                          

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10(c) TENET HEALTHCARE CORPORATION AMENDED AND RESTATED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN As of October 9, 2001          Originally Dated November 1, 1984 Amended May 21, 1986 Amended April 25, 1994 Amended July 25, 1994 Amended January 28, 1997 Restated as of May 31, 1998 Amended and Restated as of October 9, 2001 -------------------------------------------------------------------------------- TENET HEALTHCARE CORPORATION AMENDED AND RESTATED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN TABLE OF CONTENTS     Page -------------------------------------------------------------------------------- Section 1 — Statement of Purpose 1 Section 2 — Definitions 1 2.1 Acquisition 1 2.2 Actual Final Average Earnings 1 2.3 Agreement 1 2.4 Committee 1 2.5 Change of Control 1 2.6 Date of Employment 1 2.7 Date of Enrollment 1 2.8 Disability 1 2.9 Early Retirement 2 2.10 Earnings 2 2.11 Eligible Children 2 2.12 Employee 2 2.13 Employment or Service 2 2.14 Existing Retirement Benefit Plans Adjustment Factor 2 2.15 Final Average Earnings 2 2.16 Normal Retirement 3 2.17 Participant 3 2.18 Prior Service Credit Percentage 3 2.19 Projected Earnings 3 2.20 Projected Final Average Earnings 3 2.21 Subsidiary 3 2.22 Surviving 3 2.23 Termination of Employment 3 2.24 Year 3 2.25 Year of Service 3 Section 3 — Retirement Benefits 4 3.1 Normal Retirement 4 3.2 Early Retirement Benefit 4 3.3 Vesting of Retirement Benefit 5 3.4 Termination Benefit 5 3.5 Duration of Benefit Payment 6 3.6 Recipients of Benefit Payments 6 3.7 Disability 6 3.8 Change of Control 7 3.9 Golden Parachute Cap 8 Section 4 — Payment 8 4.1 Commencement of Payments 8 4.2 Withholding; Unemployment Taxes 8 4.3 Recipients of Payments 8 4.4 No Other Benefits 8 4.5 Lump Sum Distributions 8 Section 5 — Conditions Related to Benefits 10 5.1 Administration of Plan 10 -------------------------------------------------------------------------------- 5.2 No Right to Assets 10 5.3 No Employment Rights 10 5.4 Right to Terminate or Amend 10 5.5 Eligibility 11 5.6 Offset 11 5.7 Conditions Precedent 11 Section 6 — Miscellaneous 11 6.1 Non-assignability 11 6.2 Gender and Number 11 6.3 Notice 11 6.4 Validity 12 6.5 Applicable Law 12 6.6 Successors in Interest 12 6.7 No Representation on Tax Matters 12 -------------------------------------------------------------------------------- TENET HEALTHCARE CORPORATION AMENDED AND RESTATED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN Section 1—Statement of Purpose     The Supplemental Executive Retirement Plan (the "Plan") has been adopted by Tenet Healthcare Corporation ("Tenet") to attract, retain, motivate and provide financial security to highly compensated or management employees (the "Participants") who render valuable services to Tenet and its Subsidiaries. Section 2—Definitions     2.1  Acquisition.  "Acquisition" refers to a company of which substantially all of its assets or a majority of its capital stock are acquired by, or which is merged with or into, Tenet or a Subsidiary.     2.2  Actual Final Average Earnings.  "Actual Final Average Earnings" means the highest average monthly Earnings for any 60 consecutive months during the ten years, or actual employment period if less, preceding Termination of Employment.     2.3  Agreement.  "Agreement" means a written agreement substantially in the form of Exhibit A between Tenet and a Participant.     2.4  Committee.  "Committee" means the Compensation and Stock Option Committee of the Board of Directors of Tenet.     2.5  Change of Control.  "Change of Control" of Tenet shall be deemed to have occurred if either (a) any person as such term is used in Sections 13(c) and 14(d)(2) of the     Securities Exchange Act of 1934, as amended, is or becomes the beneficial owner directly or indirectly of securities of Tenet representing 20% or more of the combined voting power of Tenet's then outstanding securities or (b) individuals who, as of April 1, 1994, constitute the Board of Directors of Tenet (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that (i) any individual who becomes a director of Tenet subsequent to April 1, 1994, whose election, or nomination for election by the Tenet's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be deemed to have been a member of the Incumbent Board and (ii) no individual who was elected initially (after April 1, 1994) as a director as a result of an actual or threatened election contest, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended, or any other actual or threatened solicitations of proxies or consents by or on behalf of any person other than the Incumbent Board shall be deemed to have been a member of the Incumbent Board.     2.6  Date of Employment.  "Date of Employment" means the date on which a person began to perform Services directly for Tenet or a Subsidiary as a result of an Acquisition or becoming an Employee.     2.7  Date of Enrollment.  "Date of Enrollment" means the date on or after June 1, 1984 on which an Employee first becomes a Participant in the Plan, provided that any Employee who becomes a Participant prior to June 1, 1985 shall be deemed to have a Date of Enrollment of the later of Date of Employment or June 1, 1984.     2.8  Disability.  "Disability" means any Termination of Employment during the life of a Participant and prior to Normal Retirement or Early Retirement by reason of a Participant's total and permanent disability, as determined by the Committee, in its sole and absolute discretion. A Participant, who makes application for and qualifies for disability benefits under Tenet's Group – 1 – -------------------------------------------------------------------------------- Long-Term Disability Plan or under any similar plan provided by Tenet or a Subsidiary, as now in effect or as hereinafter amended (the "LTD Plans"), shall usually qualify for Disability under this Plan, unless the Committee determines that the Participant is not totally and permanently disabled. A Participant who fails to qualify for disability benefits under the LTD Plans (whether or not the Participant makes application for disability benefits thereunder) shall not be deemed to be totally and permanently disabled under this Plan, unless the Committee otherwise determines, based upon the opinion of a qualified physician or medical clinic selected by the Committee to the effect that a condition of total and permanent disability exists.     2.9  Early Retirement.  "Early Retirement" means any Termination of Employment during the life of a Participant prior to Normal Retirement and after the Participant attains age 55 and has completed ten Years of Service or attains age 62 with no minimum Years of Service.     2.10  Earnings.  "Earnings" means the base salary paid to a Participant by Tenet or a Subsidiary, excluding bonuses, car and other allowances and other cash and non-cash compensation. However, for all Participants actively at work on or after February 1, 1997 as full-time, regular employees, "Earnings" means the base salary, any annual cash award paid under Tenet's annual incentive plan and any discretionary awards made under Tenet's deferred compensation plan(s) by Tenet or a Subsidiary to such Participant, but shall exclude car and other allowances and other cash and non-cash compensation.     2.11  Eligible Children.  "Eligible Children" means all natural or adopted children of a Participant under the age of 21, including any child conceived prior to the death of a Participant.     2.12  Employee.  "Employee" means any person who regularly performs Services on a full-time basis (that is, works a minimum of 32 hours a week) for Tenet or a Subsidiary and receives a salary plus employee benefits normally made available to persons of similar status.     2.13  Employment or Service.  "Employment" or "Service" means any continuous period during which an Employee is actively engaged in performing services for Tenet and its Subsidiaries plus the term of any leave of absence approved by the Committee.     2.14  Existing Retirement Benefit Plans Adjustment Factor.  "Existing Retirement Benefit Plans Adjustment Factor or Factors" means the assumed benefit the Participant would be eligible for under Social Security and all retirement plans of Tenet and its Subsidiaries whether or not he participates in such plans. This Factor will be used for calculating all benefits under the Plan and is a projection of the benefits payable under the Social Security regulations in effect June 1, 1984, and retirement plans of Tenet in effect on June 1, 1984, or the participant's Date of Enrollment in the Plan, if later. Once established for a Participant this Factor will not thereafter be altered to reflect any reduction in benefits under Social Security. This Factor will be adjusted to reflect changes in benefits under Tenet retirement plans if a Participant is transferred to different retirement plans or the Company contribution to a retirement plan is increased or decreased from the percentage used for original calculation of the Participant's Factor or the Participant becomes eligible for other retirement plans adopted by the Company which would provide benefits greater or less than the Plan considered in calculating the Participant's original Factor, except that such Factor for Participant's who are regular, full-time employees actively at work with the Company on April 1, 1994, with the corporate office or a division or Subsidiary that is not announced as a discontinued operation shall be revised based upon the Participant's actual base salary as of April 1, 1994, but no Factor will be increased as a result of revision of the Factor to use the base salary as of April 1, 1994; provided, however, for a Participant who is a full-time, regular employee actively at work on or after February 1, 1997, the Existing Retirement Benefit Plans Adjustment Factor shall be applied only to the base salary component of Final Average Earnings.     2.15  Final Average Earnings.  "Final Average Earnings" means the lesser of (i) Actual Final Average Earnings, or (ii) if the Participant has completed at least sixty (60) months of service, – 2 – -------------------------------------------------------------------------------- Projected Final Average Earnings; however, for a Participant who is actively at work as a full-time, regular employee on or after February 1, 1997 "Final Average Earnings" means Actual Final Average Earnings.     2.16  Normal Retirement.  "Normal Retirement" means any Termination of Employment during the life of a Participant on or after the date on which the Participant attains age 65.     2.17  Participant.  "Participant" means any Employee selected to participate in this Plan by the Committee, in its sole and absolute discretion.     2.18  Prior Service Credit Percentage.  "Prior Service Credit Percentage" means the percentage to be applied to a Participant's Years of Service with Tenet and its Subsidiaries prior to his or her Date of Enrollment in the Plan, in accordance with the following formula: Years of Service After Date of Enrollment --------------------------------------------------------------------------------   Prior Service Credit Percentage --------------------------------------------------------------------------------       During 1st year   25 During 2nd year   35 During 3rd year   45 During 4th year   55 During 5th year   75 After 5th year   100     2.19  Projected Earnings.  "Projected Earnings" means the (a) actual Earnings of the Participant on the Date of Enrollment plus an assumed increase of eight percent per annum, or (b) for Participants who are regular full-time employees actively at work on April 1, 1994, with the corporate office or a division or a subsidiary that has not been declared to be a discontinued operation, the actual Earnings of the Participant on April 1, 1994, plus an assumed increase of eight percent per annum.     2.20  Projected Final Average Earnings.  "Projected Final Average Earnings" means the average of a Participant's Projected Earnings during the 60 months preceding Termination of Employment.     2.21  Subsidiary.  A "Subsidiary" of the Company is any corporation, partnership, venture or other entity in which the Company owns 50% of the capital stock or otherwise has a controlling interest as determined by the Committee, in its sole and absolute discretion.     2.22  Surviving Spouse.  "Surviving Spouse" means the person legally married to a Participant for at least one year prior to the Participant's death or Termination of Employment.     2.23  Termination of Employment.  "Termination of Employment" means the ceasing of     the Participant's Employment for any reason whatsoever, whether voluntarily or involuntarily.     2.24  Year.  A "Year" is a period of twelve consecutive calendar months.     2.25  Year of Service.  "Year of Service" means each complete year (up to a maximum of 20) of continuous Service (up to age 65) as an Employee of Tenet and its Subsidiaries beginning with the Date of Employment with Tenet and its Subsidiaries. Years of Service shall be deemed to have begun as of the first day of the calendar month of Employment and to have ceased on the last day of the calendar month of Employment. – 3 – -------------------------------------------------------------------------------- Section 3—Retirement Benefits     3.1  Normal Retirement Benefit.   a.Upon a Participant's Normal Retirement, the Company agrees to pay to the Participant a monthly Normal Retirement Benefit for the Participant's lifetime which is determined in accordance with the Benefit Formula set forth below, adjusted by the Vesting Percentage in Section 3.3. Except as provided below, the amount of such monthly Normal Retirement Benefit will be determined by using the following formula: X = A × [B1 + [B2 X C]] × [2.7% - D] × E       X = Normal Retirement Benefit A = Final Average Earnings B1 = Years of Service After Date of Enrollment B2 = Years of Service Prior to Date of Enrollment C = Prior Service Credit Percentage D = Existing Retirement Benefit Plans Adjustment Factor E = Vesting Percentage Note: B1 and B2 Years of Service combined cannot exceed 20 years. b.In the event of the death or Disability of a Participant at any age or the Normal or Early Retirement of a Participant after age 60, the Normal or Early Retirement Benefit will be determined on the basis of a Prior Service Credit Percentage of 100. c.If a Participant who is receiving a Normal Retirement Benefit dies, his or her Surviving Spouse or Eligible Children shall be entitled to receive (in accordance with Sections 3.5 and 3.6) 50% of the Participant's Normal Retirement Benefit. d.If a Participant who is eligible for Normal Retirement dies while an Employee of the Company after attaining age 65, his or her Surviving Spouse or Eligible Children shall be entitled to receive (in accordance with Sections 3.5 and 3.6) the installments of the Normal Retirement Benefit which would have been payable to the Surviving Spouse or Eligible Children in accordance with this Section 3.1 as if the Participant had retired on the day before he or she died.     3.2  Early Retirement Benefit.   a.Upon a Participant's Early Retirement, Tenet shall pay the Participant a monthly Early Retirement Benefit for the Participant's lifetime commencing on the first day of the calendar month following the date he or she attains age 65, calculated in accordance with Section 3.1 and Section 3.3 with the following adjustments: (i)Only the Participant's actual Years of Service, adjusted appropriately for the Prior Service Credit Percentage, as of the date of Early Retirement shall be used. (ii)For purposes of determining the Actual Final Average Earnings and Projected Final Average Earnings, only the Participant's Earnings and Projected Earnings as of the date of Early Retirement shall be used. (iii)To arrive at the payments to commence at age 65 for a Participant whose termination occurs prior to February 1, 1997 the amount calculated under paragraphs a(i) and a(ii) of this Section 3.2 will be reduced by 0.42% for each month Early Retirement commences before age 62. To arrive at the payments to commence at age 65 for a Participant who is actively at work as a full-time, regular employee on or after February 1, 1997, the amount calculated under paragraphs a(i) and a(ii) of this Section 3.2 will be reduced by 0.25% for each month Early Retirement commences before age 62. – 4 – -------------------------------------------------------------------------------- b.Upon the written request of a Participant prior to termination of employment, the Committee, in its sole and absolute discretion, may authorize payment of the Early Retirement Benefit at a date prior to the Participant's attainment of age 65; provided, however, that in such event the amount calculated under paragraphs a(i) and a(iii) of this Section 3.2 shall be further reduced by 0.42% for each month that the date of the commencement of payment precedes the date on which the Participant will attain age 62; however, for a Participant who is actively at work as a full-time, regular employee on or after February 1, 1997, the amount of further reduction under paragraphs a(i) and a(iii) of this Section 3.2 shall be 0.25% for each month that the date of commencement of payment precedes the date on which the Participant will attain age 62. c.If a Participant dies after commencement of payment of his or her Early Retirement Benefit, the Surviving Spouse or Eligible Children shall be entitled to receive (in accordance with Sections 3.5 and 3.6) 50% of the Participant's Early Retirement Benefit. d.If a Participant dies after his or her Early Retirement but before benefits have commenced, or while on Disability, the Surviving Spouse or Eligible Children shall be entitled to receive (in accordance with Sections 3.5 and 3.6) 50% of the benefit that would have been payable on the date the Participant elected to have benefits commence. e.If a Participant dies after becoming eligible for Early Retirement but before taking Early Retirement or while on Disability, the Surviving Spouse or Eligible Children shall be entitled to receive (in accordance with Sections 3.5 and 3.6) 50% of the Participant's Early Retirement Benefit determined as if the Participant had retired on the day prior to his or her death with payments commencing on the first of the month following the Participant's death. The benefits payable to a Surviving Spouse or Eligible Children under this paragraph shall be no less than the benefits payable to a Surviving Spouse or Eligible Children under Section 3.4 as if the Participant had died immediately prior to age 55.     3.3  Vesting of Retirement Benefit.  A Participant's interest in his or her Retirement Benefit shall, subject to Sections 5.5 and 5.7, vest in accordance with the following schedule: Years of Service --------------------------------------------------------------------------------   Vesting --------------------------------------------------------------------------------       Less than 5   -0- 5 but less than 6   25% 6 through 20   5% per year Notwithstanding the foregoing, a Participant who is at least 60 years old and who has completed at least five years of Service will be fully vested, subject to Sections 5.5 and 5.7, in his or her Retirement Benefits. No Years of Service will be credited for Service after age 65 or for more than 20 years.     3.4  Termination Benefit.  Upon any Termination of Employment of the Participant before Normal Retirement or Early Retirement for reasons other than death or Disability, Tenet shall pay, commencing at age 65, to the Participant a Retirement Benefit calculated under Section 3.1 and 3.3 but with the following adjustments: a.Only the Participant's actual Years of Service, adjusted appropriately for the Prior Service Credit Percentage, as of the date of Termination of Employment shall be used. b.For purposes of determining the Actual Final Average Earnings and the Projected Final Average Earnings, as used in Section 3.1, only the Participant's Earnings and Projected Earnings prior to the date of his or her Termination of Employment shall be used. – 5 – -------------------------------------------------------------------------------- c. (i)If a Participant dies after commencement of payment of his or her Retirement Benefit under this Section 3.4, the Surviving Spouse or Eligible Children shall be entitled at Participant's death to receive (in accordance with Sections 3.5 and 3.6) 50% of the Participant's Retirement Benefit. (ii)If a Participant, who has a vested interest under Section 3.3, dies after Termination of Employment but at death is not receiving any Retirement Benefits under this Plan, the Surviving Spouse or Eligible Children shall be entitled to receive (in accordance with Sections 3.5 and 3.6) commencing on the date when the Participant would have attained age 65, 50% of the Retirement Benefit which would have been payable to the Participant at age 65. (iii)If a Participant, who has a vested interest under Section 3.3, dies while still actively employed by Tenet or a Subsidiary or on Disability before he or she was eligible for Early Retirement, his or her Surviving Spouse or Eligible Children shall be entitled at the Participant's death to receive 50% of the Retirement Benefit (in accordance with Sections 3.5 and 3.6) calculated as if the Participant was age 55 and eligible for Early Retirement on the day before the Participant's death; provided, however, that the combined reductions for Early Retirement and early payment shall not exceed 21% of the amount calculated under paragraphs a(i) and a(ii) of Section 3.2. d.To arrive at the payments to commence at age 65, the amount calculated under paragraphs (a), (b), (c)(i) and (c)(ii) of this Section 3.4 will be reduced by the maximum percentage reduction for Early Retirement at age 55 (i.e., 21%).     3.5  Duration of Benefit Payment.  Normal and Early Retirement Benefit payments shall be for the life of the Participant. Surviving Spouse Benefit payments shall be for the Spouse's lifetime. All benefits payable to the Surviving Spouse are subject to actuarial reduction if spouse is more than three years younger than the Participant. Eligible Children Benefit payments shall be made until the youngest of the Eligible Children reaches 21.     3.6  Recipients of Benefit Payments.  If a Participant dies without a Surviving Spouse but is survived by any Eligible Children, then benefits will be paid to the Eligible Children or their legal guardian, if applicable. The total monthly benefit payable will be equal to the monthly benefit that a Surviving Spouse would have received without actuarial reduction. This benefit will be paid in equal shares to all Eligible Children until the youngest of the Eligible Children attains age 21.     If the Surviving Spouse dies after the death of the Participant but is survived by Eligible Children then the total monthly benefit previously paid to the Surviving Spouse will be paid in equal shares to all Eligible Children until the youngest of the Eligible Children attains age 21. When any of the Eligible Children reaches 21, his or her share will be reallocated equally to the remaining Eligible Children.     3.7  Disability. Any Participant, who is under Disability upon reaching age 65 will be paid the Normal Retirement Benefit in accordance with Sections 3.1 and 3.3.     Upon a Participant's Disability while an Employee of the Company, the Participant will continue to accrue Years of Service during his or her Disability until the earliest of his or her: a.Recovery from Disability, b.His or her 65th Birthday, or c.Death, If a Participant is receiving Disability payments, he or she shall not be entitled to receive an Early Retirement Benefit. – 6 – --------------------------------------------------------------------------------     For purposes of calculating the foregoing benefits, the Participant's Actual Final Average Earnings and Projected Final Average Earnings shall be determined using his or her Earnings and Projected Earnings up to the date of Disability.     3.8  Change of Control.   a.In the event of a Change of Control of Tenet while this Plan remains in effect, (i) a Participant's Retirement Benefits hereunder (a) will be determined on the basis of receiving full Prior Service Credit under Sections 3.1 and 3.2 for all Years of Service prior to his or her Date of Enrollment and (b) will be fully vested in the Participant without regard to his or her Years of Service with Tenet and its Subsidiaries and (ii), notwithstanding any other provisions of the Plan, a Participant will be entitled to receive the Normal Retirement Benefit on or after age 60 with no reduction by virtue of paragraphs a(iii) and b of Section 3.2. b.For a Participant who is a regular, full-time employee actively at work on April 1, 1994, with the corporate office or a division or a Subsidiary which has not been declared to be a discontinued operation, who has not yet begun to receive benefit payments under the Plan and whose employment is Terminated without cause or who voluntarily Terminates Employment following (a) a material downward change in the functions, duties, or responsibilities which reduce the rank or position of the Participant, (b) (i) a reduction in the Participant's annual base salary, or (ii) a material reduction in the Participant's annual incentive plan bonus payment other than for financial performance as it broadly applies to all similarly situated active Participants in the same plan, or (iii) a material reduction in the Participant's retirement or supplemental retirement benefits that does not broadly apply to all active Participant's in the same plan, or (c) a transfer of a Participant's office to a location that is more than fifty (50) miles from the Participant's current principal office location, if such Termination of Employment occurs within two years following a Change of Control of Tenet while this Plan remains in effect, the provisions of Section 3.8(a) above shall not apply and (i) a Participant's Early or Normal Retirement Benefits under this Plan (a) will be determined on the basis of (I) receiving full Prior Service Credit under Sections 3.1 and 3.2 for all Years of Service prior to his or her Date of Enrollment and (II) being credited with three additional years to his or her Years of Service (with total Years of Service not to exceed 20 years) and (b) will be fully vested in the Participant without regard to his or her Years of Service with Tenet and its Subsidiaries, (ii) will be determined by replacing the definition of "Earnings" under Section 2.10 hereof with the following "the base salary and the annual cash bonus paid to a Participant by Tenet or a Subsidiary, excluding (A) any cash bonus paid under the LTIP, (B) any car and other allowances and (C) other cash and non-cash compensation", and (iii) notwithstanding any other provision of this Plan to the contrary, a Participant will be entitled to receive the Normal Retirement Benefit on or after the age of 60, without reduction, and after the age of 55 with a reduction of 0.25% per month for each month for which the benefit commences to be paid prior to the Participant's attaining the age of 60 and after the age of 50 with the foregoing reduction from age 60 to age 55 and with a reduction to 0.56% per month for each month for which the benefit commences to be paid prior to the Participant's attaining the age of 55. No other reductions set forth in Sections 3.2(a)(iii) and 3.2(b) will apply. c.For a Participant who (a) is an active, full-time employee, (b) has not yet begun to receive benefit payments under the Plan and (c) is involuntarily terminated from employment without cause or voluntarily terminates employment pursuant to Section 3.8(b) above, within two years following a Change of Control of Tenet while this Plan remains in effect, the provisions of Section 5.7(ii) below shall not apply. – 7 – --------------------------------------------------------------------------------     3.9  Golden Parachute Cap.  Notwithstanding any provision in this Plan to the contrary, in no event shall the total present value of all payments under this Plan that are payable to a Participant and are contingent upon a Change of Control in accordance with the rules set forth in Section 280G of the Internal Revenue Service Code of 1986, as amended (the "Code") and the Treasury Regulations thereunder, when added to the present value of all other payments, other than payments that are made pursuant to this Plan, that are payable to a Participant and are contingent upon a Change of Control, exceed an amount equal to two hundred and ninety-nine percent (299%) of the Participant's "base amount" as that term is defined in Section 280G of the Code. For purposes of making a calculation under this Section 3.9, the determination of the portion of a payment that shall be treated as contingent upon a Change of Control shall be made in accordance with Proposed Treasury Regulations Section 1.280G-1Q/A-24. Section 4—Payment     4.1  Commencement of Payments.  Payments under this Plan shall begin not later than the first day of the calendar month following the occurrence of an event which entitles a Participant (or a Surviving Spouse or Eligible Children) to payments under this Plan.     4.2  Withholding; Unemployment Taxes.  To the extent required by the law in effect at the time payments are made, Tenet shall withhold from payments made hereunder any taxes required to be withheld by the Federal or any state or local government.     4.3  Recipients of Payments.  All payments to be made by Tenet under the Plan shall be made to the Participant during his or her lifetime. All subsequent payments under the Plan shall be made by Tenet to Participant's Surviving Spouse, Eligible Children or their guardian, if applicable.     4.4  No Other Benefits.  Tenet shall pay no benefits hereunder to the Participant, his or her Surviving Spouse, Eligible Children or their legal guardian, if applicable, by reason of Termination of Employment or otherwise, except as specifically provided herein.     4.5  Lump Sum Distributions.  At any time following a Termination of Employment which occurs within two (2) years after a Change of Control or following an Early Retirement or a Normal Retirement, a Participant, or the Surviving Spouse of a Participant, who has a vested interest in the Plan may elect to receive a lump sum payment, in an amount determined below, sixty (60) days after giving notice to the Committee of the Participant's, or the Participant's Surviving Spouse's, desire to receive such lump sum benefit. The date of the notice shall be the "Commencement Date." The lump sum payment shall be determined in accordance with the following provisions of this Section 4.5, and then shall be reduced by a penalty equal to ten percent (10%) of such payment which shall be forfeited to Tenet. However, the penalty shall not apply if the Committee determines, based on the advice of counsel or a final determination by the Internal Revenue Service or any court of competent jurisdiction, that by reason of the foregoing elective provisions of this Section 4.5 any Participant, Surviving Spouse or Eligible Children has recognized or will recognize gross income for federal income tax purposes under this Plan in advance of payment to him or her of Plan benefits. Tenet shall notify all Participants (and Surviving Spouses or Eligible Children of deceased Participants) of any such determination. Wherever any such determination is made, Tenet shall refund all penalties which were imposed hereunder on account of making lump sum payments at any time during or after the first year to which such determination applies (i.e., the first year when gross income is recognized for federal income tax purposes). Interest shall be paid on any such refunds based on an interest factor determined under Section 4.5b hereof. The Committee may also reduce or eliminate the penalty if it determines that this action will not cause any Participant to recognize gross income for federal income tax purposes under this Plan in advance of payment to him or her of Plan benefits.     Notwithstanding any other provision of this Plan, a penalty shall not apply if a retired Participant or the Surviving Spouse or Eligible Children of a deceased Participant receives a lump sum distribution – 8 – -------------------------------------------------------------------------------- due to a financial hardship. The Committee shall determine whether a financial hardship exists in its sole discretion, but in good faith and on a uniform, nondiscriminatory and reasonable basis. A hardship distribution shall be a cash payment not to exceed the amount necessary to relieve the hardship. a.When monthly benefit payments have not yet commenced and the Participant is living on the Commencement Date, the lump sum payment (prior to the ten percent (10%) reduction) shall equal the lump sum value of the Participant's Early Retirement Benefit or Normal Retirement Benefit as of the Commencement Date. The amount described in this Section 4.5a shall include, in addition, in the case of a Participant who has a spouse or Eligible Children on the Commencement Date, the lump sum value, determined as of such date, of any benefit payable to a Surviving Spouse or Eligible Children by reason of the Participant's death on or after such date assuming such spouse would qualify as a Surviving Spouse on and after such date. The lump sum amount representing the value of the benefits described in the preceding two sentences shall be computed (i) first by reducing the amount of the Participant's monthly benefit payable under Section 3.2 hereof, if the Participant's Commencement Date occurs before the Participant's Normal Retirement date, (ii) then determining the survivor benefit which would be payable to a Surviving Spouse or Eligible Children in respect of such monthly benefit under Section 3.1c or Section 3.2c whichever is applicable, and (iii) next commuting such benefits to their lump sum equivalent at the Commencement Date by reference to the factor described in Section 4.5b. In computing the Participant's monthly benefit under clause (i) of the preceding sentence, if the Commencement Date occurs before the earliest date when the Participant may commence to receive his or her Early Retirement Benefit, the Participant's Early Retirement Benefit shall be computed as the annual actuarial equivalent of the Early Retirement Benefit which would be payable to him or her at the earliest date when benefits could commence under the Early Retirement provisions of Section 3.2, in the form of a single life annuity. – 9 – -------------------------------------------------------------------------------- When annual benefits have previously commenced, the lump sum payment (prior to the ten percent (10%) reduction) shall be equal to the difference between (A) minus (B) below, determined as of the Participant's Commencement Date, accumulated to the date of the lump sum payment using the same interest rate which is used in calculating the amounts (A) and (B): (A)The lump sum value of the monthly benefits payable to the Participant (including any benefit payable to the Surviving Spouse or Eligible Children) determined as of the Participant's Commencement Date in the same manner as described in the previous paragraph. (B)The lump sum value of the monthly benefits previously paid to the Participant discounted to the Participant's Commencement Date. When a Surviving Spouse of a deceased Participant elects to receive a lump sum payment, the amount of the lump sum payment shall be determined by the Committee in a manner similar to that used for a Participant, except that the lump sum payment shall only reflect the benefit which would be payable to a Surviving Spouse and Eligible Children. All lump sum equivalents hereunder shall be determined by reference to the factor described in Section 4.5b. b.The factor described in this Section 4.5b is the actuarial equivalence factor of the Pension Benefit Guaranty Corporation applicable to plans terminating on the Commencement Date. Section 5—Conditions Related to Benefits     5.1  Administration of Plan.  The Committee has been authorized to administer the Plan and to interpret, construe and apply its provisions in accordance with its terms. The Committee shall administer the Plan and shall establish, adopt or revise such rules and regulations as it may deem necessary or advisable for the administration of the Plan. All decisions of the Committee shall be by vote or written consent of the majority of its members and shall be final and binding. Members of the Committee shall not be eligible to participate in the Plan while serving as a member of the Committee.     5.2  No Right to Assets.  Neither a Participant nor any other person shall acquire by reason of the Plan any right in or title to any assets, funds or property of Tenet and its subsidiaries whatsoever including, without limiting the generality of the foregoing, any specific funds or assets which Tenet, in its sole discretion, may set aside in anticipation of a liability hereunder. Tenet has established the 1994 Supplemental Executive Retirement Plan Trust, dated May 25, 1994 and amended and restated on July 25, 1994 (the "Trust"). Without limiting the generality of the foregoing, Section 1(d) of the Trust provides as follows: Plan participants and their beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets of Tenet. Any rights created under the Plan and this Agreement shall be mere unsecured contractual rights of Plan participants and their beneficiaries against Company. Any assets held by the Trust will be subject to the claims of Company's general creditors under federal and state law in the event of Insolvency, as defined in Section 3(a) herein. A Participant shall have only an unsecured contractual right to the amounts, if any, payable hereunder.     5.3  No Employment Rights.  Nothing herein shall constitute a contract of continuing employment or in any manner obligate Tenet and its Subsidiaries to continue the service of a Participant, or obligate a Participant to continue in the service of Tenet and its Subsidiaries, and nothing herein shall be construed as fixing or regulating the compensation paid to a Participant.     5.4  Right to Terminate or Amend.  Except during any two year period after any Change of Control of Tenet, Tenet reserves the sole right to terminate the Plan at any time and to terminate an – 10 – -------------------------------------------------------------------------------- Agreement with any Participant at any time. In the event of termination of the Plan or of a Participant's Agreement, a Participant shall be entitled to only the vested portion of his or her accrued benefits under Section 3 of the Plan as of the time of the termination of the Plan or his or her Agreement. All further vesting and benefit accrual shall cease on the date of Plan or Agreement termination. Benefit payments would be in the amounts specified and would commence at the time specified in Section 3 as appropriate. Tenet further reserves the right in its sole discretion to amend the Plan in any respect except that Plan benefits cannot be reduced during any two-year period after any Change of Control of Tenet. No amendment of the Plan (whether there has or has not been a Change of Control of Tenet) that reduces the value of the benefits theretofore accrued and vested by the Participant shall be effective.     5.5  Eligibility.  Eligibility to participate in the Plan is expressly conditional upon an Employee's furnishing to Tenet certain information and taking physical examinations and such other relevant action as may be reasonably requested by Tenet. Any Employee Participant who refuses to provide such information or to take such action shall not be enrolled as or cease to be a Participant under the Plan. Any Participant who commits suicide during the two-year period beginning on the date of his or her Agreement, or who makes any material misstatement of information or non-disclosure of medical history, will not receive any benefits hereunder unless, in the sole discretion of the Committee, benefits in a reduced amount are awarded.     5.6  Offset.  If at the time payments or installments of payments are to be made hereunder, any Participant or his or her Surviving Spouse or both are indebted to Tenet and its Subsidiaries, then the payments remaining to be made to the Participant or his or her Surviving Spouse or both may, at the discretion of the Committee, be reduced by the amount of such indebtedness; provided, however, than an election by the Committee not to reduce any such payment or payments shall not constitute a waiver of any claim for such indebtedness.     5.7  Conditions Precedent.  No Retirement Benefits will be payable hereunder to any Participant (i) whose Employment with Tenet or a Subsidiary is terminated because of his or her willful misconduct or gross negligence in the performance of his or her duties or (ii) who within 3 years after Termination of Employment becomes an employee with or consultant to any third party engaged in any line of business in competition with Tenet and its Subsidiaries (a) in a line of business in which Participant has performed Services for Tenet and its Subsidiaries or (b) that accounts for more than ten percent (10%) of the gross revenues of Tenet and its Subsidiaries taken as a whole. Section 6—Miscellaneous.     6.1  Non-assignability.  Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance any provision hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and non-transferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant's or any person's bankruptcy or insolvency. Tenet may assign this Plan to any Subsidiary which employs any Participant.     6.2  Gender and Number.  Wherever appropriate herein, the masculine may mean the feminine and the singular may mean the plural or vice versa.     6.3  Notice.  Any notice required or permitted to be given to the Committee under the Plan shall be sufficient if in writing and hand delivered, or sent by registered or certified mail, to the principal office of Tenet, directed to the attention of the Secretary of the Committee. Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark or on the receipt for registration or certification. – 11 – --------------------------------------------------------------------------------     6.4  Validity.  In the event any provision of this Plan is held invalid, void or unenforceable, the same shall not affect, in any respect whatsoever, the validity of any other provision of this Plan.     6.5  Applicable Law.  This Plan shall be governed and construed in accordance with the laws of the State of California.     6.6  Successors in Interest.  This Plan shall inure to the benefit of, be binding upon, and be enforceable by, any corporate successor to Tenet or successor to substantially all of the assets of Tenet.     6.7  No Representation on Tax Matters.  Tenet makes no representation to Participants regarding current or future income tax ramifications of the Plan. – 12 – -------------------------------------------------------------------------------- QuickLinks Exhibit 10(c) TENET HEALTHCARE CORPORATION AMENDED AND RESTATED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN TABLE OF CONTENTS TENET HEALTHCARE CORPORATION AMENDED AND RESTATED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN Section 1—Statement of Purpose Section 2—Definitions Section 3—Retirement Benefits Section 4—Payment Section 5—Conditions Related to Benefits Section 6—Miscellaneous.

TABLE OF CONTENTS AGREEMENT PART "A" Article Preamble Employees Represented by the Brotherhood I Definitions II Recognition of Brotherhood III Brotherhood Membership Requirements IV Regular Wages V Overtime Compensation VI Application of Rated Wage VII Hours and Days of Work VIII Days of Relief IX Meal Allowance / Period X Vacations XI Seniority XII Discipline, Suspension and Discharge XIII Grievance XIV Payroll Deductions XV Pension Plan XVI Disability Retrogression Pay Plan XVII Sick Pay Plan XVIII Group Insurance XIX 401(k) Plan XX Leaves of Absence XXI Severance Pay Plan XXII Bulletin Boards XXIII Effect of Agreement XXIV Contractors XXV Working Conditions XXVI Benefits XXVII Bargaining Unit Work XXVIII Union Business XXIX UNITIL Retiree Trust XXX Safety XXXI No Discrimination XXXII Duration and Termination XXXIII Successors Schedule of Wages Roster 1 - Transportation Roster 2 -- Operations Support Clerk Roster 3 -- Meter & Service Roster 6 - Meter (Gas and Electric) Roster 7 - Street Roster 8 - Electric Distribution Roster 9 - Meter Readers Roster 11 - Stores Roster 12 -- Property Maintenance Worker Roster 19 - Gas Production Roster 20 - Dig Safe Clerical Progression and Pay Plan Policy with Reference to Rest Period Shift Differential Sunday Premium Double Time on Second Day of Relief Off-Hour Coverage Emergency Call Out Part ""B"" - Retained Policies - Not Incorporated in Part "A" Part ""C"" - Group Insurance Summary Part ""D"" - Retained Letters of Intent - Progression Charts Policies Unitil System Policies AGREEMENT made and entered into by FITCHBURG GAS AND ELECTRIC LIGHT COMPANY, a Massachusetts corporation hereinafter called the ""Company"" and THE BROTHERHOOD OF UTILITY WORKERS OF NEW ENGLAND, INCORPORATED, LOCAL NO. 340UTILITY WORKERS UNION OF AMERICA, AFL-CIO, BROTHERHOOD OF UTILITY WORKERS COUNCIL, LOCAL B340, thereof, and the employees of the Company who are now or may hereafter become members of said Local, hereinafter called the ""Brotherhood"". WITNESSETH that: WHEREAS, the Brotherhood represents a majority of all employees of the Company at its Fitchburg, Massachusetts plant, excluding confidential employees, executives, forepersons, crew forepersons, and all other supervisory employees who have authority to hire, promote, discipline, discharge or effectively make such recommendations, and has been designated by said majority to be the exclusive representative of all said employees for the purposes of collective bargaining with respect to rate of pay, wages, hours of employment and other conditions of employment; and WHEREAS, both the Company and the Brotherhood desire to promote harmony and efficiency in the working forces so that the employees and the Company may obtain mutual economic advantages consistent with the duty of the Company as a public utility to provide at all times an adequate and uninterrupted supply of electric and gas services in the territory and communities which it serves. NOW, THEREFORE: As to wages to be paid by the Company, as to working conditions involved in the Company's operations, and as to the application of the principle of seniority to changes in the Company's forces, the parties hereto, each by its duly authorized representatives, agree as follows: ARTICLE I DEFINITIONS The Company and the Brotherhood mutually agree that for the purpose of this agreement, the following definitions apply: Regular Employee - one who, subject to a six (6) months'' probationary period, is hired on a regular basis. Temporary Employee - one who is hired for a specific job and/or period of time but who it is not intended to become a regular employee as defined above and whose employment is not intended to last for more than (six) 6 months. If their employment continues for more than six (6) months, they becomes a ""regular"" employee as defined above. Part-time Employee - an employee who is hired to work less than the regularly scheduled workweek ARTICLE II RECOGNITION OF BROTHERHOOD The Brotherhood is hereby recognized as the exclusive representative of all employees of the Company at its Fitchburg, Massachusetts plant, excluding confidential employees, executives, forepersons, crew forepersons and all other supervisory employees who have authority to hire, promote, discipline, discharge or effectively make such recommendation for the purposes of collective bargaining with respect to wages, hours of employment and other conditions of employment.   ARTICLE III BROTHERHOOD MEMBERSHIP REQUIREMENTS The Company agrees that until the termination of this agreement it will require as a condition of employment that all employees subject to this agreement shall become members of the Brotherhood. The Company agrees that it shall require as a condition of employment that all new employees hereafter employed by the Company in any class of work to which this agreement applies shall become members of the Brotherhood after the thirtieth day following the beginning of their employment and shall continue as members thereafter while this agreement is in effect and their classification is subject to the terms of this agreement. The Company and the Brotherhood mutually agree that this provision in no way affects the other terms and conditions of employment applicable to temporary and probationary employees set forth in this agreement. Any employee who has been exempted from the Brotherhood membership requirement under the provisions of this article but who is transferred or demoted while this agreement is in effect to a class of work which is subject to the Brotherhood membership requirement shall become a member of the Brotherhood within thirty (30) days after the effective date of such transfer or demotion. The provisions of this article shall not apply to anyone exempted from the provisions of this agreement, nor to student engineers who may be assigned from time to time to any of the departments of the Company. In no event will any employee be required, as a condition of employment, to become a member of the Brotherhood until after the thirtieth day following the beginning of their employment or the effective date of this article, whichever is the later. Any employee of the Company who at any time while this agreement is in effect has been performing a class of work which is subject to the Brotherhood membership requirements of this Agreement, but who is subsequently transferred or promoted to a class of work which is not subject to the Brotherhood membership requirements of this Agreement shall have the privilege of withdrawing from Brotherhood membership.     ARTICLE IV REGULAR WAGES Section 1. Effective on the date indicated therein, employees who are receiving the ultimate rate of the class to which they are permanently assigned shall be paid wages in accordance with the Schedule of Wages showing classifications and the rated wage of each class. Said Schedule of Wages of footnotes and accompanying paragraphs are attached hereto and made a part hereof, and are set forth at pages 54 to 59, inclusive, hereof. Section 2. If, upon the effective date of said schedule, an employee is not receiving the ultimate rate of the class to which the employee is permanently assigned, then, the present wage of such employee shall be increased in an amount equal to the difference between the ultimate rate of the class in effect at the time of the last prior wage schedule and the ultimate rate of the class of the wage schedule effective herein. Section 3. The following conditions shall control, limit, restrict and govern the application of said schedule. 1. An employee, if awarded the next higher-rated job in the same roster will receive the higher rate from the date of the award. 2. In other cases where an employee is awarded a bargaining unit job, the employee's rate of pay shall be as follows: a) Twenty-five cents ($.25) per hour more than the employee's present rate of pay or the rate of the new job, whichever is less, no later than one week after the date of the award. b) Twenty-five cents ($.25) per hour more than the rate arrived at in (a) above or the rate of the new job, whichever is less, thirty days from the date of the award. c) The ultimate rate of the new job ninety (90) days from the date of the award. Section 4. Clerical Progression and Pay Plan (See Page 51) is not subject to Section 3 above. Section 5. New employees hired during the term of this agreement will receive a starting wage that shall not be less than eighty-five per cent (85%) of the ultimate rate for the class of work to which they are assigned. When an employee has completed their probationary period, the employee's rate of pay shall be subject to the provisions of paragraphs (a), (b), and (c) of Section 3 above, substituting ""six months anniversary date"" for ""date of the award"" in that Section. Section 6. In no event shall the resulting wage from time to time exceed the rated wage for the applicable class established by the Schedules of Wages, attached hereto and made a part hereof.     ARTICLE V OVERTIME COMPENSATION Section 1. Employees subject to this agreement shall be paid wages at the rate of time and one-half for all work that does not occur within their regularly scheduled work day or week. (a) Employees normally scheduled to work more or less than eight (8) hours within a day shall be paid overtime at one and one-half times their regular rate for all work that does not occur within such scheduled hours provided that no employee shall be paid both daily and weekly overtime on account of the same hours of overtime worked. (b) Employees, when required to work on their regularly scheduled days of relief, shall be paid overtime at the rate of one and one-half times their regular rate, subject to the provision for double time on the second day of relief which is the seventh day of work, a provision set forth in the paragraphs following the schedule of wages attached hereto. ""Regular rate"", for the purpose of this section, shall mean the regular hourly rate of the employees. Section 2. Employees subject to this agreement shall be paid a minimum of three (3) hours at the time and one-half or overtime for actual time worked, whichever is greater, for each period of time worked during unscheduled hours. This minimum shall not apply: (a) In any case where employees are assigned to work continuous overtime from the end of their regular workday, but in that event, payment shall be at the overtime rate for such continuous time, or (b) In any case where employees are called out or assigned during the lunch hour. If an employee is scheduled in advance for overtime work on a day of relief, he or she will be paid the minimum if the overtime work is canceled unless he or she is notified of the cancellation prior to the close of the preceding regularly scheduled workday. If no such notice is given, the employee will report for work as scheduled, unless otherwise notified. If such overtime is scheduled on a regular workday, the minimum will apply unless the employee is notified of cancellation prior to the end of such regular workday. When planned overtime is scheduled for Saturday, or Sunday, the Company will notify the employees involved at least forty-eight (48) hours prior to Saturday, to the extent such notice is practicable and provided the Company has knowledge of the need for scheduling such work sufficiently in time to give such notice. If notice is given, but the planned overtime is later canceled, the minimum penalty for cancellation of planned overtime will not apply if notice of the cancellation is given prior to the end of the regularly scheduled workday on Friday. There will be a single overtime list for planned and unplanned overtime. The overtime equalization schedules on the Bulletin Boards are regarded as an equalization of overtime agreement. If an employee is entitled to overtime under the equalization provisions of the contract and is not requested to work such overtime, the employee will be provided overtime work to be assigned by the supervisor within seven days of acknowledgment by the supervisor that the employee was entitled to the overtime. Refusal of the overtime work by the employee will negate any further penalties by the Company. In the event there is a call out while the employee is on this overtime assignment, the employee will be assigned the call out even if the employee is not entitled to the call out based on the equalization list. The overtime assignment must be appropriate for the classification of the employee. The overtime assignment will be for a minimum of three hours or longer if the call out extended for a longer period of time. Section 3. If an officer, steward, or committee person of the Brotherhood is unavailable for overtime work because of Brotherhood business, such unavailability will not be charged against him or her for purposes of determining whether there has been an equitable distribution of overtime. Section 4. Employees who are on vacation for five (5) consecutive days or are sick are not considered available for overtime and such unavailability will not be charged against them for purposes of determining whether there has been an equitable distribution of overtime. Vacation will commence at the end of the employee's shift and end at the start of the employee's next scheduled shift. Section 5. Emergency Storm Work Premium - 5/1/87 It is sometimes necessary to assign outside physical workers for more than 24 hours because of severe storms causing extensive interruptions to service. The senior staff member responsible for operations will determine when this policy goes into effect. When these employees are so assigned to work for a period of more than 24 hours under this policy, including travel time, the method of payment will be as follows: (a) The outside physical workers so assigned will be paid for working time at the rate of one and one-half times their regular straight time rate and for rest time at their regular straight time rate. (b) The Rest Period Policy will not apply during this emergency work when employees are being paid under (a), but every effort will be made to give employees adequate rest time. It is intended that an employee who has worked continuously for sixteen hours be given at least eight hours rest and be paid for this rest time at the employee's regular straight time rate, but if it is not given, the employee will be entitled to compensating rest time at a later time for that portion of the eight hours rest time which was not given. (c) If a holiday occurs during this assignment, working time shall be paid for at the rate of two and one-half times the regular straight time rate and rest time at the regular straight time rate. (d) When the 24-hour period has ended and the emergency is over, the normal method of payment and rest time procedures will be in effect. ARTICLE VI APPLICATION OF RATED WAGE Section 1. The application of a rate of pay shall be based on the duties performed. Section 2. If, during the course of the daily work schedule, an employee is temporarily assigned (but not promoted) to a higher class of work for a period of three (3) hours or more, such employee shall receive the scheduled wage of such higher class for all hours worked within the daily work schedule. Section 3.  (a) Employees subject to the provisions of this agreement shall receive normal straight-time compensation for eight (8) hours on eight (8) recognized holidays and four (4) floating holidays, as listed below: New Year's Day January 1 Memorial Day Last Monday in May Independence Day July 4 Labor Day First Monday in September Veterans Day November 11 Thanksgiving Day Fourth Thursday in November Day after Thanksgiving Fourth Friday in November Christmas Day December 25   Floating Holidays (4) replaces previous holidays:   Birthday Holiday   Martin Luther King Day   Patriot's Day   Columbus Day The Company would grant employees the floating holiday off based on seniority. All other rules would apply as far as the number of people off at one time in each area. The Company would remain open for business in all departments. Employees who have completed six months of service are entitled to receive Floating Holidays. If the legal holiday occurs on Saturday, one of the following three options may be made available to one or more employees not scheduled to work on that day, in lieu of normal straight-time compensation, where the Department Head determines that it is feasible to make the option available in that Department. > a. A day off on Friday preceding the Saturday holiday, > > b. A day off on Monday following the Saturday holiday; or > > c. A day of on any date following the holiday. (b) If employees are assigned to work on a floating holiday or a holiday recognized hereunder which occurs on a workday within their scheduled workweek, they shall receive, in addition to the holiday pay described in (a), time and one-half for all hours worked in their normal schedule and two and one-half times their normal straight-time rate for hours worked outside their normal schedule within the holiday period, or the minimum, whichever is greater. (c) If employees are assigned to work on a holiday recognized hereunder which does not occur on a workday within their scheduled workweek, they shall receive, in addition to the holiday pay described in (a), twice their normal straight-time rate for the first (8) hours worked and two and one-half times their normal straight-time rate for time worked in excess of eight (8) hours within the holiday period, or the minimum, whichever is greater. (d) Existing Night Trouble Workers will work the Christmas and New Year Schedule - Normally - one will work one Holiday - the other Trouble Worker will work the other. Section 4. Where an employee of ten (10) years or more of continuous service, because of disability, is or becomes unable to continue to perform assigned duties based on classification as of the date of disability, the rights of such employee and the obligations of the Company under such circumstances shall be determined in accordance with ""Disability Retrogression Pay Plan"" included herein and made a part hereof under Article XVI on pages 26 to 28, inclusive. Section 5. Employees may be temporarily assigned to another class of work in the same or a different roster for a temporary period of time not to exceed forty-five (45) days per year. Management shall determine the roster from which employees are assigned. The selection will be according to the following criteria: 1. Voluntary by seniority 2. Junior qualified employee   Each temporary assignment shall be for a minimum of one (1) full day. These assignments shall not be used to fill permanent vacancies.   ARTICLE VII HOURS AND DAYS OF WORK Section 1. Eight (8) consecutive hours shall constitute the regular daily assignment and five (5) days of eight (8) consecutive hours shall constitute the regular weekly assignment of all employees coming within the scope of this agreement, insofar as such assignments do not interfere with presently established practices. Section 2. Hours and Days of Work Roster 1 Transportation   Transportation Technician   April 1 to November 30 - 7:30 a.m. - 3:30 p.m. Monday - Thursday   April 1 to November 30 - 6:00 a.m. - 2:00 p.m. Friday   December 1 to March 31 - 7:30 a.m. - 3:30 p.m. Monday - Thursday   December 1 to March 31 - 8:30 a.m. - 4:30 p.m. Friday     Roster 2 Operations Support   Clerks   January 1 to December 31 - 8:00 a.m. - 5:00 p.m. Monday - Friday   Radio Operator   January 1 to December 31 - 7:30 a.m. - 4:30 p.m. Monday - Friday If workload requirements change, the supervisor will notify employees that the work schedule has been changed to 8:00 a.m. to 5:00 p.m. with a paid 20 minute lunch. Roster 3 Meter & Service   Gas Service / Pipefitter Worker   January 1 - December 31 - 8:00 a.m. - 4:00 p.m. Monday - Friday   Emergency Night Trouble Worker: The second shift in the Service Department:   December 1 to March 31 - 4:00 p.m. to 12:00 Midnight   April 1 to November 30 - 1:00 p.m. to 9:00 p.m. Roster 6 Meter (Gas & Electric)   Gas / Electric Tester / Installer   January 1 - December 31 - 8:00 a.m. - 4:00 p.m. Monday - Friday or   January 1 - December 31 - 8:30 a.m. - 4:30 p.m. Monday - Friday     Roster 7 Street   Utility Worker, Utility / Regulator Worker   January 1 - December 31 - 7:30 a.m. - 3:30 p.m. Monday - Friday     Roster 8 Electric Distribution   Lineworkers, Cable Slicers, Maintenance Workers   January 1 - December 31 - 7:30 a.m. - 3:30 p.m. Monday - Friday   Night Emergency Trouble Worker - as posted     Roster 9 Meter Reading   Meter Reader   January 1 - December 31 - 7:30 a.m. - 3:30 p.m. Monday - Friday     Roster 11 Stores   Stores Clerk, Stock Person   One person will work:   January 1 - December 31 - 7:00 a.m. - 4:00 p.m. Monday - Friday   One person will work:   January 1 - December 31 - 8:00 a.m. - 5:00 p.m. Monday - Friday From January 1 through December 31, the stock person and stock clerk will establish a work schedule to ensure coverage of the stockroom from 7:00 a.m. to 5:00 p.m. Meal schedules will normally consist of one hour to be alternated between the two classifications. During any absence, coverage will be provided by the remaining employee on an overtime basis, working a straight eight (8) hours with a twenty (20) minute lunch period. Roster 12 Property Maintenance   Property Maintenance Worker   January 1 - December 31 - 11:00 a.m. - 7:00 p.m. Monday - Friday     Roster 19 Gas Production   Utility Workers   January 1 - December 31 - 7:30 a.m. - 3:30 p.m. Monday - Friday During the non-production season, LNG and Propane Plant inspections will be performed on a mandatory planned overtime basis on Saturdays, Sundays and holidays by Roster 19 personnel. Roster 20 Dig Safe   Dig Safe Technician   January 1 to December 31 - 6:30 a.m. to 2:30 p.m. Monday - Friday   ARTICLE VIII DAYS OF RELIEF Section 1. Days of relief now established shall not be changed without good and sufficient cause. When new positions are created, days of relief shall be established for such new positions and shall not be changed thereafter without good and sufficient cause. Section 2. Whenever employees are replaced in any class of work where continuous operation is necessary, the prevailing days of relief established with each assignment within such class shall not be changed without good and sufficient cause. Section 3. In departments or groups where continuous operation is not necessary, every effort will be exerted by the Company to establish the days of relief in accordance with the desires of the employees. Section 4. Employees will not be compelled to change their days of relief with other employees.     ARTICLE IX MEAL ALLOWANCE / PERIOD Section 1. A meal period of not less than thirty (30) minutes nor more than one (1) hour shall be arranged for employees unless otherwise mutually agreed upon. Section 2. The meal period shall be assigned between the end of the third hour after reporting for duty and the beginning of the sixth hour after reporting for duty. Section 3. Where the nature of the service requires continuous operation, eight (8) consecutive hours may be worked during which twenty (20) minutes shall be allowed for lunch at reasonable and convenient times without interruption of service and without deduction in pay. Section 4. (1) From January 1 through December 31, employees in the following Rosters will bring their lunch and will work a straight eight (8) hours (as specified below) with a twenty (20) minute lunch period provided, (normal lunch period to start four (4) hours after starting time) and with no deduction in pay for this twenty (20) minute period. Roster #3 8:00 a.m. to 4:00 p.m.     Roster #6 8:00 a.m. to 4:00 p.m. or, 8:30 a.m. to 4:30 p.m. (2) From April 1 through November 30, employees in the following Rosters will bring their lunch and will work a straight eight (8) hours (as specified below) with a twenty (20) minute lunch period provided, (normal lunch period to start four (4) hours after starting time) and with no deduction in pay for this twenty (20) minute period. Roster #7 7:30 a.m. to 3:30 p.m. Roster #8 7:30 a.m. to 3:30 p.m. (3) From December 1 through March 31 employees in the following Rosters will bring their lunch and will work a straight eight (8) hours (as specified below) with a thirty (30) minute lunch period provided, (normal lunch period to start four (4) hours after starting time) and with no deduction in pay for this thirty (30) minute period. Roster #7 7:30 a.m. to 3:30 p.m. Roster #8 7:30 a.m. to 3:30 p.m. (4) The following accommodations will be made for Company crew working in Rosters 7 and 8 with respect to the requirement that they work a straight eight (8) hours and bring their lunch, as set forth in this Article: (A) Employees in these rosters will bring their lunches year round. (B) During the winter months from December 1 through March 31, these employees may supplement their lunches through the purchase of hot foods, so long as the purchases meet the following requirements: 1. The purchase is to be on a take-out basis only; 2. The purchase may be made when the crew is on route between work assignments during the lunch breaks and it does not take longer than five (5) minutes to complete. Employees shall not drive away from their routes for purposes of making such purchases; 3. If the crew is at a job site during the meal period, the job site will not be broken down. Under such circumstances, if one employee on the crew can be spared from the work being performed, that employee may drive to a nearby restaurant and purchase and bring back hot food for the crew, provided that the total time during which the employee is away from the job for this purpose does not exceed ten (10) minutes. No member of the crew will leave any job site where emergency or urgent work is being performed, or where the employee cannot be spared; and, 4. There will not be multiple Company vehicles parked at any location. Section 5. The Company will grant, reimburse or otherwise compensate an employee for meals when an employee is required to work outside their normal work hours. The Company encourages employees to take their meal, if possible, without alteration in pay. If this is not possible, the employee should take a meal at the end of the work period. The Company also recognizes that when the nature of certain work requires continuous operation, that a meal may not be taken at a reasonable and convenient time without interruption to service. (1)             The meal allowance is:                   Breakfast           $7.50                   Lunch                 $7.50                   Supper             $13.50 (2) Definitions: (a) When a meal is not taken, the employee will be entitled to a meal allowance and compensated for a meal period. (b) A meal allowance will be paid in accordance with Article IX, Section 5 (1) of this agreement. (c) A meal period will be paid at time and a half (1-1/2) employee's base pay for thirty (30) minutes. (d) Emergency overtime is defined as overtime work where notice given the employee is twenty-four hours or less. (e) Establishing Meal Periods: Meal periods are based on the employee's normal starting time and shall not exceed thirty (30) minutes. Meal periods shall be defined as follows: (i) Employee works through a meal period: Based on employee's normal starting time. (a) Breakfast - One and a half (1-1/2) hours prior to the employee's starting time. (b) Lunch - Four (4) hours after the employee's starting time. (c) Supper - Ten and one-half (10-1/2) hours after employee's starting time. (d) Other - Six (6) hours after the start of the supper meal period. (ii) Employee does not work through a meal period. (a) Other- When applying this provision of the Agreement to establish a meal and meal period, no other timing for a meal(s) will apply. When an employee has not worked through a meal period, the employee will be entitled to a meal and a meal period six (6) hours after reporting for duty and every six (6) hours thereafter. (3) Callouts - The Company will pay a meal allowance to an employee when their normal meal period is disrupted by emergency overtime work and the period extends beyond three (3) hours. (4) Continuous Overtime - In the event an employee works two (2) or more hours of continuous emergency overtime after an eight (8) hour period, and such overtime extends beyond a normal meal period, the Company will pay a meal allowance to the employee. If the overtime work ends simultaneously with the expiration of two (2) hours after the end of an eight (8) hour period, the Company will pay a meal allowance of $3.00 in lieu of the meal and meal period. If the overtime work ends after two (2) hours but prior to two and one half (2-1/2) hours, the company will pay a meal allowance. If the overtime work ends at two and one half (2-1/2) hours and before three (3) hours, the company will pay a meal allowance and allow time to eat the meal. If the overtime work ends after three (3) hours, the company will pay a meal allowance and allow time to eat the meal or pay a meal allowance period. (5) Scheduled/Planned Overtime - The Company will not pay a meal allowance for a meal occurring during an eight (8) hour period on an employee's day of relief. (6) Extended Planned Overtime - Planned overtime that extends beyond an eight (8) hour period; the employee will be paid in accordance with Article IX, Section 5 (4) - continuous emergency overtime. (7) Meals are to be taken at the closest location within the Company's service territory. Without exception, Employees are required to call on the radio to report their location when taking a meal on overtime. After the completion of the meal, the employee will notify Dispatch that they are back on the air and ready for assignment.   Section 6. Employees engaged in emergency overtime work will be paid an allowance for the normal meal period that is disrupted and granted a meal period of twenty (20) minutes without deduction in pay and will be granted an allowance every six (6) hours later. Section 7. When a regular meal period is established, it shall not be changed without good and sufficient cause. Section 8. The meal allowance will not apply during emergencies involving employees working more than eight (8) hours beyond the normal work day. During emergencies, the reasonableness of the cost of the meal shall be subject to the approval of the department head.   ARTICLE X VACATIONS   Section 1 Vacation Pay is provided under the terms of the Vacation Pay Policy, HR 1.20, effective June 1, 2000. The schedule below illustrates the accrual of the vacation leave benefit: Completed Years of Service Entitlement Monthly Accrual 0 - 4 years 2 weeks .833 days/month 5 - 9 years 3 weeks 1.25 days/month 10 - 19 years 4 weeks 1.67 days/month 20+ years 5 weeks 2.08 days/month   Employees earn the Monthly Accrual if they are employed for the entire month and are not on leave of absence without pay. * Employees hired prior to January 1, 1983 and with over twenty-five (25) years of service shall be entitled to one day of vacation for each full year beginning with the twenty-sixth (26) year and ending in the 30th year, vacation beginning in the year that such service is completed. Employees must seek prior approval from their supervisors before taking vacation time and all questions regarding vacation leave should be directed to their immediate supervisor. Section 2. Vacations will be granted according to a schedule approved by the Company, and insofar as possible, seniority will govern. One (1) of the three (3) weeks of vacation, two (2) of the four (4) weeks of vacation and three (3) of the five (5) weeks of vacation for those employees who are eligible may be scheduled by the Company at any time during the calendar year. If an employee is unable to start their vacation as scheduled, such vacation will be rescheduled by the Company at the earliest opportunity. Section 3. Employee's vacation pay will be the greater of their regular straight time pay at the time of vacation or the average of the employee's straight time earnings in the previous calendar year. Section 5. All departments within the Company will distribute vacation selection forms to be completed by December 31 for scheduling vacations for the following year. All months of the year will be used by all departments for vacation scheduling. Department Managers will exercise discretion as to the number of employees on vacation at any one time. Section 6. For purposes of vacation scheduling in the Street Department and Line Department (exclusive of underground personnel) the following provisions shall apply: The year will be divided into the following three periods for taking vacation. Period I: The prime period consisting of June, July, August and September. During this period, employees may take up to two weeks of vacation. Period II: The months of April, May, October, November and December. During these months, an employee may take two weeks of vacation. Period III: The months of January, February, and March. During these months, an employee will take any remaining vacation not taken in Periods I and II. Not more than four (4) lineworkers may be on vacation at the same time during Period I and Period II, December only. Not more than two (2) lineworkers may be on vacation at the same time during Period II, except December. Department Head approval is required for more than four (4) lineworkers to be on vacation at the same time in December. Single days of vacation may be taken in Periods I and II, on the same basis as at present; namely, one (1) day for each week of vacation taken in the period, but they may be taken out of any of the scheduled vacation weeks in either Periods I and II instead of the scheduled vacation in the Period in which the single day is taken. Section 7. Where an employee becomes ill, or a member of the employee's immediate family dies just prior to their scheduled vacation, the vacation will be rescheduled upon the employee's request; scheduled vacation will not be rescheduled if the illness commences after the beginning of the scheduled vacation. However, if the death of an immediate member of the family (as defined in Article XX, Pg. 30) occurs after the beginning of the scheduled vacation, and the time lost, for the purpose intended, would have been in their normal work schedule, such time will be rescheduled, at a mutually agreed upon later date. Section 8. For purposes of vacation scheduling in Roster 9 (Meter Reading), the following shall apply: During the period of June, July and August, employees may take up to two (2) weeks of vacation but not more than two (2) employees may be on vacation at the same time during this period. During the remainder of the year only one (1) meter reader may be on vacation at any time.   ARTICLE XI SENIORITY Section 1. Seniority progression charts showing all classes of employees subject to this agreement and the seniority movement of such employees between classes hereinafter provided for have been prepared jointly by the Company and the Brotherhood. Roster sheets showing the names, classifications, Company seniority, and class seniority ratings of all employees subject to each seniority progression chart have been prepared and posted. The Company shall prepare and post quarterly, revised roster sheets showing any changes affecting the employees on such sheets. Any employee subject to this agreement who is aggrieved by any change in seniority rating may, within thirty (30) days after such change is posted, and not thereafter, request the Company to correct such rating, and upon adequate proof of error, it shall be corrected in accordance with the facts. Section 2. It is agreed, that when an employee is assigned to a position, which is not subject to the rules of the Agreement, on a temporary basis, the employee's seniority status will continue in the class which the employee held at the time of the assignment. An employee promoted, on a regular basis, to a position which is not subject to the rules of the Agreement, and subsequently returns to a classification which is subject to the rules of the Agreement, shall have their seniority status, for unit seniority purposes, reflect only that time served in the Bargaining Unit; i.e., the employee would return to the bottom of the classification from which they came, with the seniority that they had at the time of their promotion. This period of time will not exceed ninety (90) days. Section 3. Seniority shall begin when an employee was or shall be first hired by the Company, except that where an employee has been dismissed and rehired or has voluntarily left the employ of the Company and has been rehired, seniority shall begin when such employee was last hired. The seniority rating of employees shall be as follows: (a) Any present employee of the Company who was in the employ of the Company when seniority was first adopted (June 2, 1946) shall receive credit (in the class of work in which they are employed) for all prior employment with the Company. (b) Any present employee of the Company who was hired subsequent to June 2, 1946, shall receive credit beginning with their last hiring date and continuing during the term hereof in each class of work in which they have been or are hereafter regularly assigned. (c) The foregoing provisions of this section shall not apply to new employees until they have been continuously employed for a period of six (6) months, but thereafter these provisions shall apply to such employees. If because of a reduction-in-forces an employee is demoted from a class of work to which they were assigned on the date when seniority first became effective as aforesaid, such employee shall be assigned to the head of the list in the class to which the employee is demoted, but an employee promoted after said date and subsequently demoted because of a reduction in forces shall revert to that place on the list in the lower class which the employee held before their promotion; provided, however, that when forces are reduced in the lowest class, necessitating the furloughing of employees, the employee in such class having the shortest total period of service with the Company shall be furloughed first, and so on up through the class. Employees assigned to any class of work in one department of the Company, if furloughed out of their class of work because of a reduction-in-forces, shall be re-assigned by the Company to the same class of work in the same or some other department of the Company if there is another such class, and, if there is not another such class, then to some other class, provided such furloughed employees are qualified by fitness and ability to perform the work in the new class. When so reassigned, such employees shall have the same seniority rating in the new class which they had in the class from which they were furloughed and they shall displace juniors in the new class. New employees shall be deemed to be on trial for a period of six months from the date of hiring and within such period the Company shall have the right to discharge any new employee whenever in the opinion of the Company the employee has not qualified for the work for which they were hired or for other work to which the employee may be assigned. The Company shall have the right in its discretion to employ temporary forces for emergencies, vacation relief, or in other unusual situations, and seniority shall not apply to employees in such forces. The Company may employ student engineers in any class, the total number of student engineers so employed not to exceed three percent (3%) of the number of employees of the Company, and the Company in its discretion and without regard to seniority may assign the work of student engineers in any class or may transfer them from class to class, but in the event that student engineers are assigned to positions permanently such assignments shall be subject to the seniority rights of regular employees affected thereby. Section 4. If there is seniority movement between the classes involved, when a vacancy occurs in any class, the employee senior in the next lower class shall be entitled to promotion to the vacancy if their fitness and ability qualify them for the position, and when forces are reduced, the last person the class affected shall be furloughed first, and so on up through the class, employees so furloughed having the rights to displace juniors in a lower class if qualified by fitness and ability. An employee accepting promotion or transfer to a new class after June 2, 1948, shall have seniority in the new class beginning with the date of such acceptance, and the employee will retain unimpaired their seniority in the former class without the right, however, to displace juniors in the former class as long as they may have employment in the new class in any position for which they are qualified by fitness and ability. Section 5. If there is no seniority movement between the classes involved and forces are reduced in a class, an employee who was transferred to such class from another class shall return to their former class without loss of seniority in that class if then qualified by fitness and ability to perform the work in the employee's former class. Section 6. In the event of a vacancy in an existing position or in a newly created position within each class in any department, notice of the vacancy will be posted at places accessible to employees affected in that department, and Company-wide in all other departments, and shall remain posted for a period of seven (7) days, within which time applicants eligible and desiring to fill such vacancy shall apply in writing to the official of the Company designated in the notice. Such notice shall also set forth the title of the position to be filled, hours of work, days of relief, rate of pay and outline of duties. The bidders will be considered in the following order and the senior qualified bidder will be awarded the job: (1) Employees with seniority who have previous time in the class where the vacancy exists, in the order of their seniority in that classification. (2) Employees with seniority in the next lower class in the same roster, in the order of their classification seniority in that classification. (3) Employees with seniority in each lower class, in order, in the same roster, in the order of classification seniority within each such class. (4) Employees with seniority in a class, if any, above the vacancy and in the same roster, in the order of seniority in such higher classification. (5) Employees with seniority from other rosters, considered in the order of their Company seniority. Within one (1) week after expiration of the posting period the Company shall assign the accepted applicant to such vacancy or newly created position. If the Company anticipates a problem will arise in making the assignment within one (1) week, the Company agrees to discuss this with the Union in advance. When such vacancies occur in positions that are to be refilled, the Company will post notice within one (1) week. Any employee assigned to a new position shall have thirty (30) days in which to qualify. If the employee is unable to qualify, the employee may return to the class from which they came without loss of seniority rating therein. If in the opinion of the Company the employee is competent, the employee shall not return to the class from which they came until a vacancy occurs in that class. Section 7. The seniority status of an employee transferred to a new position or vacancy in another department in accordance with the preceding Section shall begin on the date of the employee's assignment to the new class and the employee will retain unimpaired their seniority in the former class without the right, however, to displace juniors in the former class as long as they may have employment in the new class in any position for which that employee is qualified by fitness and ability. Section 8. When forces are increased in any class, furloughed employees shall be given preference over applicants not previously employed by the Company if they are qualified by fitness and ability to perform the work in the class of service affected. When employees are furloughed from several classes and a vacancy later occurs in a particular class, furloughed employees from the class where the vacancy occurs shall have preference. Furloughed employees shall notify the Company in writing on or about the first day of each calendar month that they are available for re-employment, and if offered work by the Company for which they are qualified, they must accept it in writing and report for work within seven (7) days, and furloughed employees failing so to notify the Company of their availability for a period of six (6) months or to accept as aforesaid work so offered shall forfeit all seniority rating. Section 9    -    6/1/67 In reducing and increasing forces, in making promotions, and in making appointments to fill vacancies occurring in any class with employees in the same class in which the vacancies occur, or from other classes, all as provided in the foregoing sections, the Company shall determine the fitness and ability of all applicants for new or different positions. In determining fitness and ability of any applicant from another roster, the desire and ability of such applicant to advance to higher classifications in the roster to which the bid is made will be contributing factors. Should reduction of forces become necessary for any reason, the Brotherhood will be consulted and every attempt made to achieve the reduction by attrition. In the event that employees are displaced from their classification by reason of a reduction in forces, the following will apply: 1. The Company will discuss the matter with the Local Union. 2. Such employee may displace other employees of the Company pursuant to the Seniority provisions of the agreement. 3. The wage rate of employees upon such transfer to lower rated jobs will be as follows: Continuing Service at Date of Reduction Total Reduction Employees with ten (10) or more  years of continuous service. No reduction Employees with nine (9) but less than ten (10)  years of continuous service. $1 per week after 6 months Employees with eight (8) but less than nine (9)  years of continuous service. $2 per week after 6 months Employees with seven (7) but less than eight (8)  years of continuous service. $2 per week after 6 months $1 per week after 12 months Employees with six (6) but less than seven (7)  years of continuous service. $2 per week after 6 months $2 per week after 12 months Employees with five (5) but less than six (6)  years of continuous service. $2 per week after 6 months $2 per week after 12 months $1 per week after 18 months Employees with less than five (5)  years of continuous service. No reduction for first 6 months; a reduction of $2 per week at the beginning of the second and successive periods of 6 months until the rate wage equals the ultimate of the lower classification   4. Employees reduced to a lower-rated job classification are required to bid vacancies they are qualified to perform as they may occur in the former classification or in other higher rated jobs unless the Company and the Brotherhood feel there are extenuating circumstances. Employees failing to bid, or accept assignments, may have their wages reduced. All assignments will be made in accordance with the seniority provisions of the contract. 5. If an employee is transferred to a lower-rated job under the above and bids for and is awarded a job with a lower ultimate, the difference in ultimates will be deducted from the employee's rate unless the Company and the Brotherhood feel there are extenuating circumstances. If, after such transfer, a general wage increase is made on a percentage basis, the employee shall receive eighty percent (80%) of said general increase, the percentage to be figured on the adjusted rate prior to applying the eighty percent (80%). FITCHBURG GAS AND ELECTRIC LIGHT COMPANY By /s/ F. Manley President Section 10. Any employee who, subsequent to the enactment of the Selective Training and Service Act of 1940, left the employ of the Company to enter any of the armed forces of the United States of America, will retain the same seniority status that they would have had if the employee had remained in the employ of the Company during the period of their absence, provided that their military service is terminated by an honorable discharge and that within ninety (90) days thereafter the employee shall apply in writing to the Company for re-employment. The Company shall assign such an employee according to their seniority status provided the employee is then qualified by fitness and ability to perform the work in their class, but, if the employee is mentally or physically unfit to perform the work in their class, the Company shall endeavor to provide the employee with employment in any class of work in any department of the Company for which the Company deems the employee to be mentally, physically and otherwise qualified, and provided also that the employee's total length of service with the Company, including the aforesaid military service, shall be greater than that of the employee to be displaced. Section 11. The Company agrees to grant to regular employees of the Company such reasonable leaves of absence, without pay for transacting official union business of the Brotherhood, in such numbers and for such length of time as the Company shall determine. Any such employee who returns to the employ of the Company at the expiration of their leave of absence will be credited with the seniority that such employee would have had if they had remained in active service with the Company during the leave of absence and shall be assigned to the classification in their roster to which such seniority entitles the employee, provided such employee is then qualified by fitness and ability to perform the work of such classification.   ARTICLE XII DISCIPLINE, SUSPENSION AND DISCHARGE Section 1. If any employee is disciplined, suspended or discharged, a meeting will be held between the Company and the Union Grievance Committee within a reasonable time. The Brotherhood may in its discretion within seven (7) days from the date upon which such employee is disciplined, suspended or discharged request the Company to grant a hearing to such an employee, such request to be in writing, registered and mailed to the Director of the Company. Hearings will be held by the Director of the Company or by a department head or other officer of the Company designated by the Director within one (1) week after receipt of such written request. Section 2. If an employee is charged with the violation of Company rules or any other offense, and a hearing is requested under Section 1, the Brotherhood shall be furnished with a statement of the charge in writing. At the hearing, the Brotherhood shall represent the employee disciplined, suspended or discharged and may present witnesses. Section 3. If the employee is exonerated, the employee will be restored to service without prejudice and shall be compensated for any loss in wages caused by such discipline, suspension or discharge.   ARTICLE XIII GRIEVANCE   Section 1. Any dispute arising during the term hereof shall be treated as a grievance and every reasonable endeavor shall be made to settle such dispute by agreement between the Grievance Committee of the Brotherhood and the Director of the Company or their representatives. Within ten (10) working days, any grievance shall be presented in writing to the employee's immediate supervisor. Section 2. If the employee's immediate supervisor cannot satisfactorily resolve the grievance as stated in Section 1, it shall be referred to the Department Head. Section 3. Within ten (10) working days of such submission as stated in Section 2, a meeting shall be arranged between the grievant, the Union Steward, the Supervisor and the Department Head. Section 4. Within ten (10) days, if the grievance is not satisfactorily resolved by the meeting as stated in Section 3, the grievance may be submitted to the Director of the Company, or the Director's designees. Within five (5) working days of such submission, a meeting shall be arranged between the Union Grievance Committee and the Director or the Director's designees. The Company shall reply in writing to the grievant within five (5) working days after the meeting. Section 5. If the response given pursuant to Section 4 above does not satisfactorily adjust a grievance, the grievance may be submitted in writing to arbitration within sixty (60) working days of the date of the written response pursuant to Section 4 above. Section 6. The party requesting arbitration shall do so by delivering to the other party a notice in writing setting forth its statement of the matter in dispute. If a party requests arbitration and so notifies the other in writing and thereafter either party fails or neglects to name its arbiter within ten (10) days after receipt of such request, it shall be construed that the party failing or neglecting to name its arbiter as aforesaid has waived its right to arbitration of the particular dispute, and in that event the demands of the other party shall be conceded unless it so happens that both parties fail or neglect to name arbiters within the time provided. Section 7. Any grievance not presented in accordance with applicable time limits or other requirements in the steps listed above shall be automatically foreclosed and considered settled and shall constitute a denial of the grievance. By mutual agreement the parties may extend the time limits in any of the steps listed above. Section 8. Arbitration shall be conducted through a Board of Arbitration consisting of one (1) representative selected by the Union, one (1) representative selected by the Company and an impartial Chairman mutually chosen by the parties. The procedure for Arbitration shall be as follows; A. The Union representative and Company representative shall meet forthwith to choose an impartial Chairman, but no later than fifteen (15) calendar days from the date of the demand of arbitration. If no selection can be made within such fifteen (15) day period, then either party may request lists from the American Arbitration Association and selection shall be made in accordance with the rules of the service. B. Hearings and post hearing activities shall be conducted in accordance with the voluntary labor arbitration rules of service. C. The decision of a majority of the Board shall be the decision of the Board of Arbitration. The Board shall have no power to change, amend, modify, or otherwise alter the provisions of this Agreement. The decision of the Board, which shall contain a full written statement of the grounds upon which the issue or issues are decided, shall be final and binding on the Union and the Company. D. Each party shall bear the expense of preparing and presenting its own case. The compensation and expense of the impartial Chairman and any other expenses of such Board shall be borne equally by the parties. E. At the meeting with the impartial Chairman it will be discussed and agreed to that the impartial Chairman is required to return a decision within sixty (60) days of the hearing. Section 9. The Company shall have the right to grieve and arbitrate any dispute which arises concerning the terms and conditions of this Agreement. Section 10. While this agreement is in effect, there shall be no authorized or sanctioned cessation, retarding or stoppage of work because of any dispute which may result from any interpretation of this agreement or for any cause whatsoever. If an employee represented by the Brotherhood and subject to the terms and conditions of this agreement who, without the authority and sanction of the Brotherhood, voluntarily absents themself from work because of any dispute or demand, the employee may be denied further employment or suspended at the option of the Company.   ARTICLE XIV PAYROLL DEDUCTIONS The Company agrees to deduct weekly from earned wages and remit to the Brotherhood, the dues of those employees who are members of the Brotherhood and not exempt from the provisions of this agreement, in an amount individually authorized in a manner and on a form approved by the Union and the Company.   ARTICLE XV PENSION PLAN A pension plan is provided for employees and is briefly outlined below. In the event there shall be enacted state or federal legislation which conflict with the terms of the below plan, state or federal legislation will govern. Eligibility Any employee of the Company shall or may retire on a retirement benefit subject to the provisions and conditions hereinafter set forth: 1. An employee who has attained the Normal Retirement Date (first day of the month in which occurs an employee's 65th birthday) and ceases active service with the Company shall be entitled to a pension. 2. For employees hired on or after June 1, 1985, an employee shall be entitled to a disability retirement benefit if the employee has completed 15 or more years of Credited Service (excluding service before age 18) and becomes totally and permanently disabled. In order to be eligible for a disability pension the employee must: a. Be totally and permanently -prevented from engaging in any occupation or employment for wages or profit. b. The disability must not have been incurred while the employee was engaged in: (1) criminal act (2) service in the armed forces (3) habitual drunkenness or addiction to a narcotic (4) intentional self-inflicted injury (5) act or disease resulting during the course of employment with an employer other than the Company. Further, that the disability pension may be discontinued should the employee refuse to be examined by a physician designated by the plan. The pension would be computed on the basis of the Credited Service and Average Monthly Wages at the time of the disability retirement. Such pension shall commence on the employee's Normal Retirement date. On each January 1st, prior to the Employee's Normal Retirement Date, the monthly pension payable to a disabled employee shall be increased to reflect an additional year of Credited Service which would have accrued to the employee. For employees hired on or before May 31, 1985, disability retirement benefits shall be provided under the contract terms as stated in the "Agreement Between Unitil/ Fitchburg Gas and Electric Light Company and The Brotherhood of Utility Workers of New England, Inc.Utility Workers Union of America, AFL-CIO, Brotherhood of Utility Workers Council, Local Union No. 340B340, May 1, 1998 - May 31, 2000." An employee with fifteen (15) years of Credited Service and who has attained age fifty-five (55) may elect to retire on an Early Retirement Date, which may be the first day of any month thereafter prior to the employee's Normal Retirement Date. The Company requests that the employee notify the Company in writing at least ninety (90) days prior to such date of intention to retire early. Vesting An employee's pension benefit will become vested (a right to a deferred benefit at age 65) after completing at least five (5) years of credited service following their 18th birthday (excluding Credited Service completed prior to age 18). Determination of Amount of Normal Retirement Benefit A. Basis: The basis for the computation of the amount of the retirement benefit shall be the employee's average monthly wage for the last five (5) years of Credited Service or the employee's average monthly wages for any consecutive five-year period during the employee's last twenty (20) years of Credited Service, whichever amount is larger. B. Amount: Based upon average monthly wages determined as above stated, the employee shall be eligible for a monthly retirement benefit payable in advance, computed as follows: > > 1. For each of the first twenty full years of Credited Service - 2% of said > > average monthly wages, plus > > 2. For each full year of Credited Service in excess of twenty full years > > and not in excess of thirty full years - an additional 1% (one percent) > > of said average monthly wages, plus > > 3. For each full year of Credited Service in excess of thirty years - an > > additional 1/2 of 1% (one-half percent) of said average monthly wages, > > such sum to be reduced by: > > 4. Fifty (50%) percent of such employee's Primary Social Security Benefit > > payable under the Federal Social Security Act in effect on December 31, > > 1970: such reduced sum to be further reduced by: > > 5. The amount of monthly retirement benefit, if any, to which the employee > > is entitled under any retirement plan maintained by a former employer > > for which credit is given under the Plan (i.e. another Unitil System > > Company). Determination of Amount of Early Retirement Benefit The monthly amount of Early Retirement Benefit payable to an employee retiring on their Early Retirement Date shall be equal to the employee's Normal Retirement Benefit based on Credited Service to their Early Retirement Date, reduced on the basis of the following schedule: Early Retirement Percent Reduction of Normal Retirement Benefit Early Retirement Benefit Expressed as a % of Normal Retirement Benefit 65 0% 100% 64 0% 100% 63 0% 100% 62 0% 100% 61 0% 100% 60 0% 100% 59 5% 95% 58 10% 90% 57 15% 85% 56 20% 80% 55 25% 75% Normal Form of Benefits A. Monthly Annuity for Life An employee who is unmarried at retirement will receive a retirement benefit as a monthly annuity for as long as the employee lives. Upon death, no death benefits will be payable to any beneficiary. B. Joint and Survivor Annuity with Spouse An employee who is married at retirement and who does not elect to receive the retirement benefit as a monthly annuity for life will receive an actuarially reduced benefit for as long as the employee lives with fifty (50%) percent of such reduced benefit payable after death to the employee's spouse for as long as such spouse lives. The reduction is based upon the life expectancies of the employee and spouse on the employee's retirement date. Optional Form of Benefits Contingent Annuitant Option An employee may elect, instead of the retirement benefit as heretofore provided, to have reduced retirement benefits made commencing on the employee's retirement date and after death such reduced payments, or any lesser amount selected by the employee, will be continued to the designated beneficiary, if living after the employee's death, for the beneficiary's lifetime. Ten (10) Year Certain and Life Annuity An employee may elect that the retirement benefit, payable on the retirement date, be reduced with the guarantee that not less than one hundred and twenty (120) monthly payments will be made either to the employee or the named surviving beneficiary. Five (5) Year Certain and Life Annuity An employee may elect that the retirement benefit, payable on the retirement date, be reduced with the guarantee that not less than sixty (60) monthly payments will be made either to the employee or the named surviving beneficiary. If any of the above options are elected, the provisions for a minimum annual retirement benefit shall only apply prior to any reductions under the above options. Minimum Retirement Benefit In no event will the Company pay any employee who retires with fifteen years of Credited Service an annual normal retirement benefit of less than $1,200 in addition to such sums, if any, as the employee may receive as ""Primary Insurance Benefits"" under the Federal Social Security Act. Spouse's Benefit A Spouse's Benefit shall be payable to an employee's spouse in the event of the employee's death prior to the Normal Retirement Date, provided at least fifteen (15) years of Credited Service was completed and the employee has been married to the surviving spouse for at least one (1) year. The monthly amount of the Spouse's Benefit shall be one-half of the amount of Retirement Benefit which would have been payable had the deceased employee retired, rather than died, on the day before death, reduced, however, by one (1%) percent for each full year in excess of two (2) by which the deceased employee's age exceeds their Spouse's age. A minimum of fifty ($50.00) dollars per month shall be payable. Spouse's Benefit payment shall terminate with the last payment due preceding death. Deferred Termination Benefit An employee who terminated employment after five (5) or more years of Credited Service shall be entitled to a Deferred Termination Benefit equal to that portion of the Normal Retirement Benefit accrued to the date employment terminates. Funding The pension plan will continue to be funded, with all contributions from the Company. It is understood that the retirement plan will meet the requirements for approval by the Internal Revenue Service and will be actuarially sound. The specific details of the pension plan will be as described in the retirement plan documents. In the event of any conflict between this summary and the Plan Document, the Plan Document will govern. While the Company expects to continue indefinitely the benefits provided for under this pension plan, it agrees to continue them only for the term of the agreement with The Brotherhood of Utility Workers of New England, Incorporated. The Utility Workers Union of America, AFL-CIO, Brotherhood of Utility Workers Council, Local No. 340B340, effective June 1, 2000. ARTICLE XVI DISABILITY RETROGRESSION PAY PLAN 1. Non-Compensable Disability In the event an employee with ten (10) full years of continuous service or more becomes unable to perform their normal duties because of a disability for which the employee is not receiving Worker's Compensation Benefits, the Company shall provide the employee with work, provided the employee is able to perform such work. If such employee refuses to accept such work, the obligation of the Company hereunder shall be discharged. In the event an employee with less than ten (10) full years of service becomes unable to perform their normal duties because of a disability for which the employee is not receiving Worker's Compensation Benefits and if the Company is able to provide the employee with work which the employee is capable of performing, the employee shall be assigned to such work. The adjusted pay rate in either case shall be determined by the following PLAN shown below. A. FUTURE RETROGRESSION 1. Less than ten (10) full years of continuous service at time of retrogression. a. An employee with less than ten (10) full years of continuous service with the Company at time of retrogression shall receive the ultimate base rate of the new job classification. b. The new rate shall become effective at the time of such retrogression. 2. Ten (10) full years and less than twenty-five (25) full years of continuous service at time of retrogression. a. An employee with ten (10) full years or more of continuous service with the Company at the time of retrogression shall receive an ADJUSTED pay rate equal to the ultimate base rate of the new job classification. PLUS for each full year of continuous service an additional four percent (4%) of the differential between the pay rate of the new job classification and the employee's AVERAGE pay rate, except that in no case shall the ADJUSTED rate be greater than the AVERAGE rate, or less than the ultimate base rate of the new job classification. The AVERAGE pay rate shall be determined by finding the weighted average of the pay rates for all job classifications the employee has held for the five (5) year period immediately preceding the date of retrogression. In making this computation, ultimate base rates in effect at the time of retrogression shall be used. b. The employee's pay rate shall be reduced to the ADJUSTED pay rate in steps of ten cents ($.10) per hour or four dollars ($4.00) per week every six (6) months, except that the last reduction step may be ten cents ($.10) per hour or four dollars ($4.00) per week or less as necessary to reach the ADJUSTED pay rate exactly. The first reduction step shall occur six (6) months from the effective date of retrogression. 3. Twenty-five (25) full years or more of continuous service at time of retrogression. a. An employee with twenty-five (25) full years or more of continuous service with the Company at the time of retrogression shall retain the ultimate pay rate of the classification from which the employee retrogressed. II. Compensable Disability In the event an employee with ten (10) full years of continuous service or more becomes unable to perform their normal duties because of a disability for which the employee is receiving Workmen's Compensation Benefits, the Company shall provide the employee with work, provided the employee is able to perform such work. If such employee refuses to accept such work, the obligation of the Company hereunder shall be discharged. In the event an employee with less than ten (10) full years of service becomes unable to perform their normal duties because of a disability for which they are receiving Workmen's Compensation benefits and if the Company is able to provide the employee with work which the employee is capable of performing, the employee shall be assigned to such work. The employee's ADJUSTED pay rate in either case shall be determined as set forth under 1 (A) of this PLAN except that the following shall apply: A. If, at the time of retrogression, the employee is receiving compensation for partial disability, the Company will pay such amounts so that the employee's total compensation from the Company and from such Disability Benefits will equal the adjusted pay rate. B. The date the employee commences work at the lower classification shall be considered as the date of retrogression. III. General Provisions Applicable to I and II of the PLAN A. In all computations, only FULL YEARS of service shall be used. B. ADJUSTED pay rates established under the PLAN shall be figured to the nearest cent except where the rate figures exactly to a half-cent. C. An employee with ten (10) or more full years of continuous service receiving an ADJUSTED pay rate under the PLAN shall hold the title of the new job classification with the word ""SPECIAL"" appended thereto. D. A physician appointed by the Company in all cases shall consult with such employee's family physician and in the event of disagreement as to the employee's condition and/or ability to perform the work of any particular class, the case shall be referred to a recognized specialist or clinic in the field of medicine involved, whose opinion will be final and binding upon all parties. E. No change in GROUP INSURANCE classification shall result from such retrogression. F. General increases will be figured on the adjusted pay rate of a retrogressed employee. G. An employee transferred to a lower classification under the PLAN shall be assigned without posting the job. H. References to continuous service in the Company shall include service with affiliated companies. I. If an employee who is being compensated under the provision of this PLAN is again transferred to one or more lower or higher rated classifications, the employee's new ADJUSTED rate upon each such transfer shall be computed as if the employee had been transferred to such lower or higher classification initially, using all factors applicable at the time of the first retrogression. The resultant rate shall be corrected to reflect all wage adjustments which were made in such classification since the date of the initial retrogression. J. The Company may, in its discretion, withhold the provisions of this PLAN from employees who also engage in work for other than the Company or its affiliates.   ARTICLE XVII SICK PAY PLAN Employees covered by this Agreement are eligible for the Company's Sick Pay Policy HR 1.12, effective June 1, 2000, and shall be entitled to two weeks sick pay during the first year of employment. After one year of employment, employees will be entitled to up to twenty-six weeks of sick pay. The Company may, in its discretion, withhold payment of sick pay benefits to employees who engage in other work. The Company reserves the right to request verification of continued disability by the Employee's physician, as well as the right to request second and third opinions. The Company has given its Department Heads discretion to grant limited time off without loss of pay for urgent personal reasons including a serious emergency at home, such time to be no more than required for the purpose, usually a few hours and in no event , more than one day. Department Heads also have discretion to grant time off without pay for personal reasons if there is good cause and no abuse of privilege. ARTICLE XVIII GROUP INSURANCE During the effective period of this Agreement, the Company will maintain Group Insurance as follows: Life, Accidental Death and Dismemberment, Long-Term Disability, Medical and Dental Plans, in accordance with the Group Insurance Summary dated June 1, 2000, and attached hereto. In the event that there shall be enacted after June 1, 2000, state or federal legislation in addition to that now enacted which provides benefits in the field of health, medical, hospitalization and nursing care, the parties agree that there shall be no duplication or overlapping of such benefits and the benefits provided by the Company. In the event that the Company determines that such duplication or overlapping of benefits occurs, it may revise the benefits under the Company's Group Insurance Plans to minimize the same. In so doing, there will be no reduction in the benefits provided to employees as set forth in the attached Group Insurance Summary. The Union shall be given reasonable advance notice of any changes made pursuant to this provision and upon the request of the Union, it shall have an opportunity to discuss them with the Company prior to their being made. There will be no changes in insurance carrier during the term of the contract unless by mutual agreement.   ARTICLE XIX 401(k) PLAN Employees may participate in the Company's 401(k) Plan (Plan). The Company agrees to make payroll deductions for payments to the duly-established 401(k) Plan upon written authorization by regular employees and to forward the amounts so deducted to the 401(k) Plan in accordance with such authority. The Company reserves the right to make administrative changes to the 401(k) Plan during the term of this Agreement with the understanding that such changes will not decrease the amount of benefits provided to Plan members. These administrative changes may include the merger of 401(k) Plans. The Company will amend the 401(k) Plan to permit the election of gross wages with or without overtime for maximum contributions on an annual basis if regulations permit. The employee can save 15% of base or gross wages and the Company will match 100% of the first 3% of base wages that an employee contributes to the Plan.   ARTICLE XX LEAVE OF ABSENCE Section 1. Death in The Family Employees are eligible for the Company's Bereavement Pay Policy HR 1.15, effective June 1, 2000, which allows for three (3) days off with pay for a death in the family. Section 2. Jury Duty Employees are eligible for the Company's Jury Duty Policy HR 1.27, effective June 1, 2000, which allows for unlimited time off with pay if an employee is required to serve as a member of a jury or is subpoenaed to appear in court in a capacity other than a plaintiff or defendant. Section 3. Military Leave Employees are eligible for the Company's Military Leave of Absence Policy HR 1.08, effective June 1, 2000, which allows for two (2) weeks off with pay for military training leave and four (4) months off with pay if an employee is activated as a result of a call-up order. Section 4. Unpaid Leave of Absence Employees are eligible for the Company's Unpaid Leave of Absence Policy HR 1.34, effective June 1, 2000, which allows for up to six (6) months off, unpaid, for personal reasons that do not qualify under other leave policies. A Leave of Absence of up to six months will not effect union seniority. ARTICLE XXI SEVERANCE PAY PLAN Employees are eligible for the Unitil Corporation Severance Pay Plan. An employee who desires severance pay, must, within ten (10) days after receiving notice of layoff, notify the Company in writing of his desire to terminate employment and receive Severance Pay under this plan. Upon such termination and receipt of Severance Pay, the employee will lose all seniority and recall rights under the contract. If an employee does not desire to terminate his employment in these circumstances, he will retain his recall and seniority rights, to which entitled under the contract, if any, but shall not be entitled to any Severance Pay hereunder.   ARTICLE XXII BULLETIN BOARDS The Company will provide space on the Company Bulletin Boards for official Union notices. Notices of Union meetings, elections, and appointments may be posted by the Union without prior approval. Any other material which the Union desires to post shall first be submitted to management for approval before posting. There shall be no posting of advertising or political matter or material which is objectionable or controversial.   ARTICLE XXIII EFFECT OF AGREEMENT Section 1. This agreement is the entire agreement between the parties except such amendments or supplementary agreements as are in writing and signed by the parties. Section 2. During the term of this agreement, should any provisions or part thereof become illegal, the rest of the agreement will continue in full force and effect.   ARTICLE XXIV CONTRACTORS The Union will have the right to call to Management's attention any condition that they may consider detrimental to the employees of the Company relative to work proposed, or being performed by outside contractors, and Management agrees to discuss this condition with the Union, and to take whatever remedial action may be agreed to in these discussions. Outside contractors will be required to adhere to OSHA requirements. The Company recognizes that its use of outside contractors may, at times, cause some concern to employees and the Union. Accordingly, upon request of the Union Committee, the Company representatives will discuss any problems arising over the use of contractors. If such discussion does not satisfy the Union, it may make a written request to the Director of the Company for a meeting with the Director, in which event, the Director will sit down with the representatives of the Union for a thorough review and discussion of the problem. Addendum (May 1, 1973) - The question of Pre-notification of Contractors to be handled as a matter of common sense and good labor relations, with no legal commitment. Except when emergencies exist, the Company will before the letting of a contract discuss with the Brotherhood the reasons, economics and any other matters pertinent to the situation. There is no intent to displace regular employees by these outside forces.. Note: The foregoing paragraph would not preclude the Company from hiring temporary forces.   ARTICLE XXV WORKING CONDITIONS Section 1. Alternate Emergency Trouble Worker - Line Department It is agreed that the following supplementary practices affecting working conditions will be continued during the term of the current Collective Bargaining Agreement: The conditions for Alternate Emergency Night Trouble Worker classification and posting thereof are as follows: a. Duties and qualifications would be the same as for the Emergency Night Trouble Worker and would be posted as such. b. Only Lineworkers-1st Class will be eligible to fill the job. c. One or more Lineworkers-1st Class with ""alternate"" listing will be listed according to seniority on summation sheet, but will retain present place in roster. d. Senior ""Alternate"" person would be assigned to fill in on a temporary basis when the regular Emergency Night Trouble Worker is not available for work. In the event the senior ""Alternate"" person is not available due to sickness, vacation, etc., the second ""Alternate"" person would be assigned. Any ""Alternate"" so assigned would accumulate seniority for time actually worked in the Emergency Night Trouble Worker's classification. e. Planned absences: Example - vacation, sickness other than first day - 1. Senior person from "Alternate" list will not work 7:30 a.m. - 3:30 p.m. as Lineworker-1st Class. 2. Will be notified and assigned in advance to fill in on the Emergency Night Trouble Worker's job. 3. Will receive credit in the classification as Emergency Night Trouble Worker. Will also receive pay of classification at straight time. 4. If there is overtime involved while the "Alternate" is working as the Emergency Night Trouble Worker, overtime will be at the Emergency Night Trouble Worker rate. f. Absences other than planned: Example - sickness first day - 1. If "Alternate" man has reported for work for normal 7:30 a.m. - 3:30 p.m. hours, then "Alternate" will work 7:30 a.m. - 3:30 p.m. at straight time as Lineworker-1st Class. And then 3:30 p.m. - 12 midnight at time and one-half at the Emergency Night Trouble Worker's rate. g. When the Emergency Night Trouble Worker returns to work, "Alternate" will be notified not later than 4:00 p.m.. on the last working day prior to the Emergency Night Trouble Worker's return. "Alternate" will report on next working day at normal hours. If the Company is not able to meet this time factor, the "Alternate" and the regular Emergency Night Trouble Worker will work together for the first night after the regular Emergency Night Trouble Worker returns to work. h. An "Alternate" can be removed from the "Alternate" list by request. When an "Alternate" is so removed, the "Alternate" job will be posted to obtain a replacement. Section 2 Work Assignments Line Department The normal crew complement for work assignments will be two line workers except the Company would have the option of assigning and upgrading a qualified line worker(s) to a single person operations and maintenance vehicle(s) . The Union may request additional personnel and the crew supervisor may, at their discretion, grant the request. a. It is management's responsibility to determine the number of line workers needed on work assignments; that various relevant conditions affect a judgment whether two (2) line workers or three (3) line workers are needed on particular job assignments; and that supervision should make particular job assignments on the basis of the number of line workers needed--whether this is two (2) line workers, three (3) line workers or more. b. It is the Company's policy to observe high standards of safety and in no event will it assign two (2) line workers if, in its judgment, three (3) line workers are required for a particular job by reason of safety considerations. Work assignments are based on a collaborative effort from a Joint Working Committee. There is an understanding that work assignments will be mutually agreed upon before implementing. The Committee consists of two (2) Company and two (2) Union personnel. It is recognized that as provided in Section 502 of the Labor-Management Relations Act of 1947, an employee may decline to work in good faith because of abnormally dangerous conditions for work and nothing in this memorandum can affect such right of the employees as set forth in the Federal Statute. Section 4. Work Assignment Gas Department Two (2) qualified persons will be used when working on live gas lines. The Union may request additional personnel and the crew supervisor may, at their discretion, grant the request. (a) It is management's responsibility to determine the number of utility workers needed on work assignments; that various relevant conditions affect a judgment whether two (2) utility workers or three (3) utility workers are needed on particular job assignments; and that supervision should make particular job assignments on the basis of the number of employees needed--whether this is two (2) utility workers , three (3) utility workers or more. (b) It is the Company's policy to observe high standards of safety and in no event will it assign two (2) utility workers if, in its judgment, three (3) utility workers are required for a particular job by reason of safety considerations. Work assignments are based on a collaborative effort from a Joint Working Committee. There is an understanding that work assignments will be mutually agreed upon before implementing. The Committee consists of two (2) Company and two (2) Union personnel. In the event there is a reduction in Roster 7, identification of underground facilities and gas leak surveys using the flame ionization unit would be assigned exclusively to Union employees. Section 5. Residential Gas Cock Lubrication Duties * Work to be performed, during scheduled hours by the Gas Meter & Service Department * Work to be performed, during non-scheduled hours, when Gas Service Department and Gas Distribution Department are both working, by Gas Meter & Service Department. * Work to be performed for call-outs, by the Gas Distribution Department. General Duties > * Maintenance, Cleaning and lubricating of gas cocks to be performed by the > Gas Meter and Service Department under the above stated Stipulations. Section 6. Inclement Weather Clause 5/1/89 The following provisions will apply to employees in Rosters 7 and 8 with respect to inclement weather: During stormy weather (per OSHA 1910.269) or extreme cold, employees in these rosters will not be required to perform outside work, except in emergencies. Extreme cold shall be considered fifteen degrees Fahrenheit and will be determined by the digital recording thermometer in the Transmission and Distribution office. The exception is to perform work required to meet a customer requirement. The Union and Company agree to make every effort to meet customer commitment even during extreme cold. Outside work will be performed in precipitation. It will be management's discretion on work assignments in inclement weather. Field employees will exercise a common sense approach when working in adverse weather conditions and will make the determination whether work should continue. Section 7. Medical Matters 8/14/84 The Company and the Union agree to the following in respect to medical matters involving employees. 1. Employees who desire to consult the Company Doctor should make an appointment through their supervisor. 2. When the Company Doctor, in accordance with the Disability Retrogression Pay Plan, decides that an employee should be retrogressed for physical disability, the Local Officers of the Union will be notified before the employee is told. 3. When an employee is denied a job because of physical reasons, the Union will be notified and the reason given before the employee is notified. 4. When an employee is out sick or out as a result of injury and the Company Doctor says the employee cannot return to work, the Union will be notified. 5. If there is disagreement between the employee's physician and the Company Doctor, arrangements will be made for the Union Representatives to talk with the Company Doctor as soon as possible. 6. If there is still disagreement, the matter may, upon request of either party, be referred to a third doctor, whose decision will be final and binding upon all parties. The third doctor will be selected by the Company Doctor and the employee's doctor. If they are unable to agree upon the third doctor, a joint request will be made to the Dean of the Harvard Medical School for choice of a third doctor in the special field involved. In the event a third doctor is appointed, the Company Doctor and the employee's doctor will have the right to submit the medical history of the employee and all other relevant information in their possession. 7. If an employee who has been absent from work because of disability is advised by their doctor to return to work but is prohibited from doing so until approved by the Company Doctor, the time required for the Company Doctor to make a decision whether or not the employee may return to work will be paid time and not subject to the provisions of the plan for payment of disability benefits. 8. The Company Doctor is responsible for determining when an ill employee is well enough to return to work and what type of work the employee should be returning to. 9. All employees who have been out for a serious illness such as Heart Condition High Blood Pressure Cerebral Hemorrhage Diabetes Tuberculosis Serious Surgery Back Condition Broken or Fractured Bones - any type Joint Condition Mental Disease Any type of paralyzing Disease will have their condition checked by the Company Doctor before returning to any type of work. Any case where there has been a serious illness not mentioned, and there is any doubt as to the employee's ability to fulfill their regular job, it should be brought to the attention of the Company Doctor before the employee returns to work. 10. The Company Doctor will contact the family doctor, see the patient, if necessary, and make whatever tests are necessary to determine whether or not the employee can safely return to work; and also determine the type of work, or what limitations there should be on the work that the employee performs. 11. In any case where the Company Doctor feels that the employee is not ready to return to work or that the work should be changed, the Doctor will consult with the management giving the reasons and the limitations. 12. All employees wearing casts, splints, braces, using crutches, or canes must be cleared by the Company Doctor before returning to work. There are certain conditions which must be clarified before the Company Doctor will give their approval. 13. The following conditions must be met before the Company Doctor is contacted for approval: There must be a job that the employee can perform. The employee must be willing to do the work. The employee's attending physician must give permission to return to work. FITCHBURG GAS AND ELECTRIC LIGHT COMPANY By (s) R. A. Ferreia Vice President Section 8. Snow Plowing 5/1/91 For the Liquefied Natural Gas Plant (LNG), the Liquefied Petroleum Gas Plant (LPG), and the Tennessee Gas Pipeline Metering (TGP), the plowing services will be provided by the members for Roster #19 and the equipment used for those services will normally be that which is assigned to the Department. For all other locations, the plowing services will be provided by Roster #7 and the equipment used for those services will be those that are normally assigned to that Department. As such, the reference in the Inclement Weather, Memo #10 Item #9 under the ""Gas"" section will be eliminated, and it is expected that snow plowing will be conducted irrespective of the temperature restrictions stated in this memo. The Snow Plowing Equalization List will be discontinued and all hours plowing will be recorded on the Emergency Overtime Equalization List. The Property Maintenance Worker will continue to use the snow blower and shovel and sand the sidewalks and entryways at the John Fitch Highway facility. The Property Maintenance Worker may be assisted by employees from other rosters. Qualified licensed backhoe operator will be from Roster 7. Employees in Roster 7 prior to 5/1/79 will not be required to provide service for snow plowing / removal and sanding. Selection of personnel for these assignments during normal working hours will be by seniority. Employees in the various rosters, including Roster #8, will perform normal snow removal activities associated with their roster. Section 9. Tools and Equipment The Company will furnish to employees such tools and equipment as in its judgment are required for the class of work involved for use on Company work only. Employees may furnish personal tools and equipment for use on the Company work subject to the approval of the Company, except that rubber gloves, cover gloves, and liners and safety belts will always be furnished by the Company. Tools and equipment damaged or lost by misuse or neglect shall be replaced by the employee. Ownership of all tools and equipment furnished by Company shall remain with the Company and subject to its rules as to storage, inspection and turning in to the Department Head on the completion of the work requiring them. Upon termination of employment by the employees, all Company tools and equipment, or their replacement cost, shall be turned into the Company. Section 10. Wash-up Time On jobs requiring it, the Company allows wash-up time to the extent necessary and agrees to continue such allowance, and any complaints by an employee in this respect may be processed as a grievance. In most situations, a fifteen minute period at the end of the shift is sufficient. Section 11. Work Gloves Work gloves shall be furnished by the Company at no cost to the employee, of a grade deemed by the Company suitable for the work involved. If the employee desires a better grade of glove, the Company will furnish that grade at half cost to the employee. Rubber hats, rubber coats, and rubber boots, or their equivalent, shall be furnished by the Company for those classes of work which require such equipment. Gloves and other equipment, above referred to, shall continue to remain the property of the Company, shall be replaced by the employee if damaged or lost through misuse or neglect, shall be turned in to the Company in order to obtain replacements, and, upon termination of employment, they shall be turned in to the Company by the employee, or their replacement cost paid for if such equipment has been lost or damaged through misuse or neglect and, provided further, that only one-half such replacement cost will be payable if the employee paid one-half the cost under the foregoing provisions. Section 12. Gas Production Employees in Roster 7 who entered the Roster after 5/31/00 may be assigned to the LNG and Propane Plants during the operating season. Assigned employees will not receive operating premium if their rates exceed Utility Worker-1 rate, plus operating premium. Two additional employees will be made available and trained to run the plants during the winter heating season when such additional help is required. The number of assigned employees will be determined by Management and selection will be according to the following criteria: 1. Voluntary by seniority. 2. Assignment on the basis of less senior employees. Utilityworkers will report to assigned plant at start of shift. During the production season, Utilityworkers will be paid a car allowance of $3.75/day when using own vehicles. A Company vehicle will be made available for travel to and from the LNG plant. Operators will receive one-half hour (one way) travel allowance to the LNG plant only at a rate of 11/2 times base pay. The Company will provide LNG and Propane Plant operators training to new employees entering Roster #7. Employees who initially fail Utility Worker 1, 2 and 3 examinations will be able to retake the examination every ninety (90) days. Section 13. Gassing Vehicles 5/18/85 Employees will fuel vehicles assigned to them by the Company. Section 14. Upgrading - Line and Street Departments 5/1/87 Effective May 1, 1987, employees in Rosters 7 and 8, who are scheduled to be upgraded but due to inclement weather or other reasons do not work in that capacity, will be paid at their regular rate of pay. The provisions of Article VI, Section 2 on page 6 will apply in this situation. Section 15. Off Season Assignments of Production Workers 5/1/87 Personnel in Roster 19 will be assigned to perform the following list of duties at any time throughout the year when not operating the gas plants: a. Maintenance of LPGA and LNG Plants. b. Maintenance of Service Center Building, miscellaneous buildings and grounds. c. Delivery of material to job site. d. Cleanup of any substation, regulator station (not on public ways), lawn cleanup, hanging ""Danger"" signs, repair of fencing and buildings, etc. e. Loam and Seed f. Perform pre-cuts g. Gas pipe installation and removal with qualified workers using a common sense approach in making work assignments. h. Regulator maintenance with qualified worker using a common sense approach in making work assignments. i. Meter department systematic meter work, credit lock-ins and lock-outs and assist in service work. j. Corrosion control work, including installing insulator couplings. k. Perform dig safe markings and pre-markings. Section 16. Use of Company Backhoe 5/1/91 This will confirm our discussion during the negotiations in 1985 that under normal operations, the Company will ensure that our backhoe is being operated prior to the use of a contractor's backhoe. The Company will make every effort to use the Company backhoe in jobs involving Roster 8 when it is not disruptive to its other operations. Section 17. Assignment of Rental Service Work Effective 5/1/85, employees in Roster 6, in the classifications of Gas/Electric Tester/Installer - 3rd Class may be assigned service work on rentals for gas and electric hot water heaters and gas and electric dryers as part of the duties of the classifications. This does not affect the duties of employees in Roster 3 to also perform this function. Section 18. Response to Overtime 5/1/87 Because of the nature of our business, and our need to provide 24-hour a day service to our customers, it is necessary that employees work a reasonable amount of overtime - planned and unplanned. In departments where management determines there is no problem with response to overtime, local practices will continue. Where management determines there is an overtime response problem, a meeting between management and the union will be held. Following this meeting, department practices may be replaced by the following policy: 1. The company will establish a call list that will record each instance when an employee does not respond to the call out. The concept of equalization of overtime may apply. 2. Employees shall furnish an acceptable means of off-hour contact by telephone. 3. Employees who do not respond to a call will be charged with an instance for lack of response (exception - employees who are out on authorized absences). Employees shall not be charged with more than one instance in a twenty-four hour period or on two consecutive days of relief. 4. The lack of response records of employees will be reviewed on at least a quarterly basis. Consideration will be given to the number of instances, the reasons for lack of response and the average response record of the employee in the department. If, as a result of this review, management considers that an employee's lack of response record is excessive, a formal meeting will be held with the employee (with Union representation) and the employee will receive formal warning. A continued unsatisfactory response record, reviewed on a monthly basis, will result in more severe disciplinary action. Section 19. Overtime 5/1/87 The Company and the Union recognize that overtime is an inherent part of the business and employees are expected to work unless an exception is granted by the department manager. In the event an employee is unable to work overtime, the employee must receive a waiver from the department manager or their designee. An employee will be required to work continuous overtime on jobs the employee was working during their regular work hours. The employee working second shift will be required to continue working if overtime is required rather than the calling in of additional personnel. If an employee refuses to work overtime, the employee will be subject to normal disciplinary action. An employee scheduled to work overtime and who does not report, or leaves early, will be subject to disciplinary action. Section 20. Attendance at Training Sessions 5/1/91 I. When training sessions are designated by the Company that require a temporary change in working hours, the following will prevail:. A. The Company will provide seventy-two (72) hour advance notice of the training session to the employee(s) involved. B. The provisions of Articles V, Pg. 4 and VII, Pg. 7 will not apply. C. The employee will be provided a noontime meal or reimbursement for a noon meal at the option of the Company. D. The Company will provide a vehicle for transportation to and from the training site if held outside the service territory. E. Compensation will be at a straight time rate of pay for eight (8) hours, including travel time and time and one-half for all other hours. The provisions of Article IX, Section 5 on page 11 will apply. II. If training sessions are conducted that require the trainee to stay overnight, the following will prevail: A. The Company will provide seven (7) days advance notice to the employee. B. The provisions of Articles V on page 4 and VII on page 7 will not apply. C. The Company will provide for reimbursement of meals and arrange for lodging. D. The Company will arrange for transportation of the employee to and from the training site. E. The employee will be compensated at the straight-time rate of pay for eight (8) hours for each day of training. There will be no additional compensation for travel time over and above the straight eight (8) hours. Section 21. Meter Reader - Car Washing 5/1/87 Effective 5/1/87, Meter Readers may wash their personal vehicles that are used for company business. They will be able to wash their vehicles between the hours of 7:30 a.m. and 5:00 p.m., but not during paid time. Section 22. Training and Qualification 5/1/87 In Rosters 7 and 8, employees who wish to advance to a higher classification within the roster will be required to demonstrate their qualifications before advancement. A Joint Subcommittee will be formed to review training needs and qualifications procedures. Section 23. Meter Reading Department The following practices shall apply to the Meter Reading Department: 1. Routes will be assigned by the Supervisor and will be rotated on a regular basis. 2. Employees will be entitled to a meal allowance when working overtime in accordance with Article IX, Section 5, Pg.11. 3. All training assignments for new meter readers will be made by the supervisor. 4. All routes are scheduled to be read in an average read time of 6.5 hours. This will allow for additional time for a 20 minute lunch (30 minutes for the months of December 1 through March 31) and (2) 15 minute breaks to be taken on the route or with approval from the supervisor, at the completion of the route (to be taken on the way while returning to the office or upon arrival at the office) and will also account for travel time to and from the route. The Company and the Union understand that this is an average and that routes may take more or less time to read due to weather conditions. Route configuration may be adjusted based on actual average read time for the duration of this agreement. 5. All routes should normally be completed by the Meter Reader before returning to the office. If the route requires overtime to read all meters, the Meter Reader must complete the assigned work before returning to the Company. Under unusual circumstances the matter of completing the route can be discussed by the employee with the Supervisor prior to the assignment. 6. During extremely adverse weather conditions including severe cold, the Company agrees to delay sending meter readers out or to call them in, if deemed appropriate by the supervisor. Section 24. Electric Night Trouble Worker - Electric Turn-ons 5/1/89 The Night Trouble Worker in the Electric Transmission & Distribution Department will not be required to turn on more than four (4) electric turn-ons per night. Section 25 Standby Practice 6/1/00 1. Two qualified Line Workers (Roster 8), to remain within reach of a telephone or pager so that each employee on standby duty may be notified to report for work in cases of emergency or necessity on Thanksgiving, Christmas and New Years. 2. Two qualified Utility Workers (Roster 7) to remain within reach of a telephone or pager so that each employee on standby duty may be notified to report for work incases of emergency or necessity on Thanksgiving, Christmas and New Years. 3. Standby duty requires the employee to be able to be contacted by telephone or pager, be within a reasonable driving time to the place the employee normally reports for work and be prepared to report for work when contacted. 4. Standby duty shall be for the entire 24-hour period of an established holiday. 5. Each employee shall receive 8 hours of straight time pay for the 24-hour period of standby plus holiday-pay for the hours worked on the holiday. 6. Standby can be implemented for other special conditions only if mutually agreed upon by both the union and the company. Section 26. Returning to Roster - With or Without Automatic Progression 5/1/91 The parties agree the Company will follow this agreement when awarding a job to an employee who is returning to a roster previously occupied by the employee. Roster with Automatic Progression In any roster that has automatic progression, if the senior eligible employee has previous time in the roster, the employee will be awarded the entry level position and the previously held classification on the same date. Exception: If in the opinion of the department manager and training committee, the employee was not qualified to perform the higher class work, the employee would be awarded the higher class when the manager and training committee felt the employee was qualified to perform the work. Seniority would be on the basis of the job award. Roster without Automatic Progression In any roster that does not have automatic progression, if the senior eligible employee has previous time in the roster, the employee will be awarded the entry level position. The employee would be evaluated by the training committees established in the labor agreement or be tested in accordance with the provisions of the labor agreement before being awarded a higher classification in the roster. The employee could request being tested or evaluated at any of the classifications they previously held in the roster. Seniority would be on the basis of the job award. Section 27. Service Department Alternate Trouble Worker 5/1/91 The Alternate Night Trouble Worker would be assigned to fill in on a temporary basis when the other Night Trouble Worker is not available for work on the 1-9 p.m., 4 p.m.- 12 midnight or Tuesday - Saturday shift due to sickness, accident, vacation, etc. Examples: 1. If one Trouble Worker takes a week's vacation on Tuesday-Saturday schedule, the other Trouble Worker will cover their normal 4 p.m.- 12 midnight, Monday-Friday shift plus work Saturday. 2. If one Trouble Worker takes a week's vacation on Monday-Friday, 4 p.m.- 12 midnight schedule, the other Trouble Worker will work Monday-Friday 4 p.m.- 12 midnight at regular time and Saturday at time and one-half. 3. If the Trouble Worker on the 4 p.m.- 12 midnight shift calls in sick, the 8 a.m.- 4 p.m. Trouble Worker will stay on and work 4 p.m.- 12 midnight on overtime. The 8 a.m. -- 4 p.m. Trouble Worker would then be assigned to cover the 4 p.m.- 12 midnight shift only until the other Night Trouble Worker returns. 4. Coverage on Thanksgiving, Christmas and New Years will be alternated between each Trouble Worker yearly. 5. The Alternate Night Trouble Worker will be given first refusal for all overtime that is required by vacation, sickness or accident of the other Trouble Worker. 6. When the Night Trouble Worker returns to work, ""Alternate"" will be notified not later than 4:00 p.m. on the last day prior to the Night Trouble Worker's return. ""Alternate"" will report on the next working day at normal hours. If the Company is not able to meet this time factor, the ""Alternate"" and the regular Night Trouble Worker will work together for the first night after the regular Night Trouble Worker returns to work. > > > Example: Regular night Trouble Worker calls in sick on Tuesday and informs > > > the Company that they will not report to work until Friday. The Alternate > > > is notified and continues working until the end of the regular Trouble > > > Worker's shift. The alternate then reports on Wednesday and Thursday at > > > the start of the regular trouble worker's shift. If the regular Trouble > > > Worker reports in on Thursday their regular shift and the alternate was > > > not notified by 4:00 p.m. on Wednesday to change back to their normal > > > schedule, the alternate and regular Trouble Worker would work together on > > > that shift. Section 28. Progression - Roster 7 and Roster 8 (Underground) Applies to all future and current employees in these rosters. Roster 7 Street Department Progression from Street Worker to Utility Worker A   Street Worker to Utility Worker C 6 months   Utility Worker C to Utility Worker B 12 months   Utility Worker B to Utility Worker A 15 months Roster 8 Underground Progression Progression from Cable Splicer Helper to Cable Splicer 1st Class   Cable Splicer Helper to Cable Splicer 3rd Class 6 months   Cable Splicer 3rd Class to Cable Splicer 2nd Class 12 months   Cable Splicer 2nd Class to Cable Splicer 1st Class 15 months Roster 8 Maintenance Progression Progression from Maintenance Worker 3rd Class to Maintenance Worker 1st Class   Maintenance Worker 3rd Class to Maintenance Worker 2nd Class 15 months   Maintenance Worker 2nd Class to Maintenance Worker 1st Class 15 months 1. If employee is qualified, may progress more quickly. 2. All incumbents start with effective date of agreement. 3. If any employee does not qualify, they will be returned to classification previously held outside roster. Section 29. Temporary Assignments Outside the Company's Service Area Work assignments with utilities outside the Company's service area are voluntary except when the utility is an affiliate of Unitil Corporation. If adequate volunteers cannot be obtained for work assignments at Unitil affiliates, personnel will be assigned. Assignments will be based on the following: Emergency - Equalization Overtime List Scheduled - Next Truck Out List The employee will be paid in accordance with the contract except when an emergency situation exists. Under emergency conditions, the employee will be paid in accordance with the Emergency Storm Premium. The provision does not apply to assignments classed as non-working; for example, training, schools, meetings, etc. Section 30. Residency Requirements - The following requirement will apply to new employees hired after April 30, 1998. (Applies to employees in rosters 3, 6, 7, 8, 11, 19 and 20) As a condition of employment, employees are required to maintain residency within a 20 minute travel commute between their primary residence and the Company's Operation Center located at 285 John Fitch Highway, Fitchburg, Massachusetts. Section 31. Line Workers Performing non-PILC work 6/1/00 1. Overhead line workers will be properly trained to perform non-PILC cable work 2. Qualified (trained) overhead line workers will be able to Locate, Repair, Splice, Replace or Test non-PILC cable work. 3. During off hours, the Underground crew will be the first call (1st) on underground trouble. 4. During normal work hours, if the underground crew is available they will perform the necessary cable work, if however they are busy or unavailable the overhead personnel will perform the work. 5. The Head Cable Splicer position will be posted if the current position becomes vacant. The Cable Splicer first class (1st) position will be posted if the incumbent, as of June 1, 2000, becomes a Head Cable Splicer. The 1st Class Cable Splicer duties will be modified to include substation operations maintenance and construction work, Section 32. Emergency Day TroubleWorker 1. This position will be filled normally by the alternate night trouble person, at no additional cost to the company with no increase in complement. 2. When the Emergency Night Trouble worker is not available, the First Class Line Workers will be canvassed, by seniority, to perform the Day Emergency Trouble Worker duties. If no First Class Line Worker accepts the canvass, the junior qualified First Class Line Worker will be assigned as the Day Emergency Trouble Worker. 3. A First Class Line Worker, will receive the alternate rate of pay for that period for which they are assigned as the Day Emergency Trouble Worker. 4. The Emergency Day TroubleWorker may be assigned to work as part of a crew or complement a full crew as needed. 5. The Emergency Day Trouble Worker position will be filled at the discretion of management.   ARTICLE XXVI BENEFITS Section 1. Coffee Breaks Coffee breaks will be limited to fifteen (15) minutes, one in the morning and one in the afternoon. The following mutually agreed upon interpretation will govern the application of the Coffee Breaks provision as it applies to Roster 7 and 8. 1. The morning coffee break may be taken by employees on a take out basis on their way to their first work assignment of the day, so long as the total amount of time taken for the break, including the purchase and drinking of the coffee, does not exceed a total of fifteen (15) minutes. This shall not apply when the employee's first work assignment of the day is an emergency or urgent in nature, nor shall employees drive away from their route for purposes of purchasing coffee. 2. The afternoon coffee break may be taken by employees on their route between jobs subject to the same limitations as set forth in Article IX, Section 4 (4) (B) 2 and Section 4 (4) (B) 4. 3. When employees are working on a job site during coffee break period, the following rules shall govern the taking of the break: (a) On emergency or urgent jobs on which an employee cannot be spared to leave, the employees may take their break on the job site without purchasing any coffee or the break may be deferred to allow for the purchase of coffee on a take out basis on route to the next job or on the way back to the Company at the end of the workday, subject to the same limitations as set forth I Article IX, Section 4 (4) (B) 2, and Section 4 (4) (B) 4. (b) If an employee can be spared from the job site, the employee will be allowed to drive to a nearby restaurant or store for purposes of purchasing coffee and bringing it back to the job site, subject to the same limitations as set forth in Article IX, Section 4 (4) (B) 3. 4. If during break time, employees are working at the Company facility where coffee is provided or can be made, employees will take their break at the facility. Section 2. Thermos Bottles Thermos bottles of coffee are available for line and street department employees to take with them in the morning. Section 3. Damaged Clothing The Company will repair or replace clothing damaged by acid, chemicals, or fire because of employment or by accidents involving the use of hydraulic equipment on the line trucks, or, at its discretion, reimburse the employee for the cost if it does not decide to repair or replace the damaged clothing. Holes caused by heat or delayed chemical reaction will be considered as included within the meaning of damaged clothing. Section 4. Treatment of Meal Allowances 5/1/87 This is to confirm discussions during the negotiations in 1985 that all meal fees that are submitted by employees without a receipt from the restaurant will be treated as an allowance and so reflected in the employees'' wages. Meal allowances will be processed through the payroll system and reflected in the employees'' paychecks. Under no circumstances will meal allowances be processed through petty cash. Section 5. Motor Vehicle Insurance 5/1/87 Employees who use their own motor vehicles on company business will be covered for the insurance deductibles in the event of an automobile accident as long as they are not cited for a serious motor vehicle violation. Section 6. Reimbursement for Safety Shoes The Company, with appropriate documentation, will reimburse employees the full cost up to $100.00 for the first pair, and one-half the cost, up to $50.00 for the second pair of safety shoes, up to two (2) pair per calendar year or the Company will reimburse the employee up to $150.00 for a single pair of safety shoes per calendar year. The Apprentice Lineworker will be allowed a one time allowance of $175.00. Meter Readers will be reimbursed the full cost, up to $85.00 each, for two (2) pair of safety shoes per year and may use safety sneakers during regular business hours. Section 7. License Reimbursement The Company will reimburse the cost of a valid motor vehicle and hoist engineer's license to those employees who are required to have such licenses as part of their job posting. Employees will be required to submit a photostat copy of their license in order to receive reimbursement. It will be the employee's responsibility to meet all requirements to maintain and retain their license or licenses. The Company will provide training so that employees will be able to obtain a Class No. 2 license for vehicle operation, and employees in Roster 7, 8 and 15 will be able to obtain a Class No. 1 license, and thus, be able to qualify on this score where possession of such a license is a job requirement. Section 8. Company Uniforms The Company will furnish uniforms for Meter Readers, Service Department, and Meter Department personnel. The uniforms will consist of jackets, trousers, and shirts. The employees will arrange for the laundering of these uniforms at their own expense. The employees will take reasonable care of the clothing furnished and they will be required to wear such clothing during all working hours. Officers of Local No. 340B340, B.U.WU.W.U.A.. not only endorse the program of personnel wearing uniforms but have offered to support this program by assisting the Company in seeing that the personnel involved wear said uniforms. In the event that one were not to wear the uniform for any reason, Local No. 340B340 officers requested that they be notified at which time they will immediately contact the individual involved and make every effort to see that the uniform will be worn with consistency. In the event the officers of Local No. 340B340 are unsuccessful in this initial assistance, the Company would then become involved and would resort to their normal disciplinary practices in cases of infraction of Company rules.   ARTICLE XXVII BARGAINING UNIT WORK Supervisors who are not covered by the Collective Bargaining Agreement will not normally perform bargaining unit work which employees, subject to such Agreement, are normally required to perform, except in the following circumstances: emergencies, training, demonstrations, testing, or trying out new equipment or methods; work incidental to supervisory duties; helpful or relieving a bargaining unit employee for short periods in cases of fatigue, strain, unusual condition or the like; occasions when non-performance of the bargaining unit work by the supervisor would result in hardship, inefficiency or unjustifiable cost to the Company; and occasional instances when a bargaining unit employee is not readily available. Nothing in the foregoing shall be interpreted to mean that a supervisor, other than in emergencies, may perform bargaining unit work outside of an employee's regularly scheduled hours which the employee would normally be called in to perform, such as 13 KV switching on Saturday or Sunday.   ARTICLE XXVIII UNION BUSINESS The Company will grant the employee who is the Union's Council Representative one (1) day off without pay to attend the monthly Council meeting. Days off on union business will be considered a workday without pay for the following people: * President * Vice President * Secretary * National Representative * Grievance Committee Representative     ARTICLE XXIX UNITIL RETIREE TRUST Employees are eligible to join the Unitil Retiree Trust upon retirement from the Company.   ARTICLE XXX SAFETY 5/1/87 1. The Company and the Union agree that safety is a matter of highest importance and will cooperate in an effort to enforce the safety rules contained in the safety manual. 2. The Union will select five (5) representatives, one (1) each from the following areas: (Electric Overhead; Street; Production; Meter & Service and Office) to serve on the Safety Committee for a minimum of one (1) year. The membership will be rotated to ensure that all employees have the opportunity to participate on the committee. 3. The Company will provide a safety manual to each employee. The manual will be reviewed with the employee and any questions clarified. The employee will be expected to comply with the safety manual and violations will be enforced through the disciplinary process, up to and including termination. 4. All revisions to the Safety Manual will be sent to the Local President prior to implementation for review and discussion. ARTICLE XXX NO DISCRIMINATION Employees are covered by the Company's Equal Employment Opportunity Policy HR 1.07, dated February 22, 1999. The Company provides equal employment opportunity for all employees regardless of race, color, marital status, religion, age, gender, sexual orientation, national origin, citizenship status, disability or veteran status. ARTICLE XXXII DURATION AND TERMINATION This agreement shall be effective as of June 1, 2000 except where the effective date of any provision thereof is otherwise specifically provided and shall be binding upon the parties hereto and upon all employees who are subject to its provisions, and it shall remain in full force and effect through May 31, 2005.   ARTICLE XXXIII SUCCESSORS This agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns; and the words ""Company"" and ""Brotherhood"", respectively, shall be construed to include their respective successors and assigns.   IN TESTIMONY WHEREOF the parties hereto have caused these presents to be executed by their respective officers, thereunto duly authorized, this day of June 2000 FITCHBURG GAS AND ELECTRIC LIGHT COMPANY By: /s/ Robert E. Bisson, Director, Distribution Operations Center Robert E. Bisson, Director, Distribution Operations Center   THE UTILITY WORKERS UNION OF AMERICA, AFL-CIO, BROTHERHOOD OF UTILITY WORKERS COUNCIL, LOCAL B340 By:   /s/  Randall W. Hier, President, Local 340B340 Randall W. Hier, President, Local 340B340 /s/ Robin Courtemanche, Secretary, Local 340B340 Robin Courtemanche, Secretary, Local 340B340   THE UTILITY WORKERS UNION OF AMERICA, AFL-CIO, BROTHERHOOD OF UTILITY WORKERS COUNCIL, LOCAL B340 By:  /s/  George P. Fogarty, National Representative, UWUA George P. Fogarty, National Representative, UWUA       FITCHBURG GAS AND ELECTRIC LIGHT COMPANY SCHEDULE OF WAGES Effective June 1 of each year, during the term of the contract, the Company will pay each bargaining unit employee, who is on the Company's payroll, according to the following schedules: Roster 1 -- Transportation   Ultimate Hourly Rate Effective Job Title 2000 2001 2002 2003 2004 Transportation Technician 1st Class 22.77 23.57 24.30 25.03 25.78 Transportation Technician 2nd Class 21.01 21.75 22.42 23.09 23.79 Employees must have worked satisfactorily in the lower rated job for 15 months before advancing to a higher rate.   CLERICAL PROGRESSION AND PAY PLAN All clerks will enter clerical progression and pay plan as a probationary employee and, if qualified, will progress under the following schedule: Roster 2 - Operation Support Clerk     Ultimate Hourly Rate Effective Step Period in Step 2000 2001 2002 2003 2004 Clerk (Probationary) 3 months 11.64 12.05 12.42 12.80 13.18 Clerk (Probationary) 3 months 12.50 12.94 13.34 13.74 14.15 Clerk Regular 6 months 13.28 13.74 14.17 14.59 15.03 Clerk Regular 6 months 14.07 14.56 15.01 15.46 15.92 Clerk Regular 6 months 15.81 16.37 16.88 17.38 17.90 Clerk Regular   16.63 17.21 17.75 18.28 18.83 Radio Operator   17.13 17.73 18.28 18.83 19.39 All progression in the aforementioned steps is contingent upon demonstrated ability, increased job knowledge and satisfactory accomplishment. The position calls for personnel in this Roster to do any job in the Roster. Effective 6/1/00; 1. Employees entering Roster 2 will be allowed to advance to Step 6 of the Clerical Progression and Pay Plan. Step 6 will be considered the ultimate rate for these employees and they shall be expected to perform all the functions associated with employees in higher steps who entered the rosters before the effective date of this change. In order to progress to step 6, candidate will be able to cover all areas of the department. 2. Hours are 8:00 a.m. to 5:00 p.m. unless assigned to the dispatch area, the hours for the dispatch area will be 7:30 a.m. to 4:30 p.m. 3. If being assigned to the dispatch area a minimum of 24-hour notice will be given for coverage. 4. When Radio Operator position becomes vacant, Clerk position will be posted. Step 7 Radio Operator will be eliminated. 5. The Senior Plant Records Clerk, as of May 31, 2000, will be advanced to Step 7. Roster 3 - Meter & Service   Ultimate Hourly Rate Effective Job Title 2000 2001 2002 2003 2004 Gas Service / Pipefitter Worker 1st Class 22.71 23.50 24.23 24.96 25.71 Emergency Night Trouble Worker 19.75 20.44 21.07 21.70 22.36 Gas Service / Pipefitter Worker 2nd Class 19.44 20.12 20.74 21.36 22.00 Gas Service / Pipefitter Worker 3rd Class 17.71 18.33 18.90 19.46 20.05 1. Personnel entering any of the new classifications must be certified as qualified under the following list of requirements: Gas Service / Pipefitter Worker - 1st Class - Self-Cleaning Ranges, Commercial and Industrial Equipment and Gas Air Conditioners Gas Service / Pipefitter Worker - 2nd Class - Central Heating Equipment, Space Heaters, Gas Ranges, and Gas and Electric Water Heaters. Gas Service / Pipefitter Worker - 3rd Class - Gas Water Heaters and Ranges. Night Trouble Worker: Must be a Gas Service / Pipefitter Worker - 2nd Class. 2. Upon completion of the necessary classes on any appliance, the employee must satisfactorily pass written examination based on the subject matter covered in the class. The employee must also satisfactorily demonstrate their ability to repair a malfunction of the appliance. 3. The examination and demonstrations will be prepared and administered by a gas and electric service supervisor with such manufacturer's assistance as is available. Samples showing the general type of examination will be submitted to the B.U.W. in advance. After satisfactory completion of examination and demonstration, the supervisor will certify the employee for the particular appliance. A Union representative may be present at examinations as an observer. 4. Training will be arranged first on those appliances required for the lowest classification and will be given progressively through the requirements for all classifications. 5. Each employee must be certified for all appliances required below as well as those required by the classification equal in wage rate to their present class before taking training and attempting certification for advancement. 6. As employees are certified for higher classes, they will be automatically advanced. If a junior employee advances to a classification higher than that of an employee senior to him/her in the present roster, the senior employee, upon advancement to that class, will be accorded seniority over the junior employee. 7. Present employees will not be reduced in wages, during the term of this contract, if they do not satisfactorily complete certification as required but shall not advance without certification. 8. Only after employees are certified for higher classification will they receive the higher rate of wages. 9. After certification on all appliances necessary to qualify as a Gas Service Worker - 1st  Class, employees will be expected to accept training and certification on any newly-developed appliances without further change in rate.   Roster 6 - Meter (Gas and Electric)   Ultimate Hourly Rate Effective Job Title 2000 2001 2002 2003 2004 Meter Worker 1 22.64 23.43 24.15 24.88 25.62 Gas / Electric Tester / Installer 1st Class 22.64 23.43 24.15 24.88 25.62 Gas / Electric Tester / Installer 2nd Class 21.49 22.24 22.93 23.62 24.32 Gas / Electric Tester / Installer 3rd Class 19.18 19.85 20.47 21.08 21.71 Gas / Electric Tester / Installer Helper 18.55 19.20 19.79 20.39 21.00 Roster 7 -- Street   Ultimate Hourly Rate Effective Job Title 2000 2001 2002 2003 2004 Utility Worker -- A -- Leader 23.92 24.76 25.52 26.29 27.08 Utility Worker -- A 22.09 22.86 23.57 24.28 25.00 Utility Worker -- B 19.59 20.28 20.91 21.53 22.18 Utility Worker -- C 18.38 19.02 19.61 20.20 20.81 Streetworker 17.17 17.77 18.32 18.87 19.44 Utility Worker -- A -- Leader / Regulator 23.92 24.76 25.52 26.29 27.08 Utility Worker -- A / Regulator 22.09 22.86 23.57 24.28 25.00 Utility Worker -- B / Regulator 19.59 20.28 20.91 21.53 22.18 Utility Worker -- C / Regulator 18.38 19.02 19.61 20.20 20.81 Streetworker / Regulator 17.17 17.77 18.32 18.87 19.44 Certified Gas Welder -- 1st Class 24.02 24.86 25.63 26.40 27.19   Roster 8 - Electric Distribution   Ultimate Hourly Rate Effective Job Title 2000 2001 2002 2003 2004 Head Lineworker 27.18 28.13 29.00 29.87 30.77 Emergency Day/Night Trouble Worker 25.44 26.33 27.15 27.96 28.80 Lineworker -1st Class 24.50 25.36 26.14 26.93 27.73 Lineworker -- 2nd Class 20.08 20.78 21.43 22.07 22.73 Lineworker 3rd Class 19.11 19.77 20.39 21.00 21.63 Apprentice Lineworker 18.17 18.81 19.39 19.98 20.57 Head Cable Splicer 27.26 28.22 29.09 29.96 30.86 Cable Splicer -- 1st Class 24.74 25.60 26.40 27.19 28.00 Cable Splicer -- 2nd Class 22.10 22.87 23.58 24.29 25.02 Cable Splicer -- 3rd Class 19.99 20.69 21.33 21.97 22.63 Cable Splicer's Helper 18.92 19.58 20.19 20.79 21.42 Head Maintenance Worker 24.32 25.17 25.95 26.73 27.53 Maintenance Worker -- 1st Class 22.73 23.53 24.25 24.98 25.73 Maintenance Worker -- 2nd Class 18.72 19.38 19.98 20.58 21.19 Maintenance Worker -- 3rd Class 17.15 17.75 18.30 18.85 19.42 (1) Lineworkers who have worked 12 months after promotion to Third Class and qualified for promotion shall be advanced without posting to Second Class. ** Lineworkers who fail to qualify in either class after 18 months shall be reassigned to the position they held prior to being promoted or transferred. Such promotions will be made with the understanding that the number of personnel on the roster will not be increased because of these promotions. An applicant for a posted Third Class Lineworker''s vacancy shall be a qualified Apprentice Lineworker with a minimum of six (6) months total time in that class. When a Lineworker-Second Class has worked 15 months and is qualified for promotion to Lineworker-First Class, two (2) jobs will be posted, to facilitate the filling of one opening as follows: 1. Lineworker-First Class This will allow Emergency Night Trouble Worker, desirous of returning to days, to bid for the opening as well as the newly qualified Lineworker-First Class. The award will be made to the Senior Qualified bidder. 2. Emergency Night Trouble Worker (Anticipated) This will allow Lineworkers-First Class, including the newly qualified Lineworker-First Class, to bid for this anticipated opening. In the event an opening does develop, the award will go to the Senior qualified bidder. If no one bids this anticipated opening, and the opening, in fact, occurs due to an Emergency Night Trouble Worker bidding and being awarded the Lineworker-First Class opening, the newly qualified Lineworker-First Class will be assigned the open Emergency Night Trouble Worker job. (2) A premium of ten cents ($.10) per hour will be paid to Apprentice Lineworkers when assigned to operate a jackhammer for periods of one (1) hour or more. (3) Premium of thirty-five cents ($.35) per hour will be paid to Cable Splicers when splicing on fully insulated cables and/or potheads for time actually worked in the air necessitating use of suspended platform, ladder, bucket truck or when working from poles. (4) In the event an Emergency Night Trouble Worker desires to revert to the job of Lineworker-1st Class, and a qualified Lineworker-1st Class is willing to take the job of Emergency Night Trouble Worker; the Company upon being advised of the desires of the two employees, will post an anticipated vacancy for each of the two (2) jobs in order to provide a swap between them. Roster 9 - Meter Readers   Ultimate Hourly Rate Effective Job Title 2000 2001 2002 2003 2004 Meter Reader 18.99 19.66 20.27 20.87 21.50 Meter Readers shall be paid a car allowance of $3.75 while using their own vehicle. Meter Readers shall be paid $4.00 for meal allowance. Roster 11 -- Stores   Ultimate Hourly Rate Effective Job Title 2000 2001 2002 2003 2004 Stock Clerk 19.85 20.55 21.18 21.82 22.47 Stock Person 19.20 19.87 20.49 21.10 21.73 Roster 12 - Property Maintenance Worker   Ultimate Hourly Rate Effective Job Title 2000 2001 2002 2003 2004 Property Maintenance Worker 17.08 17.68 18.22 18.77 19.33 Roster 19 - Gas Production Ultimate Hourly Rate Effective Job Title 2000 2001 2002 2003 2004 Utility Worker -- 1 20.79 21.52 22.19 22.85 23.54 Utility Worker -- 2 19.91 20.61 21.25 21.89 22.54 Utility Worker -- 3 19.36 20.04 20.66 21.28 21.92 A $1.50 per hour premium will be paid while operating the LNG and/or Propane Plants. Roster 20 - Dig Safe   Ultimate Hourly Rate Effective Job Title 2000 2001 2002 2003 2004 Dig Safe Technician 19.45 20.13 20.75 21.37 22.02   POLICY WITH REFERENCE TO REST PERIOD First Shift Workers An Employee who is required to work scheduled or unscheduled hours between midnight and 6:00 a.m. is entitled to a minimum aggregate of seven (7) hours of rest time between midnight and 7 a.m. except in cases of actual or threatened interruption of service. If such rest time extends into the employee's normal workday, no reduction in pay will be made for the hours overlapping the normal workday. Rest time extending into the normal work schedule will be taken at the end of the normal workday unless otherwise established by mutual agreement to be taken at the beginning of the scheduled workday. Lunch periods are excluded from determination of rest period allotment. Example 1 - If an employee called at 12 midnight works to 3:00 a.m., their normal work day starts at 7:30 a.m., the employee is allotted three (3) hours rest and reports to work at 10:30 a.m. Example 2 - If an employee called at 2:00 a.m. works to 4:00 a.m., their normal work day starts at 7:30 a.m., the employee is allotted two (2) hours rest time and reports to work at 9:30 a.m. Example 3 - If an employee called at 5:30 a.m. works to 7:30 a.m., their normal work day starts at 7:30 a.m., the employee is entitled to one and one half (1-1/2) hours rest time and continues working. First, Second and Third Shift Workers Example 4 - If an employee called at 2:00 a.m. works to 4:00 a.m., their normal work day starts at 8:00 a.m., the employee is allotted two (2) hours rest time and reports to work at 10:00 a.m. Example 5 - If an employee called at 4:30 a.m. works to 7:30 a.m., their normal work day starts at 7:30 a.m., the employee is allotted two and one half (21/2) hours rest time and leaves work at 1:00 p.m. In any twenty-four (24) hour period, an employee who has worked continuously sixteen (16) hours or more, except in case of interruption to service, is entitled to nine and one-half (91/2) hours rest (including travel time and established meal periods) before reassignment. If such rest period should overlap employee's normal workday, the employee shall suffer no loss in pay for the time involved. When employees have worked twenty-four (24) or more consecutive hours, and such work extends into the employee's normal work day, the employee shall suffer no loss of paid rest entitlement for such hours extending into that normal work day. Where the extended work period follows a scheduled work day of eight (8) hours with a one-hour paid lunch period, the scheduled work day will count as eight consecutive hours. If the paid rest period ends one (1) hour or less, prior to the end of the employee's regular scheduled workday, the paid rest period will be extended to the end of such regular scheduled workday unless notified by a supervisor to report back to work. When following a rest period, an employee is scheduled to report for work shortly before their lunch period, the supervisor has discretion to excuse the employee from reporting back to work until after lunch, without loss of pay, depending upon the then-existing work requirements, and provided the employee has telephoned the supervisor prior to the time they are scheduled to report to ascertain whether the employee should report as scheduled or wait until after lunch. The Company will consider employees completing a rest period to be available for overtime based on their standing on the overtime equalization list. Rest period will be granted to second shift workers only on a call-out which would disturb their sleep, i.e. the hours between midnight and 5:30 a.m. SHIFT DIFFERENTIAL Employees assigned to classification whose regularly scheduled hours start between 1:00 p.m. and 6:00 a.m. shall receive, in addition to their regular rate, a premium of ninety-five cents ($.95) per hour for time worked. SUNDAY PREMIUM A premium of twenty-five per cent (25%) of the straight-time basis rate of established classifications will be paid when work is performed on Sunday where such Sunday is within the regularly scheduled workweek of such class. DOUBLE TIME ON SECOND DAY OF RELIEF WHICH IS SEVENTH DAY OF WORK An employee who is required to work on their second consecutive day of relief, and having worked on their first day of relief, shall be paid double their regular hourly rate of pay for hours worked on said second day of relief. For Monday to Friday workers, for the purposes of the employee's premium payment, the first day of relief will be considered Saturday, the second day of relief the Sunday which is on the following day, and the seven (7) day period will be the period ending that Sunday. For shift workers, or those on any other schedule the first day of relief and the second day of relief will be as allocated according to the payroll workweek. If the second day of relief occurs on a holiday, the holiday premium only will be paid and these premiums will not be pyramided. In no event will the double time premium be paid more than once in any payroll workweek. EMERGENCY CALL OUT First shift employees who have a call-out which includes hours after midnight, when the next day is a day of relief (Friday night and Saturday night), will be paid double time for all hours after midnight until the normal starting time, as if it was not a day of relief, e.g., 7:30 a.m. for roster 7, 8, 15, 19 and 8:00 a.m. for all other rosters. The minimum for a call-out, between the above mentioned hours, will be double time for three (3) hours. There will be no double counting of hours after the normal starting time. This provision will also apply to employees on first shift who work other then Monday through Friday. EXAMPLES: A. An employee whose normal days of relief are Saturdays and Sunday is called out and reports to work at 11:00 p.m. on Saturday and works until 1:00 a.m. on Sunday will be paid: 1 hour @ time-and-a-half (1-1/2) plus; 2 hours @ double time (2) B. An employee whose normal days of relief are Saturday and Sunday is called out and reports to work at 2:00 a.m. on Saturday and works until 4:00 a.m. on Saturday will be paid: > > > > 3 hours @ double time C. An employee from roster 7 or 8 whose normal days of relief are Saturday and Sunday is called out and reports to work at 4:00 a.m. on Sunday and works until 8:00 a.m. on Sunday will be paid: > > > > 3 and 1/2 hours @ double time (4:00 a.m. to 7:30 a.m.) > > > > > > > > plus > > > > > > > > 1/2 hour @ time-and-a-half (7:30 a.m. to 8:00 a.m.)   D. An employee from roster 3, 5, or 6 whose normal days of relief are Saturday and Sunday is called out and reports to work at 4:00 a.m. on Saturday and works until 8:00 a.m. on Saturday will be paid: > > > > 4 hours @ double time (4:00 a.m. to 8:00 a.m.) E. An employee whose normal days of relief are Saturday and Sunday is called out and reports to work at 5:30 a.m. on Saturday and works until 8:00 a.m. on Saturday will be paid: > > > > 3 hours @ double time PART "B" TABLE OF CONTENTS RETAINED POLICIES   POLICY Page #1 - Assignment to Conventional Line Equipment  #2 - Education Assistance #3 - Payday  #4 - Length of Service Awards1 #5 - Upgrade to Supervisor (10%)    COMPANY POLICIES For the information of all concerned, we are listing below a number of Company policies of general interest: 1. The Company intends to rotate assignments to the conventional line equipment in order to keep people proficient at climbing, but the duration of assignments is predicated upon individual capabilities, performance and interest. Although assignments will not always be equal they will be equitable. While the assignments are discretionary, they will not be discriminatory and the Company will be entirely willing at any time to discuss any complaints. 2. Employees are eligible for the Company's Education Reimbursement Policy, HR 1.14, effective February 22, 1999. 3. Payday for bargaining unit personnel will be Thursday, p.m. 4. Employees are eligible for the Company's Length of Service Awards Policy, HR 1.09, Effective June 1, 2000. 5. When the Company temporarily requires a bargaining unit employee to perform supervisory work, as, for example, in the absence of a supervisor, the Company pays a premium of 10% of the employee's regular rate but not more than the rate of the supervisor, provided the employee is assigned the responsibility for the employees under them. In the event a Lineworker-1st Class is temporarily assigned as Distribution Foreperson and is assigned the responsibility for two or more crews, the Company pays the rate of the Head Lineworker plus 10% of that rate, but not more than the rate of the Distribution Foreperson. When a bargaining unit employee in Roster 2 is upgraded under this policy, the employee will perform their regular bargaining unit work and supervisory assignments made by the manager. At the present time, there is no intention to change the above policies, but the Company does intend to review them from time-to-time, and if changes are made, appropriate advance notice will be given to those concerned. None of the above policies will be changed unless the changes have been discussed with the Union.   PART "C" FITCHBURG GAS AND ELECTRIC LIGHT COMPANY GROUP INSURANCE SUMMARY Effective June 1, 2000, there shall be maintained a Group Insurance program with the following benefits: Basic Group Life Insurance Employees are eligible for group life insurance coverage equal to two times their annual base wages (hourly rate * 2080), rounded to the next higher full thousand. Employees hired before May 1, 1985 will be eligible for group life insurance coverage equal to three times their annual base wages reduced to the next lower full thousand, up to a maximum of $100,000, frozen at the amount in effect on July 31, 1997 until the two times coverage described above exceeds the frozen coverage. Employees become eligible for coverage on the first of the month following employment. Fitchburg Gas And Electric Light Company pays insurance premium cost. Accidental Death and Dismemberment Employees are eligible for accidental death and dismemberment coverage up to a maximum of one times their annual base wages (as defined above), rounded to the next higher full thousand. Employees become eligible for coverage on the first of the month following employment. Fitchburg Gas And Electric Light Company pays insurance premium cost. Insurance After Retirement Employees who retire from active service will continue Group Life Insurance of $7,500. Fitchburg Gas And Electric Light Company pays for the retiree's group life insurance. Long-Term Disability Insurance Employees are eligible for long-term disability insurance coverage equal to 60% of their annual base wage (as defined above). The waiting period to begin collecting benefits is 180 calendar days of disability. Benefits are payable for two years if the Employee is disabled from performing their own occupation, or to age 65 if the Employee is totally and permanently disabled from performing any occupation. Benefits from the plan are offset by other sources of disability income. Employees become eligible for coverage on the first of the month following completion of one (1) year of service. While collecting LTD benefits, an employees other benefits will continue as specified in the Company Policy on Continuation of Benefits While on Long Term Disability/Extended Medical Leave of Absence, HR 1.36, effective June 1, 2000.   Medical Insurance Point Of Service Plan: Provides employees with a choice each time there is a claim between receiving HMO style benefits or indemnity style benefits. HMO Style Benefits --Benefits received from a Primary Care Physician or as a result of a referral from the Primary Care Physician are subject to a $5 copayment. Indemnity Style Benefits --Benefits that are received without a referral from the employee's (or dependent's) Primary Care Physician are subject to an annual $250/person ($500/family) deductible, followed by 80% coverage for the next $5,000 of covered expenses per person ($1,000 per person in coinsurance payments). Prescription drugs are subject to a $10 copayment per 30 day supply of brand name drug, a $5 copayment per 30 day supply of generic drug, or a $5 copayment per 90 day supply of drugs ordered via mail order prescription service. While in the employ of the Company, if an employee suffers a fatal industrial accident, or an employee dies a natural or non-industrial accidental death leaving a widow(er), the widow(er) will continue to be covered under the Company's Comprehensive Health Insurance Plan (with family coverage if there are dependent children) for a period of ten (10) years, or until remarriage, or until reaching age sixty-five (65), whichever occurs first. Retirees under sixty-five (65) years and their dependents will be covered by the Medical Insurance Plan, and the Company will pay the premium for Retirees and their dependents for the first year following retirement. After this first year, retirees and their dependents will be eligible to receive health insurance benefits from the Unitil Retiree Trust. Retirees over sixty-five (65) years will be covered by a Supplement to Medicare Plan paid for by the Company. The eligible dependents (age 65 or over) of these retirees over sixty-five (65) years will also be covered under the Supplement to Medicare Plan with full premium paid for by the Company. The Company will pay the premium for Retirees and their dependents for the first year following retirement. After this first year, retirees and their dependents will be eligible to receive health insurance benefits from the Unitil Retiree Trust.   Group Dental Plan Group Dental Insurance is provided for employees and their eligible dependents and is briefly outlined as follows. Coverage I: No deductible. 100% paid by insurance. Diagnostic - Initial Examination; Examinations to determine the required dental treatment once in a six (6) month period: > > X-Rays - Full Mouth/Panorex. > > > > X-Rays once in a three (3) year period. > > > > Bitewing X-rays once each twelve (12) month period. > > > > Peripical X-Rays as necessary. > > > > Preventative - Cleanings once in a six (6) month period. > > > > Fluoride - once in a twelve (12) month period (age limit 19). > > > > Space Maintainers. Coverage II: $25 deductible per member per insurance plan year. After deductible, 80% paid by insurance, 20% paid by patient. > > Restorative - Amalgam, Silicate and Acrylic restorations. > > > > Oral Surgery - Extractions. > > > > Endodontics - Pupal therapy; root canal filling. > > > > Periodontics - Treatment of gum disease; includes periodontal cleanings. > > > > Dental Repair - Repair of removable denture to its original condition. > > > > Palliative - Emergency Treatment. Coverage III: $25 deductible per member per insurance plan year. After deductible, 50% paid by insurance, 50% paid by patient. > > Crowns and build-ups for crowns. > > > > First placement of inlays and bridges. > > > > First placement of partial or full dentures. Coverage IV: No deductible. 50% paid by insurance, 50% paid by patient. > > Orthodontia. Lifetime maximum for this benefit is $1,000 per person. Maximum of three (3) deductibles per family per insurance plan year and a maximum payment by the plan of $1,250 per member per insurance plan year.   Employees shall pay 10% of the total cost for medical and dental insurance coverage. Such premiums shall be subject to the following weekly dollar caps: Employee Weekly Premium Contributions                 2000 2001 2002 2003 2004 2005 Single $5.17 $5.94 $6.83 $7.86 $9.04 $10.39 Two Person $10.22 $11.76 $13.52 $15.55 $17.88 $20.56 Family $15.41 $17.72 $20.38 $23.44 $26.95 $30.99 Employees will have the option of contributing premiums on a pre-tax basis under the terms of the Unitil Corporation Pre-Tax Premium Plan. Employees will also have the option of dropping medical insurance coverage and receiving two months of company contributions towards the premium, rounded to the nearest $10. Supplemental Group Term Life Insurance Employees will have the option of purchasing supplemental group term life insurance equal to 1x, 2x, or 3x their base pay (hourly wage times 2080), and pay the premiums through payroll deduction. The first $100,00 coverage will be issued without any evidence of insurability if the employee signs up for coverage when initially eligible. Evidence of insurability may be required by the insurance company: 1) If the employee declines coverage and later decides to enroll in the plan after the initial eligibility period, 2) if the employee decides to increase coverage as a multiple of base pay, or 3) for any coverage exceeding $100,000. Supplemental Accidental Death and Dismemberment Employees will have the option of purchasing individual or family supplemental accidental death and dismemberment insurance in increments of $10,000 and pay the premiums through payroll deduction. Maximum coverage is $300,000. Long Term Care Insurance Employees will have the option of purchasing long term care insurance for nursing home and home health care benefits. Such policies can cover the employee, the employee's spouse, parents or in-laws, and the employee will receive the benefit of a group discount and pay the premiums through payroll deduction. Employees will have the opportunity to design individual policies that meet their individual needs. This benefits summary is for informational purposes only. The benefits are described more fully in the applicable master group insurance policy. The extent of coverage for each individual is governed at all times by that document. In the event of any conflict between this summary and the plan documents, the plan document will govern. While the Company expects to continue indefinitely the benefits provided under these plans, it agrees to continue them only for the term of the Contract with employees of Fitchburg Gas And Electric Light Company covered by the Agreement and The Brotherhood of Utility Workers of New England The Utility Workers Union of America, AFL-CIO, Brotherhood of Utility Workers Council and Local Union No. 340B340, dated June 1st, 2000.   TABLE OF CONTENTS   LETTERS OF INTENT Subject Date of Letter Page 1. Vacations - Call-in From 5/1, 1973 67 2. Plans to Furlough During Term of Contract 5/1, 1998 67   May 1, 1973 The Brotherhood of Utility Workers of New England, Inc. Local No. 340 Fitchburg, Massachusetts 01420 Gentlemen: This will confirm to you during negotiations as to our policies on employees being called in to work during their scheduled vacation periods. The Company recognizes the importance and desirability of employees being able to enjoy their vacations and, therefore, will call in employees to work during such periods only in emergency situations or for urgent reasons beyond those encountered under usual day-to-day operations. Very truly yours, FITCHBURG GAS AND ELECTRIC LIGHT COMPANY By:   /s/ Howard W. Evirs, Jr.         President   The Brotherhood of Utility Workers, Inc. Local No. 340 Fitchburg, Massachusetts The Company has no plans to furlough any regular employees during the term of the present contract. However, the Company must be free to deal with unexpected situations brought about by economical or technological changes, acts of God, natural or man-made disasters, etc., and will do so to the optimum benefit of its'' employees, owners and customers. By /s/ Robert G. Schoenberger      Chairman of the Board      & Chief Executive Officer PROGRESSION CHART ROSTER 1 TRANSPORTATION       Transportation Technican-1st Class       Transportation Technican-2nd Class (15 Months to 1st Class         ROSTER 2 Operations Support Clerk     (See Clerical Progression and Pay Plan-Page 51)           ROSTER 3 METER & SERVICE       Gas Service / Pipefitter Worker-1st Class       Emergency Night Trouble Worker       Gas Service / Pipefitter Worker-2nd Class       Gas Service / Pipefitter Worker-3rd Class     Progression Based on Successfully Passing Written and Field Exam.           ROSTER 6 METER (GAS & ELECTRIC)       Gas/Electric Tester/Installer-1st Class       Gas/Electric Tester/Installer-2nd Class Two (2) years in the classification     Gas/Electric Tester/Installer-3rd Class Two (2) years in the classification     Gas/Electric Tester/Installer Helper Six (6) months in the classification         ROSTER 7 STREET       Utility Worker-A-Leader       Utility Worker -A       Utility Worker-B (15 Months to Utilityman-A)     Utility Worker-C (12 Months to Utilityman-B)     Street Worker ( 6 Months to Utilityman-C)         ROSTER 8 ELECTRIC DISTRIBUTION       Head Lineworker       Emergency Night Trouble Worker       Lineworker-1st Class       Lineworker-2nd Class (15 Months to 1st Class)     Lineworker-3rd Class (12 Months to 2nd Class)     Apprentice Lineworker (6 Months to 3rd Class)             Head Cable Splicer       Cable Splicer 1st Class       Cable Splicer 2nd Class (15 Months to 1st Class)     Cable Splicer 3rd Class (12 Months to 2nd Class)     Cable Splicer Helper (6 Months to 3rd Class)                     Head Maintenance Worker       Maintenance Worker 1st Class       Maintenance Worker 2nd Class (15 Months to 1st Class)     Maintenance Worker 3rd Class (15 Months to 2nd Class)         ROSTER 9 METER READER       Meter Reader     No Automatic Progression           ROSTER 11 STORES       Stock Clerk       Stock Worker     No Automatic Progression           ROSTER 12 Property Maintenance Worker       Property Maintenance Worker       No Automatic Progression           ROSTER 19 GAS PRODUCTION       Utilityworker 1       Utilityworker 2 - Must have held U-2 12 Mo.) Per     Utilityworker 3 - Must have held U-3 12 Mo.) Postings   Progression Based on Successfully Passing a Written Exam for Each Class.         ROSTER 20 DIG SAFE       Dig Safe Technician     No Automatic Progression             Unitil System Policies   [image1.gif]Unitil System Policy   Subject: System Policy - Human Resources Military Leave of Absence Policy Number HR 1.08 (G) To: All System Employees From : George E. Long, Jr. Effective: June 1, 2000 Supersedes :  HR 1.08 (G) 8/1/99 FG&E 6.1-4 CECo C.03.10(X) E&H C.03.10(X) PURPOSE To establish conditions under which leave of absence may be granted to employees who leave active employment and enter the military service or reserves or who receive annual military training in the Armed Forces of the United States or the Reserves. ELIGIBILITY All regular full-time and part-time employees. POLICY - MILITARY TRAINING Eligible employees who are members of reserve components of the Armed Services of the United States or the National Guard, and who are required to report for their annual tour of military training duty, shall be granted a leave of absence, not to exceed two (2) weeks in any calendar year. Military training leave is in addition to any vacation for which an employee may be eligible. Eligible employees will be granted a supplemental allowance for any loss in pay during the two (2) week training period, equal to the difference between their base rate of pay and one week's military base pay, exclusive of allowances, for the two (2) week period. Payment will be made upon the employee's return to work, usually in the next regular pay check, after receipt of certification from the proper military officer showing the amount received while engaged in military training duty. All employee benefits will continue during this two (2) week military leave period.   POLICY - MILITARY LEAVE (INITIAL) If an employee who is in the Armed Forces, National Guard or Reserves is activated as a result of a call-up order from the President of the United States or volunteers for active service, she/he will be eligible for military leave. Military service leave is in addition to any vacation for which an employee may be eligible. Eligible employees will be granted a supplemental allowance for any loss in pay during an initial four (4) month period, equal to the difference between their weekly base rate of pay and one week's military base pay, exclusive of allowances, for the four (4) month period. Payment will be made in the employee's regular pay checks, after receipt of certification from the proper military officer showing the amount received while engaged in active service. Most employee benefits will continue during this initial four (4) month leave. The employee will not be eligible for Accidental Death and Dismemberment insurance. If the employee's activated service continues beyond the four (4) month period, his/her status will change to military leave, extended status. POLICY - MILITARY LEAVE (EXTENDED) Eligible employees leaving active employment in order to enter military service shall be considered to be on leave of absence without pay for the period of extended military service up to five years. Eligible employees entering the military service shall be permitted to return to employment with credit for all seniority, service credits, status, and pay rate they would have received had they not been absent, as long as the leave of absence does not exceed five years. Upon release from active military service, an employee who applies for reinstatement will be returned to his/her former position. If the employee's job is of such a nature that it must be filled, then the Company will attempt to return the employee to a comparable position, with all the rights and benefits the employee received before leave was taken. If no such position is available upon return, the employee will be placed in an alternate position and the Company will offer the employee the first comparable position that becomes available. Application for return to active employment status must ordinarily be made within ninety (90) days after release from active military service. Employees who are members of reserve units of the military are asked to notify their supervisor at least four (4) weeks in advance and indicate in writing their intentions with regard to participating in periods of active duty. This written notification will be made a part of the individual employee's personnel file. Medical, dental, life and long term disability insurance will cease at the end of the calendar month in which the employee terminates active employment and enters active service. All other benefits will cease during the military leave of absence. Employees shall, however, have the right to participate in the company's group health plan for up to 18 months at their own expense. Upon return to active employment, the employee will be reinstated in these programs, with the seniority and status that would have been earned had the employee not entered military service.   [image1.gif]Unitil System Policy   Subject: System Policy - Human Resources Length of Service Awards Policy Number HR 1.09 (G) To: All System Employees From : George E. Long, Jr. Effective: June 1, 2000 Supersedes :  HR 1.09 (G) 1/1/00 CECo C.03.24 E&H A.08.11(G) PURPOSE The purpose of this policy is to recognize employees at five year and multiples of five year anniversaries. ELIGIBILITY All regular full-time and part-time employees who celebrate five year and multiples of five year anniversaries with the Company are eligible for a length of service award. PROCEDURE An employee who reaches a five year or a multiple of a five year anniversary with the Company will receive a length of service award. The recognition award will be awarded in Unitil Corporation Common Stock. The amount of stock awarded will be based on $20.00 per year for every year of employment. Any difference in the cash value of the award and the amount of stock awarded will be paid to employee in cash. An employee's length of service will be calculated starting from his/her first day of employment. If an employee transfers from one location to another (within the Unitil system), his/her original date of hire will be used. Any time that an employee spent on a personal, unpaid leave of absence will not count towards the length of service credit. If an employee terminates from the Company and is rehired, the Company will credit the employee with his/her prior service. Length of service awards will be presented at regularly scheduled company-sponsored events. The awards, along with a certificate of recognition, will be presented by the CEO, President, or Department Head.   RESPONSIBILITIES The Human Resources department at USC is responsible for the overall administration of this program, including budgeting.   [image1.gif]Unitil System Policy   Subject: System Policy - Human Resources Sick Pay Policy Number HR 1.12 (G) To: All System Employees From : George E. Long, Jr. Effective: June 1, 2000 Supersedes HR 1.12 (G) 8/1/99 PURPOSE The purpose of this policy is to protect employees against loss of income when they cannot work due to an injury or illness which is short-term in nature. ELIGIBILITY All regular full-time and part-time employees who have successfully completed their probationary period are eligible. POLICY All regular full-time and part-time employees are eligible for up to two (2) weeks of sick pay upon completion of their probationary periods. Upon completion of one (1) year of service these employees are eligible to receive up to twenty-six (26) weeks of leave at full pay each calendar year. This sick pay benefit is for income protection for personal sickness and disability only. Vacation time continues to accumulate during paid sick leave. If illness occurs during a scheduled vacation, the employee may discuss the circumstances with the Department Head for special consideration. Employees will receive Holiday Pay instead of Sick Pay for any Holiday that occurs while receiving sick pay. All company benefits will continue in force while collecting sick pay. If the employee is going to be out for more than three (3) days, the Supervisor must notify the local Human Resources contact so that the employee can be placed on Family & Medical Leave if applicable. The Company may, in its discretion, withhold payment of Sick Pay for illness or injury resulting from paid employment of any kind other than employment by the Company. The Company will not pay Sick Pay benefits for illness or injury incurred while committing a felony. Any compensation payable during the period of sick leave will be reduced by any compensation paid to the employee from Federal or State Worker's Compensation Law.   [image1.gif]Unitil System Policy   Subject: System Policy - Human Resources Bereavement Pay Policy Number HR 1.15 (G) To: All System Employees From : George E. Long, Jr. Effective: June 1, 2000 Supersedes HR 1.15 (G) 3/1/00 PURPOSE The Company recognizes the need for employees to take time off from work due to the death of a family member. ELIGIBILITY Regular full-time and regular part-time employees who have successfully completed their probationary period are eligible. GUIDELINES Employees will be granted up to three (3) days off with pay for a death in the family. Usually, the time off is available in the week following the death. However, employees with legal responsibility for settling a deceased person's affairs can use part of the three days for this purpose at a later time. Family members include spouse, child, sibling, parent, parent-in-law, stepparent, grandparent, aunt, uncle, cousin, grandchild and any relative living in the employee's home. Family members also include domestic partners and close relatives of a domestic partner. Employees who require additional time due to unusual or extenuating circumstances may, at management's discretion, be granted additional time off or an unpaid leave of absence, as needed.   [image1.gif]Unitil System Policy   Subject: System Policy - Human Resources Vacation Pay Policy Number HR 1.20 (G) To: All System Employees From : George E. Long, Jr. Effective: June 1, 2000 Supersedes HR 1.20 (G) 2/22/99 PURPOSE The Company recognizes the need for employees to take periodic breaks from their work schedules in order to spend time with their families, pursue personal interests, travel, etc. To this end, the following outlines the annual vacation leave policy for all employees. ELIGIBILITY Full-time and part-time employees are eligible for vacation pay. GENERAL INFORMATION Benefit Year for vacation leave is January 1 through December 31 each year. New Employees -- During the probationary employment period, employees may not use vacation entitlements; however, they may use all vacation time accrued during this period after successful completion of the probationary period. Vacation Usage -- Accrued vacation time can be taken in one half and whole days. Up to sixteen (16) hours of vacation pay per year may be used in one (1) hour increments for unscheduled personal emergencies or family events, subject to the approval of the supervisor. Vacation entitlements should be used by December 31 each year. This reinforces the Company's commitment to employees taking time away from their job responsibilities. It is the responsibility of each manager to ensure that all vacation time accrued by their respective employees is used in accordance with this policy. Vacation Scheduling -- Employees must seek prior approval from their supervisors before taking vacation time and all questions regarding vacation leave should be directed to their immediate supervisor. The Company reserves the right to limit vacation leave to a maximum of two consecutive weeks at any given time. Certain circumstances, however, may require more vacation leave time and therefore will need the approval of the employee's supervisor. Vacation Carryover -- Up to 50% of an employee's annual vacation entitlement may be carried over to the next vacation year. All time in excess of this 50% carryover will be forfeited. Payday -- When employee is on vacation on a regularly scheduled payday their check will be direct deposited into their bank on payday if enrolled in that program, or their check will be available from their Personnel Assistant on payday. Arrangements can be made in advance to have the check mailed to the employee's home.     ACCRUAL SCHEDULE The schedule below illustrates the accrual of the vacation leave benefit: Completed Years of Service Entitlement Monthly Accrual 0 -- 4 years* 2 weeks 0.833 days/month 5 -- 9 years 3 weeks 1.25 days/month 10 -- 19 years 4 weeks 1.67 days/month 20 + years 5 weeks 2.08 days/month Part-time employees will receive a pro-rated amount of vacation pay based on the number of hours that they are regularly scheduled to work. For example, if an employee with less than 5 years of service is regularly scheduled to work 22 hours per week, then s/he would be eligible for 44 hours of vacation pay per year. See calculation below: # of Hours Regularly Scheduled to Work X 80 hours 40 hours *Additional consideration will be given to new employees who had at least 10 years of service in similar positions to that which they hold in the Company or had at least 3 weeks of vacation before joining the Company. These employees will be eligible to receive an additional week of vacation benefit through the end of the fifth year at which time their annual entitlement officially becomes 3 weeks per year. ACCRUAL RULES Benefit Year entitlements for newly hired employees will be prorated according to the month in which they begin their employment. Employee must be employed on the first working day of the month in order to receive the benefit for that month. Employees who celebrate a 5, 10, or 20 year service anniversary with the Company will receive the additional week of vacation in their anniversary year. If an employee leaves the Company, the Company will compensate the employee for all unused vacation leave time which has been accrued at the time of the employee's departure from the Company. The employee would receive the benefit for the final month worked only if they were employed on the last working day of the month. The final check covering any unused vacation would be mailed to the employee within 10 working days after their termination date. Employees who retire or who are laid off from the Company will receive the full entitlement for the Benefit Year in which the retirement or layoff becomes effective. Vacations will continue to accrue during any absence for which the employee is receiving full pay.   [image1.gif]Unitil System Policy   Subject: System Policy - Human Resources Wellness Policy Number HR 1.23 (G) To: All System Employees From : George E. Long, Jr. Effective: June 1, 2000 Supersedes HR 1.23 (G) 2/22/99 PURPOSE This policy is designed to foster the health and safety of all employees by encouraging and supporting activities that are known to maintain and improve an individual's personal health. ELIGIBILITY Regular full-time and regular part-time employees who have successfully completed their probationary period are eligible. POLICY The company will reimburse an eligible employee for out-of-pocket expenses of up to a total of $100 per calendar year for any combination of the following activities: > * Annual physical exams, including mammograms and other annual screenings > * Exercise facilities membership, such as a YMCA/YWCA, or a facility which > offers exercise equipment, track, racquetball, squash, tennis, swimming, > martial arts, yoga, etc. > * Exercise classes, such as aerobics, calisthenics, jazzercise, etc. > * Weight control programs, such as Weight Watchers, Overeaters Anonymous, > Jenny Craig, etc. > * Smoking cessation programs, including hypnosis or over-the-counter smoking > cessation aids. > * Health education classes, including courses on hypertension control, stress > management, healthy eating, CPR, First Aid, etc. > * Other fitness-related activities and exercise equipment To receive a reimbursement for any of these activities, the employee must submit a receipt of payment along with a description of the program to the Human Resources department. The bill must include the name of the facility, total cost, and date of services. The Human Resources department will then authorize payment of the reimbursement directly to the employee. The wellness benefit will not accrue from one calendar year to the next. All unused reimbursements will be forfeited.   [image1.gif]Unitil System Policy   Subject: System Policy - Human Resources Jury Duty Policy Number HR 1.27 (G) To: All System Employees From : George E. Long, Jr. Effective: June 1, 2000 Supersedes:  HR 1.27 (G) 2/22/99 FG&E 6.1-5 E&H C.03.9 (G) CECO C.03.09 (G) PURPOSE The Company recognizes that employees have a civil and legal responsibility to participate in jury service or certain other mandatory court appearances from time to time. Therefore, the Company will provide time off with pay to any eligible employee required to serve as a juror or to participate in other mandatory court appearances on a regularly scheduled work day. ELIGIBILITY Regular full-time, regular part-time, and temporary employees who have completed their probationary period are eligible. POLICY Any employee summoned to serve as a juror in a federal, state, or local court on a regularly scheduled work day shall be granted time off with pay to fulfill such obligation. An employee who is subpoenaed or served notice to appear in court or as a witness or in a capacity other than as a defendant or plaintiff on a regularly scheduled work day will be granted time off with pay for the duration of such appearance. An employee excused from jury duty for any full day must report to work on that day. Employees are also responsible for reporting to work on any day they are released early, if so requested by their managers. An employee's manager will make no attempt to get an employee released from serving on a jury, except at special request of the department head.   PAY An employee required to perform jury duty or subpoenaed as a witness will receive regular straight-time pay. Hours spent performing jury duty or appearing as a witness even though not actually worked will be counted as hours worked for purposes of computing overtime. A non-exempt employee who is required to report for work after jury duty and works beyond his or her normal working hours will be eligible for overtime pay for those extra hours. ADMINISTRATION An employee must notify his or her supervisor as far as possible in advance of any absence for such purpose. The employee must present a copy of the summons, subpoena, or written evidence requiring the court appearance. To receive pay from the Company, the employee must provide a statement certified by a court representative as to the employee's service as a juror or witness and the dates and hours of attendance to his/her supervisor. His/her supervisor will forward the statement to Payroll.   [image1.gif]Unitil System Policy   Subject: System Policy - Human Resources Unpaid Leave of Absence Policy Number HR 1.34 (G) To: All System Employees From : George E. Long, Jr. Effective: June 1, 2000 Supersedes HR 1.34 (G) 8/1/99 PURPOSE To define the company's policy on unpaid leaves of absence. ELIGIBILITY This policy applies to all regular full-time and part-time employees. PROCEDURE An employee may request an unpaid leave of absence for personal reasons which do not qualify for other leaves of absences. An unpaid leave of absence will not exceed six (6) months. Each request will be treated on a case-by-case basis and is subject to approval by the employee's manager, Department Head, and the Director of Human Resources. The employee must submit the request in writing to his/her manager. The request must include the period of time off requested and the reason for the request. If the request is approved, the employee must use all accrued vacation and Floating Holiday pay before going on unpaid leave. The employee will not accrue vacation pay and Floating Holidays, and will not be paid for any fixed holidays while s/he is on unpaid leave. If the approved leave is for one month or less, the employee must arrange to pay for his/her share of the premium for medical and dental insurance. The company will continue to pay for his/her life and long term disability insurance. If the approved leave is for more than one month, the employee must arrange to pay for 100% of the cost of medical, dental, life, and long term disability insurance in order to continue benefits. Contributions to the employee's 401(k) plan will cease while the employee is on unpaid leave. The employee must make arrangements to continue to pay off any outstanding loans before s/he goes on unpaid leave. The employee will not be eligible for the following benefits while on unpaid leave: workers' compensation, business travel accident insurance, new requests for tuition assistance, new requests for the PC purchase program, and dependent care spending account. Time spent on unpaid leave will not count towards benefits that are dependent upon length of service. The employee's service anniversary date will be adjusted to subtract any time spent on leave for more than 1 month. Prior to commencing a leave, the employee and manager will agree on a length of leave during which the manager will guarantee reinstatement to the employee's position. For any leave longer than this agreed period, the company cannot guarantee reinstatement to the same or equivalent position with equivalent pay, benefits, and other terms and conditions of employment as the employee held before going on unpaid leave. When at all possible, the company will try to reinstate the employee, if the job still exists. If the employee does not return to work on the agreed-upon date, the employee will be considered to have voluntarily terminated.   [image1.gif]Unitil System Policy   Subject: System Policy - Human Resources Continuation of Benefits While on Policy Number HR 1.36 (G) Long Term Disability/Extended Medical Leave of Absence To: All System Employees From : George E. Long, Jr. Effective: June 1, 2000 Supersedes HR 1.36 (G) 8/1/99 PURPOSE To define the company's policy on continuing benefits while an employee is receiving long term disability (LTD) benefits on an extended medical leave of absence. ELIGIBILITY This policy applies to all regular full-time and part-time employees who are eligible to receive LTD benefits. PROCEDURE An employee who is disabled for more than 26 weeks due to illness or injury must apply for LTD benefits in order to receive LTD benefits. In this case, an employee's status is considered to be LTD/extended medical leave. The employee may continue to participate in the company's medical and dental insurance for as long as the employee is deemed to be totally disabled under the LTD plan, or up until the time that the employee retires. The employee must arrange to pay for his/her share of the premium for medical and dental insurance. The employee must apply for a Waiver of Premium for his/her life insurance to continue life insurance coverage. This waiver will be subject to approval by the life insurance carrier. Contributions to the employee's 401(k) plan will cease while the employee is on LTD. The employee will not be eligible for the following benefits while on LTD: business travel accident insurance, tuition assistance, PC purchase program, and dependent care spending account. Time spent on LTD will generally count towards benefits that are dependent upon length of service. An employee on LTD/extended medical leave cannot apply for an additional unpaid leave of absence. If the employee does not return to work or retire when LTD benefits end, then the employee's status will be changed from LTD/extended medical leave to terminated.

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.55     SHARE PURCHASE AGREEMENT between (1) THE SEVERAL PERSONS as Vendors —and— (2) FOUR MEDIA COMPANY (UK) LIMITED as Purchaser LATHAM & WATKINS 99 Bishopsgate London EC2M 3XF Tel: 0207-710 1000 -------------------------------------------------------------------------------- TABLE OF CONTENTS 1.   DEFINITIONS AND INTERPRETATION   1 2.   SALE AND PURCHASE   10 3.   CONSIDERATION   10 4.   ACCOUNTS AND STATEMENT OF INDEBTEDNESS   13 5.   WAIVERS OF PRE-EMPTION   17 6.   COMPLETION   17 7.   WARRANTIES   17 8.   INDEMNITIES   21 9.   DEBTORS   22 10.   PROTECTION OF GOODWILL   22 11.   ANNOUNCEMENTS   23 12.   FURTHER ASSURANCE   24 13.   ASSIGNMENT   24 14.   ENTIRE AGREEMENT: REMEDIES   24 15.   WAIVER, VARIATION AND RELEASE   25 16.   COSTS AND EXPENSES   25 17.   PAYMENTS   26 18.   NOTICES   26 19.   DEFAULT INTEREST   27 20.   COUNTERPARTS   27 21.   INVALIDITY   27 22.   AGREEMENT TO CONTINUE IN FULL FORCE AND EFFECT   27 23.   CONFIDENTIALITY   29 24.   GOVERNING LAW AND JURISDICTION   29 25.   THIRD PARTY RIGHTS   30 i -------------------------------------------------------------------------------- SCHEDULES     SCHEDULE 1   The Vendors SCHEDULE 2   Directors of the Company SCHEDULE 3   Part 1: Properties     Part 2: Leases     Part 3: Inferior Leases     Part 4: Tenancy at Will SCHEDULE 4   The Company SCHEDULE 5   Part 1: General Warranties     Part 2: Taxation Warranties SCHEDULE 6   Completion     Part 1: Documentation     Part 2: Meetings SCHEDULE 7   Intellectual Property     Part 1:  Registered Intellectual Property     Part 2:  Material Unregistered Intellectual Property     Part 3:  Licences—In     Part 4:  Licences—Out SCHEDULE 8   Estimated Indebtedness EXHIBIT A   INVOICES EXHIBIT B   LOAN NOTES ii -------------------------------------------------------------------------------- THIS AGREEMENT is made the     day of            2000 BETWEEN: (1)   THE SEVERAL PERSONS whose respective names and addresses are set out in column (1) of Part 1 of Schedule 1 (the "Vendors"); and (2)   FOUR MEDIA COMPANY (UK) LIMITED, a company incorporated in England and Wales with registered number 3755028, whose registered office is at Film House, 142 Wardour Street, London WIV 3AU (the "Purchaser"). WHEREAS: (A)   Visiontext Limited (the "Company"), a company registered in England with number 2901884, has at the date of this Agreement an authorised share capital of £500,000 divided into 500,000 Ordinary Shares of £1 each in the capital of the Company, of which 80,000 of the said Ordinary Shares are issued and fully paid and are owned by the Vendors in the amounts shown opposite their respective names in column (2) of Schedule 1. (B)   The Vendors have agreed to sell the Shares to the Purchaser and the Purchaser has agreed to purchase the Shares in reliance (inter alia) upon the representations, warranties and undertakings in this Agreement, for the Initial Consideration and otherwise upon and subject to the terms and conditions of this Agreement. WHEREBY IT IS AGREED as follows: 1.   DEFINITIONS AND INTERPRETATION 1.1   In this Agreement the following words and expressions have the meanings set opposite them:     "Accounting Standards"   statements of standard accounting practice (including financial reporting standards) issued pursuant to section 256, CA 85 by the ASB;     "Accounts"   the audited balance sheet as at the Balance Sheet Date and the audited profit and loss account for the twelve months ended on the Balance Sheet Date of the Company and the notes, reports, statements and other documents which are or would be required by law to be annexed to the Accounts, a copy of which has been initialled by or on behalf of each of the parties for the purpose of identification;     "Adjusted Consideration"   an amount equal to £4,287,700 plus the Cash Balance (as may be stated in the Statement of Indebtedness or otherwise determined in accordance with Clause 4.1) less (i) Indebtedness (as may be stated in the Statement of Indebtedness or otherwise determined in accordance with Clause 4.1) and (ii) the Trade Working Capital Shortfall (as may be stated in the Statement of Indebtedness or otherwise determined in accordance with Clause 4.1);     "Affiliate"   in relation to any body corporate, any Holding Company or subsidiary undertaking of such body corporate or any subsidiary undertaking of a Holding Company of such body corporate;     "Agreement"   this Agreement including its Recitals and the Schedules but not the Tax Deed;                 1 --------------------------------------------------------------------------------     "ASB"   Accounting Standards Board Limited (no. 2526824) or such other body prescribed by the Secretary of State from time to time pursuant to section 256, CA 85;     "Balance Sheet Date"   31 March 2000;     "Business"   the business of the Company at the date hereof;     "Business Day"   a day (other than a Saturday or Sunday) when banks are open for business in London;     "CA 85"   Companies Act 1985;     "CAA"   Capital Allowances Act 1990;     "Capex Increment"   an amount equal to the amount by which the aggregate of the actual capital expenditures (excluding any VAT thereon) for the Post Closing Period exceeds £400,000; in the event that the Capex Increment, as calculated in accordance with the preceding provisions of this definition, is a negative amount, the Capex Increment shall be deemed to equal zero;     "Cash Balance"   the aggregate of the cash book balances of the Company at Completion plus an amount equal to the amounts owed to the Company at Completion by Nimbus Manufacturing (UK) Limited and Fox in relation to invoices, copies of which are attached hereto as Exhibit A respectively (for the avoidance of doubt, there shall be no double counting of any amounts regarding such invoices in determining the Cash Balance);     "Companies Acts"   as defined in section 744, CA 85 together with the Companies Act 1989;     "Completion"   completion of the sale and purchase of the Shares in accordance with this Agreement;     "Confidential Information"   all information received or obtained as a result of entering into or performing, or supplied by or on behalf of a party in the negotiations leading to, this Agreement and which relates to:             (i)   the Company;             (ii)   any aspect of the Business;             (iii)   the provisions of this Agreement;             (iv)   the provisions of the Loan Notes;             (v)   the provisions of the Tax Deed;             (vi)   the negotiations relating to this Agreement;             (vii)   the subject matter of this Agreement; or             (viii)   the Purchaser's Group;     "Connected Person"   a person connected with any of the Vendors or the Directors (or any former director of the Company) within the meaning of section 839, ICTA 1988;                 2 --------------------------------------------------------------------------------     "Consultant"   The Business Exchange Plc, of 21 John Adam Street, London, WC2N 6JG, and any of its directors, officers, employees or consultants;     "Copyright"   copyright, design rights, topography rights and database rights whether registered or unregistered (including any applications for registration of any such thing) and any similar or analogous rights to any of the foregoing whether arising or granted under the law of England or of any other jurisdiction;     "Customer Copyright"   means Intellectual Property belonging to customers of the Company and which is used by or licensed to the Company in the ordinary course of conducting the Business and any Intellectual Property created or developed on behalf of a customer by the Company in the ordinary course of conducting the Business;     "Directors"   the directors of the Company named in Schedule 2;     "Disclosed"   fairly disclosed by the Disclosure Documents and "Disclosure" shall be construed accordingly;     "Disclosure Documents"   the Disclosure Letter and the two identical bundles of documents collated by or on behalf of the Vendors, the outside covers of each of which have been signed for identification purposes by or on behalf of the Vendors and the Purchaser;     "Disclosure Letter"   the letter described as such of even date herewith addressed by the Vendors to the Purchaser;     "Earnout"   an amount equal to the EBITDA Improvement (if any) multiplied by two (2), less an amount equal to the Capex Increment (if any), except that where the product of such multiplication and subtraction exceeds £1,000,000, the amount of the Earnout shall be deemed to be £1,000,000;     "EBITDA"   earnings before interest, taxes, depreciation, and amortisation, determined in accordance with UK generally accepted accounting principles consistently applied and adjusted by the following: (i) EBITDA shall not include any gain or loss arising from the sale of assets (other than trading assets in the ordinary course of business); and (ii) corporate overhead or management charges incurred by, or allocated to, the Company shall be treated as an expense;     "EBITDA Improvement"   the sum of the amount (if any) by which Post Closing EBITDA exceeds LTM EBITDA;     "Encumbrance"   any interest or equity of any person (including any right to acquire, option or right of pre-emption) or any mortgage, charge, pledge, lien, assignment, hypothecation, security interest, title retention or any other security agreement or arrangement;     "Environment"   as defined in paragraph 9.1 of Schedule 5;     "ERA"   Employment Rights Act 1996;                 3 --------------------------------------------------------------------------------     "Estimated Cash Balance"   the sum of £616,798, being the amount agreed between the Vendors and the Purchaser as being a fair estimate of the Cash Balance;     "Escrow Agent"   the Purchaser's Solicitors and the Vendors' Solicitors jointly;     "Escrow Instructions"   the instructions to the Escrow Agent in the agreed terms;     "Estimated Indebtedness"   the sum of £689,147, being the amount agreed between the Vendors and the Purchaser as being a fair estimate of Indebtedness;     "Estimated Trade Working Capital"   the sum of £375,000, being the amount agreed between the Vendors and the Purchaser as being a fair estimate of Trade Working Capital     "Excess"   an amount equal to the amount (if any) by which the Initial Consideration exceeds the Adjusted Consideration;     "FA"   Finance Act;     "Hardware"   any and all computer, telecommunications and network equipment;     "Holding Company"   a holding company within the meaning ascribed to such expression by sections 736 and 736A, CA 85;     "ICTA 1988"   Income and Corporation Taxes Act 1988;     "Indebtedness"   as of immediately prior to Completion, all indebtedness and obligations, accrued or unaccrued, owed or guaranteed by the Company or which encumbers the Company or any of its assets, including by way of illustration and not as a limitation, bank indebtedness, promissory notes, all conditional sales, hire purchase or lease obligations (however expensed), Indebtedness relating to the Properties, guarantees, indemnities, warranties and bonds. In this Agreement, the Indebtedness shall also include:             (i)   any amounts which arise as a result of the prepayment of any Indebtedness including prepayment penalties under capital leases, conditional sales, hire purchase or finance leases and mortgages or other Encumbrances relating to property;             (ii)   amounts the Company is required to pay at the expiration of any lease in order to purchase free of Encumbrances, the property the subject of the lease;             (iii)   any amount due or payable to any person in connection with a change of control of the Company, including by way of illustration, any amounts arising under share option or phantom equity plans;                 4 --------------------------------------------------------------------------------             (iv)   the amount of any fees and expenses incurred by the Company in connection with the negotiation, preparation, execution and delivery of this Agreement and all documents ancillary hereto or made in contemplation hereof and including, for the avoidance of doubt, any fees, costs and expenses incurred by the Company in connection with and regarding the services of the Consultant;             (v)   any fees, costs and expenses (including VAT) to be paid by the Purchaser in connection with and regarding the services of the Consultant;             (vi)   the amount of any loans or other obligations made by the Company to any of its members, including any interest accrued thereon;             (vii)   the amount of all unpaid obligations to employees other workers or consultants of the Company, (including, without limitation, any associated Taxes, any accrued but unpaid bonuses, commissions, profit sharings, remuneration or emoluments of employment, benefits or severance) through the period to and including the date of Completion (the "Payroll Liability"); and             (viii)   the amount of any unpaid Taxation (excluding VAT) associated with or arising from the operations of the Company through the period to and including the date of Completion (the "Tax Liability").             For the avoidance of doubt, no individual debt constituting Indebtedness shall be counted more than once when calculating Indebtedness;     "Indemnities"   the indemnities given by the Vendors in Clause 8;     "Indemnity Claim"   a claim by the Purchaser under the Indemnities;     "Initial Consideration"   the sum of £3,012,650, being the amount agreed between the Vendors and the Purchaser as being equal to £4,287,700 (i) plus the Estimated Cash Balance (ii) less Estimated Indebtedness (iii) less £202,700, being the Vendors' estimate of the Trade Working Capital Shortfall;     "Intellectual Property"   Patent Rights, Know-How, Copyright (including rights in Software), Trade Marks and IP Materials and any other proprietary rights relating to any of the foregoing;     "Intellectual Property Agreements"   agreements or arrangements relating to the Relevant IP;     "IP Materials"   all documents, records, tapes, discs, diskettes and any other materials whatsoever containing Copyright works, Know-How or Software;                 5 --------------------------------------------------------------------------------     "IT Contracts"   any agreements or arrangements among the Company and any third parties relating to IT Systems or IT Services, including all hire purchase contracts or leases of Hardware owned or used by the Company, licences of Software owned or used by the Company and other IT procurement;     "IT Services"   any services relating to the IT Systems or to any other aspect of the Company's data processing or data transfer requirements, including facilities management, bureau services, hardware maintenance, software development or support, consultancy, source code deposit, recovery and network services;     "IT Systems"   Hardware and/or Software and/or embedded systems owned or used by the Company;     "ITA"   Inheritance Tax Act 1984;     "Know-How"   any of the following, whether patentable or unpatentable and whether or not reduced to practice, insofar as they are applicable to the Business: trade secrets and confidential business information including details of supply arrangements, customer lists and pricing policy; sales targets, sales statistics, market share statistics, marketing surveys and reports; marketing research; unpatented technical and other information including inventions, discoveries, processes and procedures, manufacturing and production processes and techniques, ideas, concepts, formulae, specifications, procedures for experiments and tests and results of experimentation and testing, research and development information and copyrightable works; information comprised in Software; together with all common law or statutory rights protecting the same including by any action for breach of confidence and any similar or analogous rights to any of the foregoing whether arising or granted under the law of England or any other jurisdiction;     "Legal and Beneficial Title"   full and unrestricted legal and beneficial title with the benefit of quiet possession and free from lawful interruption and disturbance;     "Loan Notes"   the loan note in substantially the form attached as Exhibit B which may be issued by the Purchaser to certain of the Vendors pursuant to Clause 3.13;     "Losses"   actions, proceedings, losses, damages, liabilities, claims, costs and expenses including fines, penalties, clean-up costs, legal and other professional fees and any VAT payable in relation to any such matter, circumstance or item except to the extent that the Purchaser obtains credit for such VAT as input tax;     "LTM EBITDA"   the amount of £730,600.00, being the amount agreed between the parties to be regarded as the EBITDA of the Company for the twelve (12) month period ended June 30, 2000;     "Management Accounts"   the management accounts of the Company for the period from 1 April to 31 August 2000 (inclusive);                 6 --------------------------------------------------------------------------------     "Patent Rights"   patent applications or patents, author certificates, inventor certificates, utility certificates, improvement patents and models and certificates of addition including any divisions, renewals, continuations, refilings, confirmations-in-part, substitutions, registrations, confirmations, additions, extensions or reissues thereof and any similar or analogous rights to any of the foregoing whether arising or granted under the law of England or any other jurisdiction;     "Post Closing EBITDA"   an amount equal to the Company's EBITDA for the Post Closing Period;     "Post Closing Period"   the period comprising the twelve (12) full calendar months commencing 1 July 2000;     "Proceedings"   any proceeding, suit or action arising out of or in connection with this Agreement;     "Properties"   the properties of which short particulars are set out in Schedule 3;     "Purchaser's Accountants"   KPMG of Arlington Business Park, Theale, Reading, RG7 4SD;     "Purchaser's Group"   the Purchaser and its Affiliates;     "Purchaser's Solicitors"   Latham & Watkins of 99 Bishopsgate, London EC2M 3XF;     "Registered Intellectual Property"   the Intellectual Property owned, licensed or exploited by the Company and listed in Part 1 of Schedule 7;     "Relevant IP"   all Registered Intellectual Property and Unregistered Intellectual Property;     "Retention"   the sum of £200,000;     "Retention Escrow Account"   an account to be opened in the joint names of the Purchaser's Solicitors and the Vendors' Solicitors following Completion;     "Shares"   the 80,000 issued Ordinary Shares of £1.00 each in the capital of the Company;     "Software"   any and all computer programs in both source and object code form, including all modules, routines and sub-routines thereof and all source and other preparatory materials relating thereto, including user requirements, functional specifications and programming specifications, ideas, principles, programming languages, algorithms, flow charts, logic, logic diagrams, orthographic representations, file structures, coding sheets, coding and including any manuals or other documentation relating thereto and computer generated works and data;     "SSAP"   a statement of standard accounting practice or financial reporting standard in force at the date hereof as issued by the Institute of Chartered Accountants in England and Wales and adopted by the ASB as an Accounting Standard;     "Statement of Estimated Indebtedness"   the statement of Estimated Indebtedness set out in Schedule 8;                 7 --------------------------------------------------------------------------------     "Statement of Indebtedness"   the statement of Indebtedness referred to in Clause 4.1;     "subsidiary"   a subsidiary within the meaning ascribed to such expression by sections 736 and 736A, CA 85;     "subsidiary undertaking"   a subsidiary undertaking within the meaning ascribed to such expression by section 258, CA 85;     "Taxation" or "Tax"   (a) all forms of taxation including any charge, tax, duty, levy, impost, withholding or liability wherever chargeable, imposed for support of national, state, federal, municipal or local government or any other person and whether of the United Kingdom or any other jurisdiction; and         (b) any penalty, fine, surcharge, interest, charges or costs payable to a Taxation Authority in connection with any taxation within (a) above;     "Taxation Authority"   the Inland Revenue, Customs & Excise, Department of Social Security and any other governmental or other authority whatsoever competent to impose any Taxation in the United Kingdom;     "Tax Deed"   the deed in the agreed terms containing certain taxation covenants and indemnities between the Vendors and the Purchaser;     "Taxation Statute"   any directive, statute, enactment, law or regulation, wheresoever enacted or issued, coming into force or entered into providing for or imposing any Taxation and shall include orders, regulations, instruments, bye-laws or other subordinate legislation made under the relevant statute or statutory provision and any directive, statute, enactment, law, order, regulation or provision which amends, extends, consolidates or replaces the same or which has been amended, extended, consolidated or replaced by the same;     "Tax Warranties"   the warranties set out in Part 2 of Schedule 5;     "TCGA"   Taxation of Chargeable Gains Act 1992;     "TMA"   Taxes Management Act 1970;     "Trade Marks"   tradename, trade or service mark applications or registered tradenames, trade or service marks, registered protected designations of origin, registered protected geographic origins, refilings, renewals or reissues thereof, unregistered tradenames, trade or service marks, domain names, get-up and company names in each case with any and all associated goodwill and all rights or forms of protection of a similar or analogous nature including rights which protect goodwill whether arising or granted under the law of England or of any other jurisdiction;                 8 --------------------------------------------------------------------------------     "Trade Union"   as defined in section 1, TULRCA;     "Trade Working Capital"   the current assets of the Company at Completion less: (i) the current liabilities (excluding Tax liabilities and excluding accruals for Tax but including VAT and including any accruals for VAT); (ii)  any current liabilities included in Indebtedness of the Company at Completion; and (iii) the Cash Balance;     "Trade Working Capital Shortfall"   the amount, if any, by which Trade Working Capital is less than £375,000;     "TULRCA"   Trade Union and Labour Relations (Consolidation) Act 1992;     "TUPE"   Transfer of Undertakings (Protection of Employment) Regulations 1981;     "Unregistered Intellectual Property"   Intellectual Property owned, licensed or exploited by the Company other than Registered Intellectual Property;     "VAT"   value added tax;     "VATA"   Value Added Tax Act 1994;     "Vendors' Accountants"   Farmiloes of Winston Churchill House, Ethel Street, Birmingham B2 4BG;     "Vendors' Solicitors"   Blake Lapthorn of New Court, 1 Barnes Wallis Road, Segensworth, Fareham, Hampshire, PO15 5UA;     "Warranties"   the warranties set out in Schedule 5;     "Warranty Claim"   a claim by the Purchaser in connection with the Warranties; and     "in the agreed terms"   in the form agreed between the Vendors and the Purchaser and signed for the purposes of identification by or on behalf of each party. 1.2   The table of contents and headings in this Agreement are inserted for convenience only and shall not affect its construction. 1.3   Unless the context otherwise requires words denoting the singular shall include the plural and vice versa, references to any gender shall include all other genders and references to persons shall include bodies corporate, unincorporated associations and partnerships, in each case whether or not having a separate legal personality. References to the word "include" or "including" are to be construed without limitation. 1.4   References to Recitals, Schedules and Clauses are to recitals and schedules to and clauses of this Agreement unless otherwise specified and references within a Schedule to paragraphs are to paragraphs of that Schedule unless otherwise specified. 1.5   References in this Agreement to any statute, statutory provision or EC Directive include a reference to that statute, statutory provision or EC Directive as amended, extended, consolidated or replaced on or prior to Completion and include any order, regulation, instrument or other subordinate legislation made on or prior to Completion under the relevant statute, statutory provision or EC Directive. 1.6   Words and expressions defined in the Tax Deed shall to the extent not inconsistent bear the same meanings in this Agreement.                 9 -------------------------------------------------------------------------------- 1.7   References to any English legal term for any action, remedy, method of judicial proceeding, legal document, legal status, court, official or any legal concept, state of affairs or thing shall in respect of any jurisdiction other than England be deemed to include that which most closely approximates in that jurisdiction to the English legal term. 1.8   Any reference to "writing" or "written" includes faxes and any non-transitory form of visible reproduction of words. 1.9   Except where indicated in this Agreement to the contrary, any agreement, covenant, representation, warranty, undertaking or liability arising under this Agreement on the part of two or more persons shall be deemed to be made or given by such persons jointly and severally. 1.10   Subject to Clause 1.9, references to the Vendors shall include each of them severally. 1.11   References to times of the day are to London time and references to a day are to a period of 24 hours running from midnight. 2.   SALE AND PURCHASE 2.1   Obligation to sell and purchase     Subject to the terms of this Agreement, each of the Vendors shall sell with full title guarantee and free from any Encumbrance, that number of Ordinary Shares set opposite his name in column (2) of Part 1 of Schedule 1 and the Purchaser shall purchase such Shares together with all rights attached or attaching thereto at the date of this Agreement. 2.2   Dividends and distributions     The Purchaser shall be entitled to receive all dividends and distributions paid or made by the Company on or after the date of this Agreement whether declared before, on or after the date of this Agreement. 2.3   Sale of all Shares     The Purchaser shall not be obliged to complete the purchase of any of the Shares unless the purchase of all the Shares is completed simultaneously pursuant to the terms of this Agreement. 3.   CONSIDERATION 3.1   Consideration     Subject as provided in Clause 4.2 below, the consideration for the Shares shall be an amount equal to the Initial Consideration. 3.2   Entitlement to consideration     Subject as provided in this Clause 3 in relation to the Retention and the Balance (as defined below), the Initial Consideration shall be satisfied by the payment by way of electronic transfer for same day value for the benefit of certain of the Vendors in the proportions set opposite their respective names in columns (3) and (4) of Part 1 of Schedule 1. 3.3   Retention and Escrow Arrangements     Each Vendor shall be deemed to have contributed to the Retention an amount equal to the amount set opposite its name in Column (5) of Part 1 of Schedule 1. 3.4   The Retention shall be paid to the Purchaser's Solicitors on Completion to be paid into the Retention Escrow Account which shall be opened promptly following Completion to be held in accordance with the Escrow Instructions.                 10 -------------------------------------------------------------------------------- 3.5   Each party shall ensure that all rights to the Retention Escrow Account remain free from any Encumbrance, set off or counterclaim except as referred to in Clauses 3.6 to 3.13 (inclusive). 3.6   In the event of a Warranty Claim, an Indemnity Claim, a claim under the Tax Deed or for breach by the Vendors of their obligations under Clause 3.13.5 (in any such case, a "Claim") being made or threatened against the Vendors before payment of the Retention or any balance thereof (if any) in accordance with Clause 3.8:     3.6.1   the Purchaser shall give to the Vendors written notice of the Claim (specifying in reasonable detail the matter giving rise to the Claim, the nature of the Claim and the amount claimed), together with an estimate of the amount required to cover its reasonable costs and any interest which may accrue upon any of such (an "Amount Claimed");     3.6.2   within 30 days starting on the day after receipt of notice of the Claim, the Vendors shall give the Purchaser notice stating:         (a)   whether or not they accept liability for the Claim; and         (b)   whether or not they accept the Amount Claimed and if they do not accept the Amount Claimed the part of the Amount Claimed they do accept;     3.6.3   if the Vendors fail to give notice in accordance with Clause 3.6.2 the Amount Claimed shall be paid to the Purchaser out of the balance of the money (if any) standing to the credit of the Retention Escrow Account;     3.6.4   subject always to Clause 3.7, if the Vendors accept liability in respect of a Claim but accept part only of the Amount Claimed, that part of the Amount Claimed which is accepted shall be paid to the Purchaser out of the balance of the money (if any) standing to the credit of the Retention Escrow Account; and     3.6.5   if the Vendors accept the Amount Claimed or there is a determination of the amount payable in respect of the Claim by a court of competent jurisdiction, the amount so accepted or determined (in the latter case less any money previously paid under Clause 3.6.4 in respect of the Claim to the extent that this was not taken in to consideration by the court in its determination) shall be paid to the Purchaser out of the balance of the money (if any) standing to the credit of the Retention Escrow Account; 3.7   To the extent that a payment to the Purchaser out of the Retention Escrow Account in respect of a Claim is less than the Amount Claimed it is a payment on account of the amount finally agreed or determined to be payable in respect of the Claim.                 11 -------------------------------------------------------------------------------- 3.8   On 1 April 2002 (the "Relevant Date"), the money then standing to the credit of the Retention Escrow Account less the total of the then outstanding Amounts Claimed in respect of which payment has not been made under Clause 3.6 shall be paid to the Vendors' Solicitors for payment to the Vendors in the relevant proportions (the Vendors' Solicitors are irrevocably authorised to receive the same by the Vendors and whose receipt shall be an effective discharge of any obligation of the Purchaser or the Purchaser's Solicitors to pay such sum). After the Relevant Date (but without prejudice to Clause 3.6) to the extent that the money standing to the credit of the Retention Escrow Account from time to time exceeds the total of the then outstanding Amounts Claimed in respect of which payment has not been made under Clause 3.6 that money shall be paid to the Vendors' Solicitors on behalf of the Vendors in the relevant proportions (the Vendors' Solicitors are irrevocably authorised to receive the same by the Vendors and whose receipt shall be an effective discharge of any obligation of the Purchaser or the Purchaser's Solicitors to pay such sum). If a Claim has not been paid, determined or settled by the Relevant Date, the Purchaser shall also provide to the Vendors on such date an opinion of Counsel of at least five years standing that such Claim has a reasonable prospect of success and is not frivolous or vexatious. 3.9   If the Vendors are or the Purchaser is entitled in accordance with Clause 3.6 or Clause 3.8 to any money (if any) standing to the credit of the Retention Escrow Account, the Vendors and the Purchaser shall, within seven days starting on the day after the date the entitlement arises, jointly instruct the Escrow Agent in writing to release the money to the Vendors' Solicitors or the Purchaser as appropriate. 3.10   Interest accruing from time to time on the balance of any Retention money standing on the credit of the Retention Escrow Account shall be added to the balance of the Retention money standing to the credit of the Retention Escrow Account and shall be subject to the provisions of Clauses 3.5 to 3.11 (inclusive). 3.11   The amount of the Retention money in the Retention Escrow Account is not to be regarded as imposing a limit on the amount of a Claim by the Purchaser. The provisions of Clause 3.3 shall not prejudice or affect any other rights or remedies of the Purchaser for the purpose of recovering any amount due to it from the Vendors. 3.12   Reduction in consideration     Any payment made by any of the Vendors in respect of a breach of any Warranties or payment made under the Indemnities or the Tax Deed, or any other payment made pursuant to this Agreement, shall be and shall be deemed to be pro tanto a reduction in the price paid for the Shares under this Agreement. 3.13   Payment of the Balance     The Purchaser shall retain the sum of £1,120,000 of the Initial Consideration (the "Balance"), to be held to its order in the Purchaser's Solicitors' client account in London against the following actions:     3.13.1   The Purchaser shall use all reasonable endeavours to procure consent from the lenders to the Purchaser Group to the issue of the Loan Note to such of the Vendors named thereon ("the Proposed Noteholders").     3.13.2   On such consent being given the Purchaser shall use all reasonable endeavours to procure the issue of a standby letter of credit in an amount not to exceed the US$ equivalent of the face value of the Loan Note on the date of issue and on terms acceptable to the Purchaser and the Proposed Noteholders.                 12 --------------------------------------------------------------------------------     3.13.3   On 20 November 2000, if the Purchaser shall have before such date             (i)   obtained all necessary consents and approvals permitting it to issue the Loan Note to the Proposed Noteholders in the form and amount agreed with the Proposed Noteholders; and             (ii)   procured the issuance of a standby letter of credit as described in Clause 3.13.2;         the Purchaser shall issue the Loan Note in an amount equal to the Balance, less any sums as described in Clause 3.13.5, and deliver the same to the Vendors' Solicitors (on behalf of the Proposed Noteholders) together with the standby letter of credit on the terms and in the amount so agreed.     3.13.4   If the Purchaser shall not have satisfied the conditions set forth in Clause 3.13.3(i) and (ii) before 20 November 2000, on such date, the Purchaser shall instruct the Purchaser's Solicitors to pay the Balance (less any sums payable pursuant to Clause 3.13.5) to the Vendors' Solicitors (who have been irrevocably authorised to accept the same and whose receipt shall be good discharge therefor) and any and all obligations of the Purchaser to issue the Loan Note or the standby letter of credit referred to in this Clause 3.13 shall be deemed for all purposes to be satisfied and/or waived.     3.13.5   The Proposed Noteholders shall be responsible for and shall, upon request by the Purchaser, promptly pay all bank fees, costs and expenses incurred or to be incurred by any member of the Purchaser's Group in arranging and maintaining the standby letter of credit referred to in this Clause 3.13 and any successor thereto. By agreement between the Proposed Noteholders and the Purchaser, such fees may be satisfied by reducing the face value of the Loan Note (or by deduction from the interest payable thereon) and to the extent not so covered shall be paid in cash by the Proposed Noteholders. 4.   ACCOUNTS AND STATEMENT OF INDEBTEDNESS 4.1   Preparation of Statement of Indebtedness     4.1.1   Forthwith after Completion, the Purchaser may prepare a statement of Indebtedness and, if so prepared, shall procure that it is delivered to the Vendors for review within 45 days after Completion. If the Purchaser gives the Vendors written notice that it elects not to prepare such a statement, the amount of Indebtedness, Trade Working Capital Shortfall, and the Cash Balance shall be deemed (for the purpose of this Clause 4 only) to equal the amount of the Estimated Indebtedness, estimated Trade Working Capital Shortfall and the Estimated Cash Balance respectively. To the extent that the Purchaser elects to prepare such a statement and elects for such a statement not to include all of the elements set out in Clause 4.1.2 below, any elements not so included shall be deemed to equate to the estimate for such element as used in calculating the Initial Consideration.     4.1.2   The Statement of Indebtedness shall, subject to the last sentence of Clause 4.1.1, consist of: (i) a statement of the Indebtedness of the Company as of immediately prior to Completion (including a statement of the Payroll Liability and the Tax Liability); (ii) a statement of the Trade Working Capital Shortfall; (iii) a statement of the Cash Balance; and (iv) a statement of the Adjusted Consideration calculated therefrom.                 13 --------------------------------------------------------------------------------     4.1.3   Each Vendor shall have the right to review the calculations comprising each element set forth in the Statement of Indebtedness and to have reasonable access (both for itself and for its professional advisers) to the books, records, properties and senior personnel of the Company for the purposes of verifying the accuracy and fairness of such calculations. The Vendors shall work in good faith and co-operate with the Purchaser in their review of such calculations. Unless within 30 days after receipt of the Statement of Indebtedness pursuant to Clause 4.1.1 the Vendors notify the Purchaser in writing of any disagreement or difference of opinion relating to the Statement of Indebtedness, setting forth in reasonable detail the basis for and amount of such disagreement or difference of opinion, the parties shall be deemed to have accepted such Statement of Indebtedness as accurate and as final and binding upon them.     4.1.4   If within the period of 30 days referred to in Clause 4.1.3 the Vendors notify the Purchaser in writing of any disagreement or difference of opinion relating to the Statement of Indebtedness ("Notice of Disagreement") and if they are able to resolve such disagreement or difference of opinion with confirmation of such in writing within 30 days of the Notice of Disagreement, then the Statement of Indebtedness shall be adjusted in accordance with the resolution and the parties shall be deemed to have accepted such adjusted Statement of Indebtedness as accurate and as final and binding upon them.     4.1.5   If the Purchaser and the Vendors are unable to reach agreement within 30 days of the Notice of Disagreement, the matter in dispute (including any dispute regarding the assumptions used by the Vendors and/or the Purchaser in preparing the Estimated Indebtedness or the Statement of Indebtedness respectively) shall be referred to the decision of an independent chartered accountant (the "Independent Accountant") to be appointed (in default of nomination by agreement between the Vendors and the Purchaser) by the President for the time being of the Institute of Chartered Accountants in England and Wales.     4.1.6   The Independent Accountant shall act as an expert and not as an arbitrator, the Arbitration Act 1996 shall not apply and his decision shall (in the absence of fraud or manifest error) be final and binding on the Vendors and the Purchaser for all the purposes of this Agreement. The costs of the Independent Accountant shall be apportioned between the Vendors and the Purchaser as the Independent Accountant shall reasonably decide but each party shall be responsible for its own costs of presenting its case to the Independent Accountant.     4.1.7   For the purposes of this Clause 4.1, references to the Vendors shall be deemed to be references to the Vendors acting as a majority by number. 4.2   Adjustment of Consideration     In the event that a Statement of Indebtedness is prepared pursuant to Clause 4.1.1, the Initial Consideration shall be adjusted after Completion in accordance with the provisions of this Clause 4.2. In the event that a Statement of Indebtedness is not prepared by the Purchaser, the Initial Consideration shall only be adjusted after Completion in accordance with the provisions of Clauses 4.2.4 to 4.2.9 (inclusive):     4.2.1   Immediately following the date on which the Statement of Indebtedness is agreed, settled or decided by the Independent Accountant pursuant to Clause 4.1.6, if the Initial Consideration is less than the Adjusted Consideration, the Purchaser shall pay to the Vendors the amount of the deficiency.                 14 --------------------------------------------------------------------------------     4.2.2   Immediately following the date on which the Statement of Indebtedness is agreed, settled or decided by the Independent Accountant pursuant to Clause 4.1.6, if the Initial Consideration is greater than the Adjusted Consideration, the Purchaser shall be entitled to and shall deduct the Excess from the Retention. If the amount of the Retention (after deducting an amount equal to the aggregate of any pending Warranty Claims, Indemnity Claims or claims under the Tax Deed), is less than the Excess, the Vendors shall pay to the Purchaser the amount of the difference in immediately available funds.     4.2.3   Any amounts to be paid under Clauses 4.2.1 and 4.2.2 shall:         (a)   be paid within 5 Business Days after the date on which the Statement of Indebtedness has been agreed or settled (whether under Clause 4.1.3, 4.1.4, by virtue of a decision of the Independent Accountant pursuant to Clause 4.1.6 or otherwise) ; and         (b)   be paid in accordance with Clause 19;         and in the case of a sum payable to the Vendors, payment shall be made to the Vendors' Solicitors who are irrevocably authorised by the Vendors to receive the same and whose receipt shall be an effective discharge of the Purchaser's obligation to pay such sums and the Purchaser shall not be concerned to see to the application or be answerable for the loss or misapplication of such sum.     4.2.4   Promptly following the Post Closing Period, the Purchaser shall examine the books and records of the Company in order to calculate the amount of the Earnout and provide written notice of its conclusions to the Vendors (regarding the determination of the amount of the Capex Increment, confirmation of the actual LTM EBITDA and the Post Closing EBITDA)(the "Earnout Statement").     4.2.5   Each Vendor shall have the right to review the calculations regarding the Earnout Statement and have reasonable access (both for itself and its professional advisers) to the books, records, properties and senior personnel of the Company for the purposes of verifying the accuracy and fairness of such calculations. The Vendors shall work in good faith and cooperate with the Purchaser in their review of such calculations. Unless within 30 days after receipt of the Earnout Statement pursuant to Clause 4.2.4 the Vendors notify the Purchaser in writing of any disagreement or difference of opinion relating to the matters set forth in the Earnout Statement, setting forth in reasonable detail the basis for and the amount of such disagreement or difference of opinion, the parties shall be deemed to have accepted the matters set forth in the Earnout Statement.     4.2.6   If within the period of 30 days referred to in Clause 4.2.5 the Vendors notify the Purchaser in writing of any disagreement or difference of opinion relating to the Earnout Statement ("Notice of Difference") and if they are able to resolve such disagreement or difference of opinion within 30 days of the Notice of Difference, then the Earnout Statement shall be adjusted in accordance with the resolution and the parties shall be deemed to have accepted such adjusted numbers as accurate and as final and binding upon them.                 15 --------------------------------------------------------------------------------     4.2.7   If the Purchaser and the Vendors are unable to reach agreement within 30 days of the Notice of Difference, the matter in dispute shall be referred to the decision of the Independent Accountant to be appointed (in default of nomination by agreement between the Vendors and the Purchaser) by the President for the time being of the Institute of Chartered Accountants in England and Wales, and the provisions of Clause 4.1.6 shall apply.     4.2.8   For the purposes of Clauses 4.2.5, 4.2.6 and 4.2.7, references to Vendors shall be deemed to be references to the Vendors acting as a majority by number.     4.2.9   Earnout Settlement         (a)   Within 5 Business Days after the date on which the Earnout Statement has been agreed, settled or decided by the Independent Accountant pursuant to Clause 4.2.7 (the "Settlement Date"), such date not to be later than 120 Business Days after the Post Closing Period, the amount of the Earnout (if any) shall be payable by the Purchaser to the Vendors. The Purchaser shall use reasonable efforts to obtain all necessary consents and approvals to enable it to satisfy the Earnout by the issue of further loan notes (on terms substantially the same as the Loan Note, except for the date of issue) to such of the Vendors as elect during the period ending on the Settlement Date to take such further loan notes for the amount of the Earnout in the relevant proportion (as defined in Clause 3) provided that if any Vendor does not so elect (or the Purchaser has not received the necessary consents and approvals to enable it to issue such further loan notes) the Earnout shall be paid by way of electronic transfer for same day value to the Vendors' Solicitors on behalf of the Vendors (the Vendors' Solicitors are irrevocably authorised to receive the same by the Vendors and their receipt shall be an effective discharge of any obligation of the Purchaser to pay such sum).         (b)   The Earnout (if any) shall be deemed to be an upward adjustment to the Initial Consideration (as may have already been adjusted in accordance with Clauses 4.2.1, 4.2.2 and 4.2.3 hereof).         (c)   The Purchaser shall procure that the obligations of the Purchaser under any further loan notes issued pursuant to Clause 4.2.9(a) will be guaranteed by Liberty Livewire Corporation.     4.2.10   As a performance incentive, in the event that the amount of the Post Closing EBITDA (as agreed, settled, or decided by the Independent Accountant pursuant to Clause 4.2.7) exceeds £1,200,000 the Purchaser may elect to make a discretionary bonus payment to certain of the Company's managers, under such terms, conditions and requirements and in such amounts as may be determined by the Purchaser in its sole discretion. 4.3   Sohonet Limited     In the event that the Company sells all or substantially all of its present shareholding in Sohonet Limited within 12 months of Completion, the Purchaser agrees that it will pay to the Vendors an amount equal to the net purchase price received by the Company therefor in the relevant proportions (as such expression is used in Clause 3), after the deduction of all costs and expenses (including Taxes and any unpaid Indebtedness owed by Sohonet to the Company) directly incurred by the Company and the Purchaser (including their reasonable legal costs and expenses) in relation thereto (the "Sohonet Amount"). The parties agree to use their respective reasonable endeavours to ensure that any payment of the Sohonet Amount is effected in as Tax efficient manner for the Company as is reasonably practicable.                 16 -------------------------------------------------------------------------------- 5.   WAIVERS OF PRE-EMPTION     Each of the Vendors hereby waives all rights of pre-emption or other rights over any of the Shares conferred on him either by the articles of association of the Company or in any other way. 6.   COMPLETION 6.1   Time and location     Completion shall take place at the London offices of the Purchaser's Solicitors immediately following signature of this Agreement by the parties hereto. 6.2   Vendors' obligations     At Completion:     6.2.1   the Vendors shall deliver to the Purchaser each of the documents listed in Part 1 of Schedule 6; and     6.2.2   the Vendors shall procure that all necessary steps are taken properly to effect the matters listed in Part 2 of Schedule 6 at a board meeting of the Company and shall deliver to the Purchaser duly signed minutes of such board meeting. 6.3   Purchaser's obligations     Subject to the Vendors complying with their obligations under Clause 6.2 the Purchaser shall at Completion:     6.3.1   satisfy the payment of the Initial Consideration less the Retention and the Balance by procuring payment by way of electronic transfer for same day value to the Vendors' Solicitors who are irrevocably authorised to receive the same by the relevant Vendors and whose receipt shall be an effective discharge of the Purchaser's obligation to pay such sum and the Purchaser shall not be concerned to see to the application or be answerable for the loss or misapplication of such sum;     6.3.2   deliver to the Vendors a duly completed copy of the Escrow Instructions;     6.3.3   pay or procure the payment by way of electronic transfer of the Retention to the Retention Escrow Account pursuant to Clause 3.4; and     6.3.4   deliver to the Vendors a counterpart Tax Deed duly executed by the Purchaser. 6.4   Company records     Upon Completion the Vendors shall, and shall use their reasonable endeavours to procure that any other person shall, without delay send to the Purchaser at 1st Floor, 142 Wardour Street, London W1V 3AU, all records, correspondence, documents, files, memoranda and other papers relating to the Company or the Business not kept at the Properties. 7.   WARRANTIES 7.1   Extent of Warranties     In consideration of the Purchaser agreeing to purchase the Shares on the terms contained in this Agreement, each Vendor hereby jointly and severally:     7.1.1   in relation to the Company, warrants and represents to the Purchaser contracting for itself and for any successor in title to the Shares or to part or all of the Business in the terms set out in Schedule 5; and                 17 --------------------------------------------------------------------------------     7.1.2   without restricting the rights of the Purchaser or any successor in title to the Shares or their ability to claim damages on any basis available to them in the event of any breach of any of the Warranties, undertakes to the Purchaser contracting as aforesaid that the Vendors will pay to the Purchaser or such successors:         (a)   the full amount of any shortfall or diminution in the value of any assets of the Company or of the Business; and         (b)   all reasonable costs, expenses and disbursements suffered or incurred by the Purchaser, the Company or any such successor as a result of or in relation to any breach of any of the Warranties,         provided that any amount so payable shall be increased so as to ensure that the net amount received by the Purchaser or any such successor shall after Taxation be equal to that which would have been received had the payment and any increased payment not been subject to Taxation. 7.2   Warranties     7.2.1   Each of the Warranties is given subject only to the matters Disclosed and to any matter expressly provided for under this Agreement but is otherwise subject to no qualification whatsoever. No letter, document or other communication shall be deemed to constitute a disclosure for the purposes of this Clause unless the same is expressly referred to in the Disclosure Letter.     7.2.2   Subject to Clause 7.11, the aggregate liability of the Vendors in respect of all or any claims pursuant to the Warranties and the Tax Deed shall not exceed a sum equal to the amount of the Initial Consideration as adjusted in accordance with Clause 4.     7.2.3   The Vendors shall not be liable in respect of any claim for breach of any of the Warranties unless:         (a)   the amount that would otherwise be recoverable from the Vendors in respect of an individual claim exceeds £10,000; and         (b)   the aggregate amount of all such claims (subject to sub-clause 7.2.3(a)) exceeds £100,000 but so that the Vendors shall, subject to Clause 7.2.2, be liable for the whole of such aggregate amount (notwithstanding sub-clause 7.2.3 (a), including any individual claims not exceeding £10,000) and not merely for the excess.     7.2.4   Subject to Clause 7.11, no claim in respect of a breach of any Warranty set out in Part 1 of Schedule 5 may be made unless written notice of the claim (giving reasonable details) has been given by or on behalf of the Purchaser to the relevant Vendors on or before the second anniversary of the date of this Agreement. If the Purchaser becomes aware of any matter which might reasonably give rise to a claim for breach of the Warranties, the Purchaser shall give the Vendors reasonable notice of the matter, including reasonable details regarding such matter, and shall consult with the Vendors in respect thereof.     7.2.5   The Purchaser confirms that in entering into and completing this Agreement it has not relied on any warranty, representation or undertaking of any person except for the Warranties. 18 -------------------------------------------------------------------------------- 7.3   General Exclusions of Liability     7.3.1   The Vendors shall have no liability whatsoever in respect of a claim for breach of the Warranties if, but only to the extent that:         (a)   the claim arises or is increased as a result of the passing or coming into force of, or any change in, after the date of this Agreement, any law, rule, regulation, directive, interpretation of the law or any administrative practice of any government, governmental department, agency or regulatory body or any increase in the rates of Taxation or any imposition of Taxation, in any such case not actually in force at the date of Completion;         (b)   the claim is based upon a liability which is contingent only unless and until such contingent liability becomes an actual liability and is due and payable, provided that the period during which a claim must be brought set forth in Clause 7.2.4 shall be deemed to be extended until 3 months such after liability has become due and payable;         (c)   such claim arose by virtue of any change in the accounting or Taxation policy of the Company including the method of submission of Taxation returns, or of valuing assets, introduced or having effect after Completion;         (d)   such claim relates to a liability for Taxation which would not have arisen but for any winding up of or cessation after the date of Completion of any trade or business carried on by the Company; or         (e)   to the extent that the liability of the Vendors to the Purchaser hereunder for any breach of the Warranties is increased solely as a direct result any actions taken by the Purchaser after Completion.     7.3.2   In relation to claims under Part 2 of Schedule 5, the provisions of Clause 3 of the Tax Deed shall apply. 7.4   No Liability if Loss is Otherwise Compensated     7.4.1   The Purchaser shall not be entitled to recover from the Vendors more than once in respect of the same claim.     7.4.2   Nothing in this Clause 7 shall in any way restrict or limit the general obligation at law of the Purchaser to mitigate any loss or damage which it may suffer in consequence of any matter giving rise to any claim. 7.5   Recovery from third parties     7.5.1   The Vendors shall not be liable for any claims under the Warranties to the extent that the Purchaser has or the Company has actually recovered any amounts in respect of the Claim from any third party, including under any insurance policy (provided that the Purchaser shall be under an obligation to mitigate in accordance with Clause 7.4.2 and that this shall not be construed so as to limit any right of subrogation of any insurer). Any reduction in liability for claims hereunder shall be net of all reasonable costs and expenses properly incurred in connection with such claim and the Vendors will indemnify the Purchasers against any increases in insurance premiums payable as a result of such claim.                 19 --------------------------------------------------------------------------------     7.5.2   If the Vendors pay to the Purchaser an amount in respect of a claim for breach of the Warranties and the Purchaser subsequently receives from a third party an amount regarding the matter giving rise to such claim and the total amount received by the Purchaser from the Vendors and the third party together exceeds the loss suffered by the Purchaser or the Company in respect of the claim the Purchaser shall promptly pay the Vendors' Solicitors (on behalf of the Vendors) an amount equal to the excess over the loss suffered in respect of the claim, less all reasonable costs and expenses the Purchaser and the Company may have incurred relating to the recovery of and payment of such amount by the third party, and less any applicable Tax. 7.6   Obligation of Vendors     Where any of the Warranties is made or given "so far as the Vendors are aware" or "to the best knowledge of the Vendors" or any phrase having similar meaning, such Warranty shall be deemed to be given to the best of the knowledge, information and belief of each of the Vendors after making due and careful enquiries of each other and the knowledge, information and belief of any one of the Vendors shall be imputed to the remaining Vendors. 7.7   Investigation by Purchaser     7.7.1   Except for any breach of the Warranties giving rise to a claim of which Ms. Josephine Navarro is shown to be actually aware at the date of this Agreement, none of the Warranties shall be deemed in any way modified or discharged by reason of any investigation or enquiry made by or on behalf of the Purchaser nor shall such investigation or enquiry prejudice any claim which the Purchaser may be entitled to bring or operate to reduce any amount recoverable by the Purchaser under this Agreement.     7.7.2   The Purchaser confirms that, on the date of this Agreement, Ms. Josephine Navarro is not actually aware of any breach of the Warranties. 7.8   Information supplied by the Company     Any information supplied by or on behalf of the Company (or by any officer, employee or agent of the Company) to the Vendors or their advisers in connection with the Warranties or the Indemnities shall not constitute a warranty, representation or guarantee as to the accuracy of such information in favour of the Vendors and the Vendors hereby undertake to the Purchaser to waive any and all claims which they might otherwise have against the Company or against any officer, employee or agent of the Company in respect of such claims but so that this shall not preclude any Vendor from claiming against any other Vendor under any right of contribution or indemnity to which he may be entitled. 7.9   Separate and independent warranties     Each of the Warranties set out in the separate paragraphs of Schedule 5 shall be separate and independent and save as expressly otherwise provided shall not be limited by reference to any other such Warranty or by anything in this Agreement or the Tax Deed. 7.10   Reliance     The Purchaser has entered into this Agreement upon the basis of and in reliance upon the Warranties and the Indemnities.                 20 -------------------------------------------------------------------------------- 7.11   Exclusions from Limitations     Notwithstanding any other provision of this Agreement, the provisions of Clause 7.2 through 7.5 shall not apply to any claim:     7.11.1   made against the Vendors in the case of any fraud, dishonesty, wilful non-disclosure, wilful misstatement or omission by or on behalf of all or any of the Vendors arising in respect of such claim provided that each Vendor shall be solely responsible for his own fraudulent, dishonest acts or omissions or wilful non-disclosure or wilful misstatements or omissions;     7.11.2   made under the Warranties set out in paragraphs 1.2, 1.3 and 1.5.1 of Part 1 of Schedule 5; or     7.11.3   made under the Indemnities. 7.12   The Purchaser shall not be entitled to rescind this Agreement at any time after Completion and the sole remedy which the Purchaser may seek after that date in respect of any breach of the Warranties or any other breach or otherwise under or in respect of this Agreement is a claim or action for damages subject to the provisions of this Agreement. 8.   INDEMNITIES 8.1   Indemnities         The Vendors undertake to indemnify and keep the Purchaser indemnified (contracting for itself and as trustee for its officers, directors, agents and employees and any successor in title to the Shares or to part or all of the Business) from and against and in respect of all Losses which may be suffered or incurred by the Purchaser, its officers, directors, agents, employees or successors in title or the Company arising directly or indirectly out of or in connection with:     8.1.1   any breach of the Warranties set forth in paragraphs 1.2, 1.3 and 1.5.1 of Part 1 of Schedule 5;     8.1.2   any claim by any person claiming to be entitled to any option, shares or any interest in the Company granted prior to Completion;     8.1.3   any grants or awards made prior to Completion to the Company by any governmental or quasi governmental body, including the Department of Trade & Industry, becoming repayable following Completion;     8.1.4   the sale by the Company of its shares in Sohonet Limited in accordance with Clause 4.3 hereof (including any representations, warranties, indemnities, covenants or other provisions or obligations in any sale agreement or other documentation executed by the Company in relation to such sale);     8.1.5   any additional benefits, payments or emoluments being due by the Company to any person relating to the period prior to Completion (including, for the avoidance of doubt, any Taxation Authority) by virtue of any person treated by the Company as a consultant, freelancer, agency worker or other worker (other than an employee) respectively being found to be an employee of the Company; and     8.1.6   any rights in any Intellectual Property that any consultant, freelancer, agency worker, employee or other person employed by the Company may have in any Intellectual Property arising out of such engagement prior to Completion, and any payments (including, for the avoidance of doubt, fees and royalties) which the Company may pay in relation to such Intellectual Property.                 21 -------------------------------------------------------------------------------- 8.2   In relation to the indemnity given by the Vendors in Clause 8.1.3, the Purchaser agrees and undertakes that it will not in the period after Completion cause the Company to take any actions inconsistent with the Company's actions in the period following receipt of any such grant or award to which Clause 8.1.3 may apply up to and including Completion to the extent notified to the Purchaser in writing prior to Completion. 8.3   Application of Clauses 7.2.1 to 7.2.6 (inclusive)     For the avoidance of doubt the provisions of Clause 7.2.1 to 7.2.6 inclusive shall not apply to this Clause 8. 9.   DEBTORS     If the Company does not, within six months following Completion, collect in full any debt owed to the Company in existence at Completion because: 9.1   despite its reasonable endeavours it has been unable to do so in the ordinary course of business; or 9.2   the debtor has gone into liquidation (within the meaning of section 247 of the Insolvency Act 1986),     the Vendors will, immediately on demand by the Purchaser, pay to the Purchaser the full amount of the uncollected debt (except to the extent that such debt was written off and such write off was included in the Statement of Indebtedness and reflected in the Adjusted Consideration). 10.   PROTECTION OF GOODWILL 10.1   Covenants     As further consideration for the Purchaser agreeing to purchase the Shares on the terms contained in this Agreement and with the intent of assuring to the Purchaser the full benefit and value of the goodwill and connections of the Company and as a constituent part of the sale of the Shares, each of the Vendors hereby undertakes to the Purchaser (contracting for itself and on behalf of the Company and for any successor in title to the Shares or to part or all of the Business) that (except as directors or employees of the Company or with the written consent of the Purchaser) they shall not whether on their own behalf or with or on behalf of any person and whether directly or indirectly by any person or business controlled by them or any Connected Person:     10.1.1   in the period from Completion to the third anniversary thereof carry on or be employed, engaged, concerned, interested or in any way assist within the United Kingdom in any business which may in any way be in competition with all or part of the Business provided that nothing in this Clause 10.1.1 shall prevent any individual Vendor from holding for investment purposes only any units of an authorised unit trust and/or not more than five per cent. (5%) of any class of the issued share or loan capital of any company quoted on a recognised investment exchange (as defined in the Financial Services Act 1986);     10.1.2   in the period from Completion to the third anniversary thereof, canvass, solicit or approach or cause to be canvassed, solicited or approached (in relation to a business which may in any way compete with all or part of the Business) the custom of any person who at any time during the 12 months preceding Completion shall have been a client or customer of the Company;                 22 --------------------------------------------------------------------------------     10.1.3   in the period from Completion to the third anniversary thereof, interfere or seek to interfere or take such steps as may interfere with supplies to the Company from any suppliers who shall have been supplying goods or services to the Company for use in connection with the Business at any time during the period of 12 months prior to the date of Completion;     10.1.4   in the period from Completion to the third anniversary thereof, offer employment to or employ or offer to conclude any contract of services with any employee of the Company employed by the Company as at the date of Completion, or procure or facilitate the making of such an offer by any person, firm or company or entice or endeavour to entice any such employee to terminate their employment with the Company;     10.1.5   at any time after Completion use as a trade or business name or mark or carry on a business under a title containing the word "Visiontext" or any other word or words which is or are deliberately calculated to resemble the same; or     10.1.6   at any time after Completion disclose to any person whatsoever or use to the detriment of the Company or otherwise make use of, or through any failure to exercise all due care and diligence cause any unauthorised use of, any Confidential Information including Know-How relating or belonging to the Company or in respect of which the Company is bound by an obligation of confidence to a third party save as required by the UK Listing Authority, London Stock Exchange plc or by law or by any court of competent jurisdiction.     Each undertaking contained in this Clause 10.1 shall be read and construed independently of the other undertakings herein as an entirely separate and severable undertaking. 10.2   Severability of covenants     Whilst the undertakings in sub-Clause 10.1 are considered by the parties to be reasonable in all the circumstances, if any one or more should for any reason be held to be invalid but would have been held to be valid if part of the wording thereof was deleted or the period thereof reduced or the range of activities or area covered thereby reduced in scope, the said undertakings shall apply with the minimum modifications necessary to make them valid and effective. 10.3   Information in the public domain     The restriction contained in Clause 10.1.6 shall not extend to any confidential or secret information which may come into the public domain otherwise than through the default of any of the Vendors. 11.   ANNOUNCEMENTS 11.1   Restrictions on announcements     No announcement shall be made by the Vendors in respect of the subject matter of this Agreement, except as specifically agreed between the parties unless an announcement is required by law or any applicable regulatory authority to which any of the Vendors are subject where such requirement has the force of law.                 23 -------------------------------------------------------------------------------- 12.   FURTHER ASSURANCE 12.1   Further assurance         The Vendors shall from time to time on being required to do so by the Purchaser, now or at any time in the future, do or procure the doing of all such acts and/or execute or procure the execution of all such documents in a form satisfactory to the Purchaser as the Purchaser may reasonably consider necessary for giving full effect to this Agreement and securing to the Purchaser the full benefit of the rights, powers and remedies conferred upon the Purchaser in this Agreement, the various parties to this Agreement bearing their own costs and expenses in this regard. 13.   ASSIGNMENT     13.1   Limited assignment         This Agreement is personal to the parties and neither it nor any of the benefits arising under it may be assigned by any Vendor or the Purchaser without the prior written consent of, in the Purchaser's case, the Vendors acting by a majority in number thereof, and in the case of any Vendor, the Purchaser, and no party shall otherwise purport to assign or transfer the same, provided always that this Agreement and the benefits arising under it may be assigned by the Purchaser to any member of the Purchaser's Group provided further that in the event of such undertaking ceasing to be a member of the Purchaser's Group this Agreement shall be deemed to be transferred immediately before such cessation to any other member of the Purchaser's Group immediately by the Purchaser for that purpose. 13.2   Successors in title         Subject to sub-Clause 13.1, this Agreement shall be binding upon and inure for the benefit of the personal representatives and assigns and successors in title of each of the parties and references to the parties shall be construed accordingly. 14.   ENTIRE AGREEMENT: REMEDIES 14.1   Entire agreement     This Agreement together with the Tax Deed any other documents referred to herein or therein constitutes the whole and only agreement between the parties relating to the subject matter hereof and supersedes and extinguishes any prior drafts, previous agreements, undertakings, representations, warranties and arrangements of any nature whatsoever, whether or not in writing between the parties, in connection with the subject matter hereof. 14.2   Remedies     Subject always to the limitations on liability contained in Clause 7, the rights of the Purchaser under this Agreement are independent, cumulative and without prejudice to all other rights available to it whether as a matter of common law, statute, custom or otherwise. 14.3   Non-exclusion of fraud     Nothing in this Agreement, the Tax Deed or in any other document referred to herein shall be read or construed as excluding any liability or remedy as a result of fraud.                 24 -------------------------------------------------------------------------------- 15.   WAIVER, VARIATION AND RELEASE 15.1   No waiver by omission, delay or partial exercise     No omission to exercise or delay in exercising on the part of any party to this Agreement any right, power or remedy provided by law or under this Agreement shall constitute a waiver of such right, power or remedy or any other right, power or remedy or impair such right, power or remedy. No single or partial exercise of any such right, power or remedy shall preclude or impair any other or further exercise thereof or the exercise of any other right, power or remedy provided by law or under this Agreement. 15.2   Specific waivers to be in writing     Any waiver of any right, power or remedy under this Agreement must be in writing and may be given subject to any conditions thought fit by the grantor. Unless otherwise expressly stated, any waiver shall be effective only in the instance and only for the purpose for which it is given. 15.3   Variations to be in writing     No variation to this Agreement shall be of any effect unless it is agreed in writing and signed by or on behalf of each party. 15.4   Non-release of all Vendors     Any liability to the Purchaser under this Agreement or under the Tax Deed (when executed) may in whole or in part be released, compounded or compromised or time or indulgence given by the Purchaser in its absolute discretion as regards any of the Vendors under such liability without in any way prejudicing or affecting its rights against any other or others of the Vendors under the same or like liability, whether joint or several or otherwise. 16.   COSTS AND EXPENSES 16.1   Payment of costs     Save as otherwise stated in this Agreement, each party shall pay its own costs and expenses in relation to the negotiation, preparation, execution and carrying into effect of this Agreement and other agreements forming part of the transaction envisaged herein. 16.2   Company to pay no costs     For the avoidance of doubt, the Company shall not pay any legal or other professional charges and expenses in connection with any investigation of the affairs of the Company or the negotiation, preparation, execution and carrying into effect of this Agreement. 16.3   For the avoidance of doubt, the Purchaser shall, upon Completion, pay the Consultant £ 297,789.65 in full and final satisfaction of his fees, costs and expenses.                 25 -------------------------------------------------------------------------------- 17.   PAYMENTS     All payments to be made by the Vendors under this Agreement and/or the Tax Deed shall be made in full without any set-off or counterclaim and free from any deduction or withholding save as may be required by law in which event such deduction or withholding shall not exceed the minimum amount which it is required by law to deduct or withhold and the Vendors will simultaneously pay to the Purchaser such additional amounts as will result in the receipt by the Purchaser of a net amount equal to the full amount which would otherwise have been receivable had no such deduction or withholding been required. The Purchaser shall (without prejudice to its rights hereunder) be entitled to set off against any amounts otherwise payable by the Purchaser to the Vendors any amount due by the Vendors to the Purchaser under, or by reason of any breach of the terms of this Agreement, or due by the Vendors to the Purchaser under the Tax Deed, and the amount so set off shall pro tanto satisfy the liability concerned. 18.   NOTICES 18.1   Form of notices     communication to be given in connection with the matters contemplated by this Agreement shall except where expressly provided otherwise be in writing and shall either be delivered by hand, facsimile transmission or sent by First Class pre-paid recorded delivery post (airmail if overseas). Delivery by courier shall be regarded as delivery by hand. 18.2   Address and facsimile     Such communication shall be sent to the address of the relevant party referred to in this Agreement or the facsimile number set out below or to such other address or facsimile number as may previously have been communicated to the other party in accordance with this Clause. Each communication shall be marked for the attention of the relevant person.     If to the Purchaser, addressed to the Purchaser:     c/o Liberty Livewire Corporation 520 Broadway Blvd., Fifth Floor Santa Monica CA 90401 USA     Attention: William Niles Facsimile: (+1 310) 434 7002     with a copy (which shall not constitute notice) to:     Latham & Watkins 99 Bishopsgate, Eleventh Floor London EC2M 3XF     Attention: Michael Bond Facsimile: +44 20 7374 4460     If to the Vendors, addressed to:     Stephen Clayton Springfield House, Spring Lane Swanmore, Hants SO32 2PT                 26 --------------------------------------------------------------------------------     with a copy (which shall not constitute notice) to:     Blake Lapthorn New Court 1 Barnes Wallis Road Segensworth Fareham Hampshire PO15 5US     Attention: Mark Shepherd Facsimile: +44 1489 579126 18.3   Deemed time of service     A communication shall be deemed to have been served:     18.3.1   if delivered by hand at the address referred to in Clause 18.2, at the time of delivery;     18.3.2   if sent by facsimile to the number referred to in Clause 18.2, at the time of completion of transmission by the sender;     18.3.3   if sent by pre-paid recorded delivery post (other than airmail) two days; and     18.3.4   if sent by airmail, six days after posting.     If a communication would otherwise be deemed to have been delivered outside normal business hours (being 9:30 a.m. to 5:30 p.m. on a Business Day) in the time zone of the territory of the recipient under the preceding provisions of this Clause, it shall be deemed to have been delivered at the next opening of such business hours in the territory of the recipient. 18.4   Proof of service     In proving service of the communication, it shall be sufficient to show that delivery by hand was made or that the facsimile was despatched and a confirmatory transmission report received. 18.5   Change of details     A party may notify the other parties to this Agreement of a change to its name, relevant person, address or facsimile number for the purposes of sub-Clause 18.1 Provided that such notification shall only be effective on:     18.5.1   the date specified in the notification as the date on which the change is to take place; or     18.5.2   if no date is specified or the date specified is less than five clear Business Days after the date on which notice is deemed to have been served, the date falling five clear Business Days after notice of any such change is deemed to have been given. 18.6   Notice to or by Vendors     Notice given to Stephen Clayton, Ronald Eagle, Michael Farrell and Graham Papworth in accordance with this Clause 18 shall be deemed to be notice to all of the Vendors respectively. Any notice to be given by the Vendors shall be sufficiently given on behalf of them all by at least (but no less than) a majority in number thereof and the rights of the Vendors shall be sufficiently exercised or waived on behalf of them respectively if exercised or waived by at least (but no less than) a majority in number thereof.                 27 -------------------------------------------------------------------------------- 18.7   Non-applicability to Proceedings     For the avoidance of doubt, the parties agree that the provisions of this Clause 18 shall not apply in relation to the service of any writ, summons, order, judgment or other document relating to or in connection with any Proceedings. The Vendors hereby appoint the Vendors' Solicitors as their agent for service of process at its address specified in Clause 1.1 or such other address as it may notify to the Purchaser from time to time. 19.   DEFAULT INTEREST 19.1   Interest on late paymentd     If a party which is required to pay any sum under this Agreement fails to pay any sum payable by it under this Agreement on the due date for payment (the "defaulting party"), it shall pay interest on such sum for the period from and including the due date up to the date of actual payment (after as well as before judgment) in accordance with this Clause. 19.2   Amount     The defaulting party shall pay interest at the rate which is the aggregate of 2% per annum and the base rate from time to time of Barclays Bank Plc. 19.3   Basis of payment     Interest under this Clause shall accrue from day to day and shall be paid by the defaulting party in arrears. 20.   COUNTERPARTS 20.1   Execution in counterparts     This Agreement may be executed in any number of counterparts and by the parties on different counterparts, but shall not be effective until each party has executed at least one counterpart. 20.2   One agreement     Each counterpart shall constitute an original of this Agreement but all the counterparts shall together constitute one and the same agreement. 21.   INVALIDITY     Each of the provisions of this Agreement is severable. If any such provision is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, the legality, validity or enforceability in that jurisdiction of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby. 22.   AGREEMENT TO CONTINUE IN FULL FORCE AND EFFECT     This Agreement together with the Tax Deed shall, to the extent that they remain to be performed, continue in full force and effect notwithstanding Completion.                 28 -------------------------------------------------------------------------------- 23.   CONFIDENTIALITY 23.1   Prohibition on disclosure     Each of the Vendors hereby undertakes with the Purchaser that it shall both during and after the term of this Agreement preserve the confidentiality of, and not directly or indirectly reveal, report, publish, disclose or transfer or use for its own or any other purposes Confidential Information except:     23.1.1   in the circumstances set out in Clause 23.2 below;     23.1.2   to the extent otherwise expressly permitted by this Agreement; or     23.1.3   with the prior consent in writing of the party to whose affairs such Confidential Information relates. 23.2   Permitted disclosures     The circumstances referred to in Clause 23.1.1 above are:     23.2.1   where the Confidential Information, before it is furnished to any of the Vendors, is in the public domain;     23.2.2   where the Confidential Information, after it is furnished to any of the Vendors, enters the public domain otherwise than as a result of (i) a breach by any of the Vendors of its obligations in this Clause 23 or (ii) a breach by the person who disclosed that Confidential Information of a confidentiality obligation and any of the Vendors is aware of such breach;     23.2.3   if and to the extent the Vendors make disclosure of the Confidential Information to any person:         (a) in compliance with any requirement of law; or         (b) in order to obtain tax or other clearances or consents from the Inland Revenue or other relevant taxing or regulatory authorities;     provided that any such information disclosable pursuant to paragraphs (a) or (b) of Clause 23.2.3 shall be disclosed only to the extent required by law and only after consultation with the Purchaser. 23.3   No time limit     The restrictions contained in this Clause shall continue to apply after Completion without limit in time. 24.   GOVERNING LAW AND JURISDICTION 24.1   English law     This Agreement shall be governed by and construed in accordance with English law. 24.2   Courts of England and Wales     The parties to this Agreement irrevocably agree that, for the exclusive benefit of the Purchaser, the courts of England shall have exclusive jurisdiction to settle any dispute which may arise out of or in connection with this Agreement and that accordingly any Proceedings may be brought in such courts.                 29 -------------------------------------------------------------------------------- 25.   THIRD PARTY RIGHTS     A person who is not a party to this Agreement shall have no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any of its terms. AS WITNESS the hands of the parties hereto or their duly authorised representatives the day and year first before written 30 -------------------------------------------------------------------------------- SCHEDULE 1 The Vendors (1)   (2)   (3)   (4)   (5) Name and Address --------------------------------------------------------------------------------   Number and class of shares held --------------------------------------------------------------------------------   Entitlement to cash consideration --------------------------------------------------------------------------------   Entitlement to Loan Note (subject to Clause 3.13) --------------------------------------------------------------------------------   Retention contribution amount -------------------------------------------------------------------------------- Stephen John Clayton Springfield House Spring Lane Swanmore Hants SO32 2PT   Ordinary Shares   17,600   162,782   500,000   44,000 Ronald Arthur Eagle 18 Oakhill Drive Welwyn Herts AL6 9NW   Ordinary Shares   17,600   602,783   60,000   44,000 Michael Henry Farrell 108 Blackheath Hill London SE10 8AG   Ordinary Shares   8,800   51,392   280,000   22,000 Diane Ellen Buck 108 Blackheath Hill London SE10 8AG   Ordinary Shares   8,800   51,392   280,000   22,000 Graham Charles Papworth 5 West Pallant Chichester West Sussex PO19 1TD   Ordinary Shares   13,200   497,086   Nil   33,000 Sybil Ellen Papworth 5 West Pallant Chichester West Sussex PO19 1TD   Ordinary Shares   4,000   150,633   Nil   10,000 Edmund Charles Papworth 50 Queen's Gardens London W2 3AA   Ordinary Shares   4,000   150,633   Nil   10,000                     31 -------------------------------------------------------------------------------- Lucinda Jane Papworth Apartment 832 The Archive 666 Greenwich Street New York NY 10014 USA   Ordinary Shares   4,000   150,633   Nil   10,000 Martin Hartas Armitage Corner Cottage Glebe Road Fernhurst Haselmere Surrey GU27 3EH   Ordinary Shares   2,000   75,316   Nil   5,000             --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   --------------------------------------------------------------------------------             1,892,650   1,120,000   200,000             --------------------------------------------------------------------------------   --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- 32 -------------------------------------------------------------------------------- SCHEDULE 2 Directors of the Company Name of Director Stephen John Clayton Ronald Arthur Eagle Michael Henry Farrell Graham Charles Papworth 33 -------------------------------------------------------------------------------- SCHEDULE 3 Part 1 Leases (1)   (2)   (3)   (4)   (5) Property --------------------------------------------------------------------------------   Date --------------------------------------------------------------------------------   Term --------------------------------------------------------------------------------   Parties --------------------------------------------------------------------------------   Current yearly rent --------------------------------------------------------------------------------         [NONE]         Part 2 Inferior leases (1)   (2)   (3)   (4)   (5) Property --------------------------------------------------------------------------------   Date --------------------------------------------------------------------------------   Term --------------------------------------------------------------------------------   Parties --------------------------------------------------------------------------------   Current yearly rent --------------------------------------------------------------------------------         [NONE]         Part 3 Tenancy at Will (1)   (2)   (3)   (4)     Property --------------------------------------------------------------------------------   Date --------------------------------------------------------------------------------   Parties --------------------------------------------------------------------------------   Current yearly rent --------------------------------------------------------------------------------             [NONE]         Part 4 Licenses (1)   (2)   (3)   (4)   (5) Property --------------------------------------------------------------------------------   Date --------------------------------------------------------------------------------   Term --------------------------------------------------------------------------------   Parties --------------------------------------------------------------------------------   Current yearly rent -------------------------------------------------------------------------------- Rooms 15, 17, 18, 19 and all 2nd Floor rooms and Room 34/35, CameoHouse, Bear Street, London WC2H 7AS   11th April 2000   11th April 2000 19th November 2000   Paul Raymond Organisation Limited and Visiontext Limited   £13,727.92 Office No. 29, 4th Floor, 50/52 Regent Street, W1   1st September 2000   1st September 2000- 30th November 2000   CountryMark House Limited and Visiontext Limited   £1,960.00 + VAT 34 -------------------------------------------------------------------------------- SCHEDULE 4 The Company Name, number and registered office of Company --------------------------------------------------------------------------------   Date of incorporation --------------------------------------------------------------------------------   Share capital Authorised --------------------------------------------------------------------------------   Share capital Issued --------------------------------------------------------------------------------   Held by -------------------------------------------------------------------------------- Visiontext Limited Registered office: Cameo House, 11 Bear Street London WC2H 7AS   23.02.94   £ 500,000   £ 80,000   Ordinary Shares Stephen John Clayton Ronald Arthur Eagle Michael Henry Farrell Diane Ellen Buck Graham Charles Papworth Sybil Ellen Papworth Edmund Charles Papworth Lucinda Jane Papworth Martin Hartas Armitage 35 -------------------------------------------------------------------------------- SCHEDULE 5 Part 1 General Warranties 1.   PRELIMINARY 1.1   Information     The facts set out in the Agreement are true and accurate and not misleading and all information relating to the Company's participation in any joint ventures, partnerships and associations has been disclosed. All information contained in the Disclosure Documents and the information in the Visiontext Limited Information Pack provided by the Consultant was when given (unless the same has been subsequently corrected) and is now true and accurate and not misleading in all respects. The budgeted capital expenditure set forth in Schedule 8 and, so far as any other information contained in the Disclosure Documents amounts to a forecast or an expression of opinion, intention or expectation, such budget, forecast, opinion, intention or expectation is, to the best of the Vendors' knowledge, fair and honest and made on reasonable grounds. 1.2   Power to contract     1.2.1   Each Vendor has full power and authority to enter into and perform this Agreement and the Tax Deed and the transactions contemplated hereby and this Agreement and the Tax Deed constitute legally binding obligations of each Vendor, enforceable in accordance with their terms.     1.2.2   Each Vendor is the legal and beneficial owner of, and is entitled to sell and transfer to the Purchaser with full title guarantee free of Encumbrances, the Shares set forth against its name in Schedule 1. 1.3   The Company     The share details of the Company set out in the recitals and Schedule 4 are true and complete and constitute the whole of the issued share capital of the Company. 1.4   Memorandum and Articles of Association     The copy of the memorandum and articles of association of the Company delivered to the Purchaser by or on behalf of the Vendors is accurate, complete and has attached to it a copy of every resolution or agreement required by the Companies Acts (or equivalent legislation in the relevant jurisdiction) to be so attached. 1.5   Share capital     1.5.1   The Shares are fully paid. There is no Encumbrance or any form of agreement (including conversion rights of pre-emption) on, over or affecting any issued or unissued shares, debentures or other securities of the Company and there is no agreement or commitment to give or create any of the foregoing. No claim has been made by any person to be entitled to any of the foregoing and no person has the right (exercisable now or in the future and whether contingent or not) to call for the issue of any share or loan capital of the Company under any of the foregoing.                 36 --------------------------------------------------------------------------------     1.5.2   The Company has not at any time:         (a)   repaid, redeemed or purchased (or agreed to repay, redeem or purchase) any of its own shares, or otherwise reduced (or agreed to reduce) its issued share capital or any class of it or capitalised (or agreed to capitalise) in the form of shares, debentures or other securities or in paying up any amounts unpaid on any shares, debentures or other securities, any profits or reserves of any class or description or passed (or agreed to pass) any resolution to do so; or         (b)   directly or indirectly provided any financial assistance for the purpose of the acquisition of shares in the Company, any holding company of the Company or for the purpose of reducing or discharging any liability incurred in such an acquisition whether pursuant to sections 155 and 156, CA 85 or otherwise. 2.   INSOLVENCY     The Company has not stopped payment and is not insolvent nor unable to pay its debts according to section 123, Insolvency Act 1986. No order has ever been made or petition presented nor has any resolution been passed for the winding up of the Company and no distress, execution or other process has ever been levied on any of its assets. No administrative or other receiver has been appointed by any person over the Business or assets of the Company or any part thereof, nor has any order been made or petition presented for the appointment of an administrator in respect of the Company. 3.   CONNECTED BUSINESS 3.1   Subsidiaries     The Company does not have, and has never had, any subsidiary or subsidiary undertaking. 3.2   Connected transactions     The Company:     3.2.1   is not and has not agreed to become the holder or other owner of any class of any shares, debentures or other securities of any other body corporate (whether incorporated in the United Kingdom or elsewhere);     3.2.2   has not agreed to become a subsidiary of any other body corporate or under the control of any group of bodies corporate or consortium;     3.2.3   is not and has not agreed to become a member of any partnership, joint venture, consortium or other unincorporated association other than a recognised trade association or agreement or arrangement for sharing commissions or other income;     3.2.4   has no branch, place of business or substantial assets outside England and Wales or any permanent establishment (as that expression is defined in any relevant Order in Council made pursuant to section 788, ICTA 1988) in any country outside the United Kingdom; and     3.2.5   save as otherwise disclosed pursuant to paragraphs 3.2.1 to 3.2.4, does not have any interest, legal or beneficial, in any shares or other capital or securities or otherwise howsoever in any other firm, company, association, venture or legal person or entity. 3.3   The Vendors are not party to any agreement as between themselves or any sub-group thereof, including any shareholders' agreement regarding the Company, which would in any way affect the provisions of this Agreement.                 37 -------------------------------------------------------------------------------- 4.   ACCOUNTS AND RECORDS 4.1   Accounts         4.1.1   The copy of the Accounts annexed to the Disclosure Letter is a true and complete copy.     4.1.2   The Accounts were prepared under the historical cost convention and in accordance with the Companies Acts and Accounting Standards and accounting principles, policies and practices generally accepted at the date thereof in the United Kingdom ("UK GAAP") and are true and accurate in all material respects.     4.1.3   The Accounts were prepared on bases and in accordance with policies consistent with those adopted in preparing the audited accounts of the Company for the three financial periods preceding that ended on the Accounts Date and there has been no change in such policies in any of such accounting periods.     4.1.4   The Accounts show a true and fair view of the assets and liabilities and state of affairs of the Company in accordance with UK GAAP at the Accounts Date and of its profit or loss and cash flow for the period then ended. 4.2   Records     4.2.1   All the accounts, books, statutory books, registers, ledgers and financial and other records of the Company are in the possession of the Company and have been fully, properly and accurately kept and completed in all material respects.     4.2.2   The accounting reference date of the Company has not at any time been any date other than 31 March. 4.3   Management Accounts     4.3.1   The Management Accounts have been properly prepared on a basis consistent with the Accounts in accordance with the accounting records of the Company and fairly present the assets and liabilities of the Company and of its profit or loss for the period covered thereby.     4.3.2   The LTM EBITDA has been properly calculated in accordance with the Accounts and Management Accounts of the Company and accurately states the EBITDA of the Company for the twelve month period ended 30 June 2000. 5.   POST-BALANCE SHEET DATE EVENTS 5.1   Since the Balance Sheet Date, the Company:     5.1.1   has carried on its Business in the ordinary and usual course and without entering into any transaction, assuming any liability or making any payment not provided for in the Accounts prepared as at the Balance Sheet Date which is not in the ordinary course of business and without any interruption or alteration in the nature, scope or manner of its Business;     5.1.2   has not experienced any material deterioration in its financial position or turnover or suffered any diminution of its assets by the wrongful act of any person and the value of its net assets is not materially less than the value of its net assets at the Balance Sheet Date and the Company has not had its Business or profitability materially and adversely affected by the loss of any important customer or source of supply or by any abnormal factor not affecting similar businesses in the UK to a like extent and so far as the Vendors are aware there are no facts which are likely to give rise to any such effects;                 38 --------------------------------------------------------------------------------     5.1.3   has not acquired or disposed of or agreed to acquire or dispose of any assets or assumed or incurred or agreed to assume or incur any material liabilities (actual or contingent) otherwise than in the ordinary course of business;     5.1.4   has not declared, made or paid any dividend, bonus or other distribution of capital or income (whether a qualifying distribution or otherwise) and (excluding fluctuations in overdrawn current accounts with bankers) no loan or loan capital of the Company has been repaid in whole or in part or has become due or is liable to be declared due by reason of either service of a notice or lapse of time or otherwise howsoever;     5.1.5   has not carried out or entered into any transaction and no other event has occurred in consequence of which (whether alone or together with any one or more transactions or events occurring before or on the date of this Agreement) any liability of the Company to Taxation has arisen or will arise (or would have arisen or would or might arise but for the availability of any relief, allowance, deduction or credit) other than corporation tax on the actual income (not chargeable gains or deemed income) of the Company arising from transactions entered into in the ordinary course of business, income tax under the PAYE system and national insurance and social security contributions in respect of persons employed by it since the Balance Sheet Date and VAT in respect of taxable supplies made by it in the ordinary course of business since the Balance Sheet Date;     5.1.6   has not made any change to the remuneration, terms of employment, emoluments or pension benefits of any present or former director, officer or employee of the Company who on the Balance Sheet Date was entitled to remuneration in excess of £24,000 per annum and has not appointed or employed any additional director, officer or employee entitled as aforesaid and has not paid any bonus, benefit or other emolument of employment to any present or former director, officer or employee of the Company other than in accordance with the terms of their respective employment agreement;     5.1.7   has not released any debts in whole or in part, has not written off debts in an amount exceeding £5,000 in the aggregate, and has not reduced the average number of days taken to collect debts owed to the Company;     5.1.8   has not entered into contracts involving capital expenditure in an amount exceeding £10,000 in the aggregate;     5.1.9   has not become aware that any event has occurred which would entitle any third party to terminate any contract or any benefit enjoyed by it or call in any money before the normal due date therefor;     5.1.10   has not purchased stocks in quantities or at prices materially greater than was the practice of the Company prior to the Balance Sheet Date;     5.1.11   has paid its creditors within the times agreed with such creditors and does not have any debts outstanding which are overdue for payment by more than four weeks and has not increased the average number of days taken to pay creditors of the Company;     5.1.12   has not borrowed or raised any money or taken any financial facility (except such short term borrowings from bankers as are within the amount of any overdraft facility which was available to the Company at the Balance Sheet Date) or since the Balance Sheet Date renegotiated or received any notice from any banker that such banker wishes to renegotiate any overdraft facility available to the Company at the Balance Sheet Date;     5.1.13   has not, otherwise than in the ordinary course of business, made or incurred an obligation to make a payment which will not be deductible in computing trading profits for the purposes of corporation tax or as a management expense of the Company; and                 39 --------------------------------------------------------------------------------     5.1.14   (including any class of its members) has not passed any resolution whether in general meeting or otherwise. 6.   TRANSACTIONS WITH THE VENDORS, DIRECTORS AND CONNECTED PERSONS 6.1   Loans and Debts     There is not outstanding:     6.1.1   any Indebtedness owing by the Company to the Vendors or a Director or any Connected Person or owing to the Company by the Vendors or a Director or any Connected Person; or     6.1.2   any guarantee or security for any such indebtedness or liability as aforesaid. 6.2   Arrangements with Connected Persons     6.2.1   There is not outstanding, any contract, lease, arrangement or understanding (whether legally enforceable or not) to which the Company is a party or by which it is bound and in which any Vendor, Director or former director of the Company or any Connected Person is or has been interested whether directly or indirectly.     6.2.2   The Company is not a party to any contract, lease, or arrangement which is not entirely of an arm's length nature. 6.3   Competitive interests     No Vendor, Director, former director of the Company nor any Connected Person, either individually, collectively or with any other person or persons, has any estate, right or interest, directly or indirectly, in any business other than that now carried on by the Company which is competitive with any aspect of the Business save as registered holder or other owner of any class of securities of any company if such class of securities is listed on any recognised investment exchange (as defined in the Financial Services Act 1986) and if such person (together with Connected Persons and Affiliates) holds or is otherwise interested in less than five per cent. (5%) of such class of securities. 6.4   Benefits     6.4.1   No Connected Person or Director or former director of the Company is entitled to or has claimed entitlement to any remuneration, compensation or other benefit from the Company which has not been paid. 7.   FINANCE 7.1   Borrowings     7.1.1   Full and accurate details of all Indebtedness available to the Company and of the amounts outstanding are set out in the Disclosure Letter and so far as the Vendors are aware the Vendors have not done anything which might affect or prejudice the continuance of any of those facilities or give rise to an adverse alteration in their terms.     7.1.2   The Company has no outstanding loan capital.     7.1.3   The Company has not:         (a)   incurred or agreed to incur any Indebtedness which it has not repaid or satisfied; or         (b)   lent or agreed to lend any money which has not been repaid to it; or         (c)   acquired the benefit of any Indebtedness, present or future.                 40 --------------------------------------------------------------------------------     7.1.4   The Company is not party to nor has agreed to enter into or has any outstanding obligation under:         (a)   any loan agreement, debenture, bond, stock, acceptance or documentary credit facility, bill of exchange, promissory note, finance lease, debt or inventory financing, discounting or sale of receivables or factoring agreement or sale and lease back arrangement; or         (b)   any other arrangement the purpose of which is to raise money or provide finance or credit (e.g. operating lease).     7.1.5   The Company does not have nor operates any bank or similar accounts other than a current account with National Westminster Bank plc. 7.2   Guarantees and security     7.2.1   The Company has not entered into or agreed to enter into any actual or contingent guarantee, indemnity, warranty, bond or other agreement to secure an obligation of another person.     7.2.2   There is not outstanding any actual or contingent guarantee, indemnity, warranty, bond or other agreement given by any person to secure an obligation of the Company.     7.2.3   The Company has not agreed to create or grant nor has subsisting, over the whole or any part of its present or future revenues or assets, any encumbrance, mortgage, charge, pledge, lien or other adverse right of any description. 7.3   Debts owed to the Company     7.3.1   Attached to the Disclosure Letter is a statement of aged debts of the Company as at 4 October 2000. 7.4   Grants     7.4.1   Full details of all grants made to the Company in the last six years have been disclosed. No act or transaction has been effected in consequence whereof the Company is or may be held liable to refund in whole or in part any investment grant, building grant, grant under the Local Employment Acts 1970 to 1972, grant under the Industry Acts 1971 to 1982, grant under the Industrial Development Act 1982 or loan received by virtue of any statute or in consequence whereof any such grant or loan for which application has been made by it will not or may not be paid or will or may be reduced. 7.5   Indebtedness     7.5.1   The Disclosure Letter sets out full details of the Indebtedness of the Company. 8.   PROPERTY 8.1   General     8.1.1   The Properties comprise all the land and premises controlled, used or occupied by the Company and all the rights or interests vested in the Company relating to any land and premises at the date hereof and the particulars set out in Schedule 3 are true and accurate and not misleading. The Company does not own any freehold or leasehold land or premises other than the Properties.                 41 --------------------------------------------------------------------------------     8.1.2   The Company has not:         (a)   surrendered any lease, licence or tenancy to a landlord without first satisfying itself that such landlord had good title to accept such surrender and without receiving from the landlord an absolute release from all liability arising under such lease, licence or tenancy;         (b)   assigned, or otherwise disposed of, any lease, licence or tenancy without receiving a full and effective indemnity from the assignee or transferee in respect of its liability under such lease, licence or tenancy;         (c)   been a guarantor of a tenant's liability under any lease, licence or tenancy; or         (d)   assigned or otherwise disposed of any leasehold property in such a way that it retains any other residual liability in respect thereof.     8.1.3   The Company has in its possession or unconditionally held to its order all the documents of title and other documents and papers relating to the Properties.     8.1.4   The Properties, title deeds and documentation relating thereto, and all fixtures and fittings and plant, equipment and other chattels on the Properties, are not subject to any Encumbrance;     8.1.5   There are no disputes or outstanding notices which have been given to the Company (whether given by the licensor/landlord, a local authority or any other person) which adversely affect proper use and enjoyment of the Properties for the purpose of the Business or any other business now being carried on at the Properties by the Company.     8.1.6   The Properties are not subject to the payment of any outgoings.     8.1.7   The Properties have the benefit of those easements and rights contained in the licence set out in Schedule 3 and the Company has the use and enjoyment of the Properties sufficient for the purposes of the Business now being carried on at the Properties by it. 8.2   Compliance with agreement     8.2.1   There are no material subsisting breaches or any material non-performance or observance of any covenant, condition or agreement contained in the lease, licence or other document under which the Properties are held whether on the part of the tenant/licensee the landlord/licensor or any other party or their respective predecessors in title. 8.3   Inferior licence     8.3.1   The Company is in actual occupation of the Properties and no other person is or will be entitled to occupy or use any part of any of the Properties. 8.4   Statutory compliance/environmental issues     8.4.1   The Company is not in breach of and has not received notice of and is not aware of any allegation of breach of the requirements of any legislation concerning health, safety or environmental matters or any regulations, orders, notices or directions made under any of such legislation which in any such case affect the Properties or any property in the vicinity thereof or anything done thereon.     8.4.2   Where required, a fire certificate has been issued in respect of the Properties and the Properties comply in all respects with current fire regulations and the current requirements of the insurers of the Properties.                 42 -------------------------------------------------------------------------------- 8.5   Condition and repair         (a)   So far as the Vendors are aware, the Properties are in good and substantial repair and condition and no damage has been occasioned thereto during the Company's occupation thereof. 9.   ENVIRONMENTAL 9.1   In paragraph 9.2 the following words and expressions shall have the following meanings:     "Environment" means the environment generally including all of its physical and ecological aspects including, without limitation, air (including, without limitation, that within buildings or natural or man-made structures above or below ground); water (including, without limitation, the open sea, coastal or inland waters and ground waters, drains and sewers); and land, (including, without limitation, the seabed or river bed under any water as described above, surface land and sub-surface land);     "Environmental law" means any law relating to the Environment whether generated under the law of the United Kingdom, the European Community or arising from any common or customary law or legislation, and any order, rule, regulation, directive, statutory instrument, bye-law or any legislative measure under any of them; and     "Environmental Licence" means any governmental, statutory, local authority or other licence, approval, consent, permit or authorisation of whatever kind relating to Environmental law. 9.2   During its occupation by the Company, the Properties have been used, and the Business has been conducted, at all times in compliance with Environmental law and any Environmental Licence and the Company has not received any notice from any local authority or other official agency under any Environmental law regarding any damage to the Environment or violation of any Environmental law, whether actual, alleged or potential. 10.   OTHER ASSETS 10.1   Title     The Company has Legal and Beneficial Title to all assets of the Company which are included in the Accounts or have otherwise been represented as being the property of the Company or which were at the Balance Sheet Date used or held for the purposes of its Business and (except for assets disposed of or realised by the Company in the ordinary course of business) the Company retains such title to all such assets free from any Encumbrance, hire or hire purchase agreement or leasing agreement or agreement for payment on deferred terms and all such assets are in the possession and control of the Company and are sited within the United Kingdom and there has been no default by the Company in the performance or observance of any of the provisions thereof. 10.2   The Company has not acquired or agreed to acquire any material asset on terms that title to such asset does not pass to the Company until full payment is made. 10.3   Encumbrances     The Company has Legal and Beneficial Title to all assets which have been acquired by the Company since the Balance Sheet Date and the same are in the possession and control of the Company and none is the subject of any Encumbrance nor has the Company created or agreed to create any Encumbrance or entered into any factoring arrangement, hire-purchase, conditional sale or credit sale agreement which has not been disclosed and in respect of any such Encumbrance, arrangement or agreement so disclosed there has been no default by the Company in the performance or observance of any of the provisions thereof.                 43 -------------------------------------------------------------------------------- 10.4   Condition of assets     The plant and machinery (including fixed plant and machinery) and all vehicles and office and other equipment shown in the Accounts or acquired since the Balance Sheet Date or otherwise used by the Company in connection with the Business which have not been disposed of in the ordinary course of business:     10.4.1   do not contravene any requirement or restriction having the force of law;     10.4.2   are in reasonable repair and condition given their age and usage and are, given their age and usage, serviceable and in satisfactory working order; and     10.4.3   are each capable of doing the work for which they are used. 10.5   Rental payments     Rentals payable by the Company under any leasing, hire-purchase or other similar agreement to which it is a party are set out in the Disclosure Documents and have not been increased since the Balance Sheet Date and all such rentals are fully deductible by the Company for tax purposes. 11.   INSURANCE 11.1   Extent of Insurance     All the assets of the Company which are of an insurable nature are and have at all material times been fully insured to their full replacement value with a well established and reputable insurer against fire and all other risks normally insured against by companies carrying on similar businesses or owning property of a similar nature to those of the Company and the Company is and has at all material times been adequately covered against all legal liability and risks normally insured against by such companies. 11.2   Premiums and claims     Particulars of all policies of insurance of the Company now in force have been disclosed and such particulars are true and correct and all premiums due on such policies have been duly paid and all such policies are valid and in force. So far as the Vendors are aware, there are no circumstances which might lead to any liability under such insurance being avoided by the insurers or the premiums being increased. There is no claim outstanding under any such policies and so far as the Vendors are aware there are no circumstances likely to give rise to a claim. 12.   LITIGATION AND COMPLIANCE 12.1   The Company is not engaged whether as plaintiff or defendant or otherwise in any legal action, tribunal or other proceedings or arbitration and the Company is not being prosecuted for any criminal offence and no such proceedings are pending or threatened by or against the Company or any person for whose acts or defaults the Company may be vicariously liable. 12.2   To the knowledge of the Vendors, there is no matter or fact in existence which might give rise to any legal proceedings or arbitration involving the Company including any which might form the basis of any criminal prosecution against the Company. 12.3   No injunction or order for specific performance has been granted against the Company. 12.4   There is no order, decree or judgment of any court or any governmental agency or regulatory body outstanding against the Company and no undertaking or assurance given to any court or governmental agency or regulatory body in relation to the Company is still in force and there is no dispute with any such court, agency or body.                 44 -------------------------------------------------------------------------------- 12.5   The Company has complied with the provisions of the Companies Acts and all returns, resolutions and other documents which the Company is required by law to deliver to the Registrar of Companies or any other governmental or regulatory authority have been correctly completed and duly delivered. 12.6   No governmental or official investigation or enquiry concerning the Company is in progress or, so far as the Vendors are aware, threatened and there are no circumstances of which the Vendors are aware which are likely to give rise to any such investigation or enquiry. 13.   LICENCES 13.1   The Company has all necessary licences (including statutory licences), permits, consents and authorities (public and private) for the proper and effective carrying on of the Business in the manner in which the Business is now carried on including, without limitation under the Data Protection Act 1984 and 1998, and all such licences, permits, consents and authorities are valid and subsisting and the Vendors know of no reason why any of them should be suspended, cancelled or revoked whether in connection with the sale to the Purchaser or otherwise and, so far as the Vendors are aware, there are no factors that might in any way prejudice the continuance or renewal of any of those licences, permits, consents or authorities and the Company is not restricted by contract from carrying on any activity in any part of the world. 13.2   Delegation of powers     There are in force no powers of attorney given by the Company other than to the holder of an encumbrance solely to facilitate its enforcement nor any other authority (express, implied or ostensible) given by the Company to any person to enter into any contract or commitment or do anything on its behalf other than any authority of employees to enter into routine trading contracts in the normal course of their duties. 14.   EFFECT OF AGREEMENT     The acquisition of the Shares by the Purchaser or execution, delivery and performance of this Agreement and all documents in the agreed terms will not: 14.1   give rise to or cause to become exercisable any right of pre-emption relating to the Shares; or 14.2   relieve any person of any binding obligation to the Company or enable any such obligation or any right or benefit enjoyed by the Company to be terminated or legally entitle any person to exercise any right whether under an agreement with or otherwise in respect of the Company; or 14.3   conflict with, violate or result in a breach of or constitute a default under any written or oral agreement or arrangement to which the Company is a party, and any law, regulation, order, decree or judgment of any court or any governmental agency or regulatory body applicable to the Company, or any loan to or mortgage created by the Company or of its memorandum or articles of association; or 14.4   cause any written or (to the knowledge of the Vendors) oral agreement or arrangement between the Company and any other person to be terminated or modified or require any payment to be made to such other person (and no such agreement or arrangement includes any provision with respect to a change in the control, management or shareholders of the Company). 14.5   except for Indebtedness paid at Completion, result in any Indebtedness of the Company becoming due or capable of being declared due and payable before its stated maturity date, or cause the suspension of any credit; or 14.6   entitle any person to receive from the Company any finder's fee, brokerage or commission.                 45 -------------------------------------------------------------------------------- 15.   MATERIAL CONTRACTS 15.1   Onerous Contracts     There are no long term contracts of an annualised value in excess of £5,000 (that is, contracts not terminable by the Company without penalty on 90 days' notice or less) or onerous or unusual contracts (that is, contracts for capital commitments or contracts differing from those necessitated by the ordinary course of business) binding upon the Company and no expenses or liabilities have been incurred before the date of this Agreement by the Company otherwise than for the purpose of the Company's Business. 15.2   Material Contracts     All contracts to which the Company is a party with a value in excess of £10,000 have been disclosed and the Company is not a party to or subject to any agreement, transaction, obligation, commitment, understanding, arrangement or liability which:     15.2.1   involves or is likely to involve the supply of goods or services by or to the Company the aggregate sales value of which will represent in excess of five per cent. (5%) of the turnover of the Company for the year ended on the Balance Sheet Date;     15.2.2   requires the Company to pay any commission, finder's fee, royalty or the like; or     15.2.3   is in any way otherwise than in the ordinary and proper course of the Company's Business, including and without limitation, all contracts relating to the Company's participation in any joint ventures, partnerships and associations. 15.3   Performance of Contracts     15.3.1   The terms of all contracts of the Company have been complied with by the Company and by the other parties to the contracts in all material respects and there are no circumstances likely to give rise to a default by the Company or, so far as the Vendors are aware, by the other parties under any such contract.     15.3.2   None of the contracts contain any change of control provisions or provisions having a similar effect.     15.3.3   So far as the Vendors are aware, there is no invalidity of or grounds for rescission, avoidance or repudiation of any agreement or other transaction to which the Company is a party and the Company has received no notice of any intention to terminate, repudiate or disclaim any such agreement or other transaction. 16.   EMPLOYEES 16.1   Particulars of employees     The particulars shown in the schedule of employees comprised in the Disclosure Documents are true and show in respect of each Director, officer and employee of the Company his date of birth, the date on which he commenced continuous employment with the Company for the purposes of ERA and all remuneration payable and other benefits provided or which the Company is bound to provide (whether now or in the future) to each such person and include full particulars of all remuneration arrangements (particularly profit sharing, incentive and bonus arrangements to which the Company is a party whether binding or not) and each Director, officer and employee of the Company is listed therein. 46 -------------------------------------------------------------------------------- 16.2   Service contracts     There is no contract of service in force between the Company and any of its Directors, officers or employees which is not terminable by the Company without compensation (other than any compensation payable under Parts X and XI, ERA) on one month's notice given at any time or otherwise in accordance with section 86, ERA. There are no consultancy or management services agreements in existence between the Company and any other person, firm or company. There are no outstanding pay negotiations with any employees or Trade Unions. 16.3   Benefits     There are no amounts owing to present or former directors, officers, employees or other workers of the Company other than not more than one month's arrears of remuneration accrued or due or for reimbursement of business expenses incurred within a period of three months preceding the date of this Agreement and no moneys or benefits other than in respect of remuneration or emoluments of employment are payable to or for the benefit of any present or former director, officer, employee or other worker of the Company, nor any dependant of any present or former director, officer, employee or other worker of the Company. 16.4   Liabilities and payments     Save to the extent (if any) to which provision or allowance has been made in the Accounts as at the Balance Sheet Date:     16.4.1   no liability has been incurred or is anticipated by the Company for breach of any contract of employment or for services or for severance payments or for redundancy payments or protective awards or for compensation for unfair dismissal or for failure to comply with any order for the reinstatement or re-engagement of any employee or for sex or race discrimination or for any other liability accruing from the termination or variation of any contract of employment or for services;     16.4.2   no gratuitous payment has been made or promised by the Company in connection with the actual or proposed termination, suspension or variation of any contract of employment or for services of any present or former director, officer or any dependant of any present or former director, officer or employee of the Company; and     16.4.3   the Company has not made or agreed to make any payment to or provided or agreed to provide any benefit for any present or former director, officer or employee of the Company. 16.5   Termination of employment     16.5.1   No present director, officer or employee of the Company has given or received notice terminating his employment except as expressly contemplated under this Agreement and Completion will not entitle any employee to terminate his employment or trigger any entitlement to a severance payment or liquidated damages.     16.5.2   The Company has complied with all recommendations made by the Advisory Conciliation and Arbitration Service and with all awards and declarations made by the Central Arbitration Committee in respect of its employees.                 47 -------------------------------------------------------------------------------- 16.6   Share and other schemes     The Company does not have in existence nor is it proposing to introduce, and none of its directors, officers or employees participate in (whether or not established by the Company) any employee share trust, share incentive scheme, share option scheme or profit sharing scheme for the benefit of all or any of its present or former directors, officers or employees or the dependants of any of such persons or any scheme whereunder any present or former director, officer or employee of the Company is entitled to a commission or remuneration of any other sort calculated by reference to the whole or part of the turnover, profits or sales of the Company or any other person, firm or company including any profit-related pay scheme established under Chapter III, Part V, ICTA 1988. 16.7   Disputes and claims     16.7.1   No dispute exists or can reasonably be anticipated between the Company and a material number or category of its employees or any Trade Union(s) and so far as the Vendors are aware there are no wage or other claims outstanding against the Company by any person who is now or has been a director, officer or employee of the Company.     16.7.2   The Company has not had during the last three years any strike, work stoppages, slowdown or work-to-rule by its employees or lock-out, nor, so far as the Vendors are aware, is any anticipated, which has caused, or is likely to cause, the Company to be materially incapable of carrying on its business in the normal and ordinary course. 16.8   Transfer of undertakings         The Company has not been a party to any relevant transfer as defined in TUPE nor has the Company failed to comply with any duty to inform and consult any Trade Union under the said regulations within the period of one year preceding the date of this Agreement. 16.9   Agreements with Trade Unions         The Company is not a party to any agreement or arrangement with or commitment to any trade unions or staff association nor are any of its employees members of any trades union or staff association. 17.   PENSIONS         The Company has not announced any proposal to establish nor is it under any legal or moral liability or obligation to pay or contribute to any bonus, superannuation, retirement, pension, life assurance, death benefit, sickness or accident benefit schemes or arrangements or the like, or pay any gratuities, allowances or the like, to any of its employees or other persons engaged in the Business or their dependants, or persons formerly employed or engaged in the Business or their dependants, nor is the Company a party to any arrangements or promise to make or in the habit of making ex gratia or voluntary payments in relation to any such matters to any such persons. 18.   INTELLECTUAL PROPERTY 18.1   Ownership and rights     18.1.1   Parts 1 and 2 of Schedule 7 respectively contain particulars of all Registered Intellectual Property and any material Unregistered Intellectual Property (which, for the avoidance of doubt shall not include licences for non-bespoke applications or non-bespoke operating software) owned by the Company.                 48 --------------------------------------------------------------------------------     18.1.2   Other than as set out in Parts 3 and 4 of Schedule 7, the Company is the sole beneficial owner of all Relevant IP (excluding for this purpose licensed non-bespoke applications or non-bespoke operating software) other than the Customer Copyright.     18.1.3   The Company does not require any further Intellectual Property in relation to the development, manufacture, marketing or sale of its products or services or in relation to any of the processes employed in the Business. 18.2   Enforcement         18.2.1   So far as the Vendors are aware, the Registered Intellectual Property is valid and subsisting and none of the Registered Intellectual Property is the subject of outstanding or threatened disputes, claims or proceedings for cancellation, revocation, opposition, interference, rectification or contested ownership.     18.2.2   No applications have been made by the Company to register any Relevant IP other than in respect of the Registered Intellectual Property.     18.2.3   In respect of all Registered Intellectual Property, all renewal fees have been paid on time.     18.2.4   Except as necessary for the operation of the Business and subject to reasonable confidentiality obligations, all Know-How owned, used or exploited by the Company has been kept secret and confidential and has not been disclosed to third parties.     18.2.5   Nothing has been done by the Company or any other person, to diminish or otherwise affect the reputation of unregistered Trade Marks owned, used or otherwise exploited by the Company. 18.3   Intellectual Property Agreements     18.3.1   The disclosure against warranty 18.3.1(a) in the Disclosure letter contains particulars of all Intellectual Property Agreements (other than those relating to licences for non-bespoke applications or non-bespoke operating software) whereby:         (a)   the Company uses or exploits any Intellectual Property belonging to a third party other than in relation to Customer Copyright ("Licences In"); or         (b)   the Company has authorised or otherwise permitted by any use whatsoever of any Intellectual Property, or granted to any third party any right or interest in respect of any Intellectual Property other than Customer Copyright ("Licences Out").     18.3.2   Save as set out in Parts 3 and 4 of Schedule 7, none of the Relevant IP owned by the Company has been charged, mortgaged, licensed or otherwise encumbered.     18.3.3   All Intellectual Property Agreements other than in relation to Customer Copyright are valid and binding and none has been the subject of any breach or default by the Company or, so far as the Vendors are aware, any other party, or of any event which with notice or lapse of time or both would constitute a default.     18.3.4   There are no disputes, claims or proceedings arising out of or relating to the Intellectual Property Agreements.     18.3.5   All Intellectual Property Agreements have been duly recorded or registered with the proper authorities whenever a requirement to do so exists.                 49 -------------------------------------------------------------------------------- 18.4   Infringement         18.4.1   The Company has not infringed and does not infringe any Intellectual Property of a third party as a result of the Company's or exploitation of the Relevant IP, nor will such use or exploitation give rise to any infringement dispute, claims or proceedings against the Company.     18.4.2   There are not and have not been any disputes, claims or proceedings threatened or in existence in any court or tribunal in respect of any of the Relevant IP as such or in respect of any use or exploitation thereof by the Company.     18.4.3   There has been and is no current infringement by any third party of any Relevant IP. 19.   INFORMATION TECHNOLOGY AND TELECOMMUNICATIONS 19.1   Identification and ownership     19.1.1   All IT Systems and data are owned by the Company, and are not wholly or partly dependent on any facilities or services not under the exclusive ownership and control of the Company.     19.1.2   None of the IT Contracts has been the subject of any breach or default, or of any event which (with notice or lapse of time or both) would constitute a default, or is liable to be terminated or otherwise adversely affected by the transaction contemplated by this Agreement.     19.1.3   The Company has not engaged any person or entity to develop any bespoke Software package.     19.1.4   All of the IT Contracts are valid and binding. 19.2   Computer operation and maintenance     19.2.1   All IT Systems are in good working order, and have been and are being properly and regularly maintained and replaced and no part of the IT Systems has materially regularly failed to function at any time during the three years prior to the date hereof.     19.2.2   So far as the Vendors are aware:         (a)   it is not necessary or desirable (save in the normal course of business) to incur any further expenditure on the modification, development, expansion or replacement of the IT Systems; and         (b)   the Capex budget attached to the Disclosure Letter for the IT Systems is sufficient in order to satisfy the anticipated requirements of the Company with regard to data processing and communications during the period ending 30 June  2001.     19.2.3   So far as the Vendors are aware, no part of the IT Systems is or has been infected by any virus or other extraneously-induced malfunction, and so far as the Vendors are aware, no person has had unauthorised access to the IT Systems or any data stored thereon.     19.2.4   All financial data processed using the IT Systems and/or the IT Services has been regularly archived on back up disk.     19.2.5   The Company has taken all steps reasonably necessary to ensure that its Business can continue in the event of a failure of the IT Systems (whether due to natural disaster, power failure or otherwise).                 50 -------------------------------------------------------------------------------- 20.   LEGISLATION         The Company is not in breach of and it has not received notice of and is not aware of, any allegation of breach of the requirements of any legislation which is applicable to it. Part 2 Taxation Warranties 21.   TAXATION     21.1   General         21.1.1   Notices and returns         All notices, returns, computations and registrations of the Company for the purposes of Taxation have been made punctually on a proper basis and are correct and none of them is, or is likely to be, the subject of any dispute with any Taxation Authority.     21.1.2   All information supplied by the Company for the purposes of Taxation was when supplied and remains complete and accurate in all material respects.     21.1.3   Payment of Tax due         All Taxation which the Company is liable to pay prior to Completion has been or will be so paid prior to Completion.     21.1.4   Penalties or interest on Tax         The Company has not within the period of six years ending on the date of this Agreement paid or become liable to pay any penalty, fine, surcharge or interest charged by virtue of the provisions of the TMA or any other Taxation Statute.     21.1.5   Compliance with PAYE, national insurance contribution and Tax collection obligations         (a)   All income tax deductible and payable under the PAYE system and/or any other Taxation Statute has, so far as is required to be deducted, been deducted from all payments made or treated as made by the Company and all amounts due to be paid to the Inland Revenue prior to the date of this Agreement have been so paid, including all Tax chargeable on benefits provided for directors, employees or former employees of the Company or any persons required to be treated as such.         (b)   All deductions and payments required to be made under any Taxation Statute in respect of national insurance and social security contributions (including employer's contributions) have been so made.         (c)   All material payments by the Company to any person which ought to have been made under deduction of Tax have been so made and the Company (if required by law to do so) has accounted to the Inland Revenue for the Tax so deducted.         (d)   Proper records have been maintained in respect of all such deductions and payments and all applicable regulations have been complied with.         (e)   The Disclosure Documents contain details so far as they affect the Company of all current dispensations agreed with the Inland Revenue in relation to PAYE and all notifications given by the Inland Revenue under section 166, ICTA 1988.                 51 --------------------------------------------------------------------------------     21.1.6   Investigations         The Company has not been subject to any visit, audit, investigation, discovery or access order by any Taxation Authority and there are no circumstances existing which make it likely that a visit, audit, investigation, discovery or access order will be made.     21.1.7   Residence         The Company is and always has been resident for Taxation purposes only in the jurisdiction in which it is incorporated.     21.1.8   Tax provision         Full provision or reserve has been made in the Accounts for all Taxation assessed or liable to be assessed on the Company or for which it is accountable in respect of income, profits or gains earned, accrued or received or deemed to be earned, accrued or received on or before the Balance Sheet Date, including distributions made down to such date or provided for in the Accounts and proper provision has been made in the Accounts for deferred Taxation in accordance with generally accepted accounting principles.     21.1.9   Concessions and arrangements         The Company has not (other than P11D dispensations) any written agreement with any tax authority other than in the course of settling tax computation which has the affect that taxation is not payable in accordance with the relevant statutory provisions.     21.1.10   Anti-avoidance provisions         The Company has not entered into or been a party to any scheme or arrangement of which the main purpose, or one of the main purposes, was the avoidance of or the reduction in or the deferral of a liability to Taxation such that a Liability to Taxation may arise after Completion.     21.1.11   Section 765, ICTA 1988         The Company has not without the prior consent of the Treasury carried out or agreed to carry out any transaction under section 765, ICTA 1988 which would be unlawful in the absence of such consent and has, where relevant, complied with the requirements of section 765A(2), ICTA 1988 (supply of information on movement of capital within the EU) and any regulations made or notice given thereunder.     21.1.12   Transactions requiring clearance or consent         All particulars furnished to any Taxation Authority in connection with an application for clearance or consent by the Company or on its behalf or affecting the Company has been made and obtained on the basis of full and accurate disclosure to the relevant Taxation Authority of all relevant material facts and considerations, and any transaction for which clearance or consent was obtained has been carried into effect only in accordance with the terms of the relevant clearance or consent.     21.1.13   Calculation of Taxation liability         The Company has sufficient records relating to past events to permit calculation of the Taxation liability or relief which would arise upon a disposal or realisation on completion of each asset owned by the Company at the Balance Sheet Date or acquired by the Company since that date but before Completion.                 52 --------------------------------------------------------------------------------     21.1.14   Claims and disclaimers         The Company has duly submitted all claims and disclaimers the making of which has been assumed for the purposes of the Accounts.     21.1.15   Outstanding claims, elections and appeals         The Disclosure Documents contain sufficient particulars of all matters relating to Taxation in respect of which the Company is or at Completion will be entitled:         (a)   to make any claim (including a supplementary claim), disclaimer or election for relief under any Taxation Statute;         (b)   to appeal against any assessment or determination relating to Taxation; to apply for a postponement of Taxation. 21.2   Corporation tax, including corporation tax on chargeable gains     21.2.1   Base values and acquisition costs         If each of the capital assets of the Company was disposed of on the date hereof for a consideration equal to the book value of that asset in, or adopted for the purposes of, the Accounts or, in the case of assets acquired since the Balance Sheet Date, equal to the consideration given upon its acquisition, no liability to corporation tax on chargeable gains or balancing charges under the CAA would arise and for the purpose of determining the liability to corporation tax on chargeable gains there shall be disregarded any relief and allowances available to the Company other than amounts falling to be deducted under section 38, TCGA.     21.2.2   Capital allowances         All capital expenditure which the Company has incurred or may incur under any subsisting commitment on the provision of machinery, plant or buildings and on which capital allowances have been claimed, has qualified or will qualify (if not deductible as a trading expense for trade carried on by the Company) for writing-down allowances or industrial building allowances (as the case may be) under CAA and where appropriate notices have been given to the Inland Revenue under section 118, FA 1994.     21.2.3   Leased assets         The Company has not made any claim for capital allowances in respect of any asset which is leased to or from or hired to or from the Company and no election affecting the Company has been made or agreed to be under sections 53 or 55, CAA in respect of such assets.     21.2.4   Finance leases         The Company is not a lessee under a lease to which the provisions of Schedule 12 to the FA 1997 apply or could apply.     21.2.5   Short life assets         The Company has not made any election under section 37, CAA nor is it taken to have made such an election under section 37(8)(c), CAA.     21.2.6   Long life assets         The Company does not own and has not owned a long life asset (within the meaning of section 38A, CAA) in respect of which any claim for capital allowances would be subject to the provisions of section 38E-38G, CAA.                 53 --------------------------------------------------------------------------------     21.2.7   Industrial buildings         None of the assets of the Company expenditure on which has qualified for a capital allowance under Part I, CAA has at any time been used otherwise than as an industrial building or structure.     21.2.8   Distributions         (a)   No distribution within the meaning of sections 209, 210 and 211, ICTA 1988 has been made (or will be deemed to have been made) by the Company during the six years immediately preceding the date of this Agreement, except dividends shown in its audited accounts and the Company is not bound to make any such distribution.         (b)   During the six years immediately preceding the date of this Agreement, no elections have been made pursuant to section 246A, ICTA 1988 in respect of any dividends nor has the Company made a distribution to which the provisions of paragraph  2 of Schedule 7, FA 1997 have been, or could be, applied.         (c)   During the six years immediately preceding the date of this Agreement, the Company has not received a dividend in respect of which the payer has made an election under section 246A, ICTA 1988 nor a distribution to which the provisions of paragraph 2 of Schedule 7, FA 1997 have been, or could be, applied.     21.2.9   Repayments of share capital         The Company has not any time during the six years immediately preceding the date of this Agreement, repaid, redeemed or repurchased or agreed to repay, redeem or repurchase or granted an option under which it may become liable to purchase any shares of any class of its issued share capital nor has the Company after that date capitalised or agreed to capitalise in the form of shares or debentures any profits or reserves of any class or description or otherwise issued or agreed to issue any share capital other than for the receipt of new consideration (within the meaning of Part VI, ICTA 1988) or passed or agreed to pass any resolution to do so.     21.2.10   Demergers         During the six years immediately preceding the date of this Agreement, the Company has not been engaged in nor been a party to any of the transactions set out in sections 213 to 218 inclusive, ICTA 1988 nor has it made or received a chargeable payment as defined in section 218(1), ICTA 1988.     21.2.11   Issues of securities         During the six years immediately preceding the date of this Agreement, no securities (within the meaning of section 254(1), ICTA 1988) issued by the Company and remaining in issue at the date of this Agreement were issued in such circumstances that the interest payable thereon falls to be treated as a distribution under either sections 209(2)(d), 209(2)(da) or 209(2)(e), ICTA 1988, nor has the Company agreed to issue such securities in such circumstances.     21.2.12   Capital distributions         During the six years immediately preceding the date of this Agreement, the Company has not received any capital distribution to which the provisions of section 189, TCGA could apply.                 54 --------------------------------------------------------------------------------     21.2.13   Land sold and leased back         During the six years immediately preceding the date of this Agreement, the Company has not entered into any transaction to which the provisions of section 779 or 780, ICTA 1988 have been or could be applied.     21.2.14   Non-deductible payments         No rents, interest, annual payments or other sums of an income nature paid or payable by the Company or which the Company is under an existing obligation to pay in the future are or may be wholly or partially disallowable as deductions, management expenses or charges in computing profits for the purposes of corporation tax by reason of the provisions of sections 74, 79, 125, 338, 339,779 to 784 inclusive, 787 or 788, ICTA 1988 or any other statutory provision or otherwise.     21.2.15   Rent payable to connected persons         No rent is or has been payable by the Company to which the provisions of sections 33A and 33B, ICTA 1988 could have applied prior to their ceasing to have effect.     21.2.16   No unremittable income or gains         No claim has been made by the Company under sections 584, 585 or 723 ICTA 1988 or under section 279, TCGA.     21.2.17   Payments to directors, officers or employees         The Company has not made or agreed to make any payment to or provided or agreed to provide any benefit for any Director or former director, officer or employee of the Company, whether as compensation for loss of office, termination of employment or otherwise, which is not allowable as a deduction in calculating the profits of the Company for Taxation purposes whether up to or after Completion.     21.2.18   [Disallowance of trading losses and advance corporation tax carry forward         No change of ownership of the Company has taken place in circumstances such that section 768 (change in ownership of company: disallowance of trading losses) or section 245, ICTA 1988 (change in ownership of company: calculation and treatment of advance corporation tax) has or may be applied to deny relief for a loss or losses incurred by the Company and within the period of three years ending with the date of this Agreement there has been no major change in the nature or conduct of any trade or business (as defined in section 768 and section 245, ICTA 1988) carried on by the Company.]     21.2.19   Transfer pricing         The Company is not a party to any transaction or arrangement under which it may be required to pay for any asset or any services or facilities of any kind an amount which is in excess of the market value of that asset or those services or facilities, neither is or was the Company a party to any transaction or arrangements to which the provisions of section 770A and Schedule 28 AA, ICTA 1988 may apply and nor will the Company receive any payment for an asset or any services or facilities of any kind that it has supplied or provided or is liable to supply or provide which is less than the market value of that asset or those services or facilities. 55 --------------------------------------------------------------------------------     21.2.20   Transactions not at arm's length         The Company has not disposed of or acquired any asset in circumstances falling within section 17 or 19, TCGA nor given or agreed to give any consideration to which section 128(1)(2), TCGA could apply.     21.2.21   Transactions between connected persons         No allowable loss has accrued to the Company to which section 18(3), TCGA will apply.     21.2.22   Chargeable debts         The Company is not owed a debt, other than a debt on a security, on the disposal or satisfaction of which a liability to corporation tax on chargeable gains will arise by reason of section 25(1), TCGA.     21.2.23   Relief for loans to traders and qualifying corporate bonds         No claim for relief has been allowed to the Company pursuant to sections 253 and 254, TCGA in respect of any loan and no chargeable gain has or is likely to arise pursuant to section 253 (5), (6), (7) or (8) or section 254 (9)  or (10), TCGA.     21.2.24   Chargeable policies         The Company has not acquired benefits under any policy of assurance otherwise than as the original holder of legal and beneficial title.     21.2.25   Postponement of gains relating to-overseas trade         No claim or election affecting the Company has been made (or assumed to be made) under sections 140, 140C or 187 TCGA.     21.2.26   Depreciatory transactions         The Company has not been a party to any scheme or arrangement whereby the value of an asset has been materially reduced as set out in sections 30-34, TCGA.     21.2.27   Restriction of straightline growth         No asset owned by the Company is subject to a deemed disposal and re-acquisition under Schedule 2, TCGA " so as to restrict the extent to which the gain or loss over the period of ownership may be apportioned by reference to straightline growth.     21.2.28   Other claims made by the Company         The Company has made no claim during the six years preceding the date of this Agreement under any of the following:         (a)   section 280, TCGA (tax on chargeable gains payable by instalments);         (b)   section 24(2), TCGA (assets of negligible value);         (c)   section 242(2), TCGA (small part disposals of land); or         (d)   section 139, FA 1993 (deferral of unrealised exchange gains).     21.2.29   Gifts         The Company has not received any assets by way of gift as mentioned in section 282, TCGA and the Company has not held, and does not hold, shares in a company to which section 125, TCGA could apply.                 56 --------------------------------------------------------------------------------     21.2.30   Controlled foreign companies         No notice of the making of a direction under section 747, ICTA 1988 has been received by the Company.     21.2.31   Profit-related pay         No scheme registered under Chapter 111 of Part V, ICTA 1988 applies to the Company or any of its employees and no application for registration of a scheme so applying has been made.     21.2.32   Payment from pension funds         The Company has not received a payment out of funds held for the purposes of an exempt approved scheme in respect of which an amount is recoverable by the Inland Revenue under section 601, ICTA 1988.     21.2.33   Claims and elections         (a)   The Disclosure Documents contain full particulars of all claims and elections made (or assumed to be made) under sections 23, 152-162 or 165, 175, 247, 248, TCGA insofar as they could affect the chargeable gain or allowable loss which would arise in the event of a disposal by the Company of any of its assets, and indicates which assets (if any) so affected would not on a disposal give rise to relief under Schedule 4, TCGA.         (b)   The Disclosure Documents contain full particulars of elections made under             (i)   Regulation 10 of The Exchange Gains and Losses (Alternative Method of Calculating of Gain or Loss) Regulations 1994 and whether or not such elections have been varied             (ii)   Regulation 3 or 4 of The Local Currency Elections Regulations 1994 and such election is still valid.     21.2.34   Loan relationships         (a)   all interests, discounts and premiums payable by the Company in respect of its loan relationships (within the meaning of section 81, FA 1996) are eligible to be brought into account by the Company as a debit for the purposes of Chapter 11 of Part IV, FA 1996 at the time and to the extent that such debits are recognised in the statutory accounts of the Company.         (b)   The Disclosure Documents contain full particulars of any debtor relationship (within the meaning of section 103, FA 1996) of the Company which relates to a relevant discounted security (within the meaning of paragraph 3 of Schedule 13, FA 1996) to which paragraph 17 or 18 of Schedule 9, FA 1996 applies.         (c)   The Company has not been a party to a loan relationship which had an unallowable purpose (within the meaning of paragraph 13 of Schedule 9, FA 1996).         (d)   The Disclosure Documents contain full particulars of:             (i)   any loan relationships to which the Company is a party to which paragraph 8 of Schedule 15, FA 1996 has applied or will apply on the occurrence of a relevant event (within the meaning of paragraph 8(2) of Schedule 15, FA 1996) ;                 57 --------------------------------------------------------------------------------             (ii)   the amount of any deemed chargeable gain or deemed allowable loss that has arisen or will arise on the occurrence of such relevant event; and             (iii)   any election made pursuant to paragraph 9 of Schedule 15, FA 1996.         (e)   The Company has not entered into any transaction to which paragraph 11 of Schedule 9, FA 1996 applies. 21.3   Corporation tax—groups of companies     The Company is not, and has not been, for any purposes related to Taxation, a member of any group of companies. 21.4   Close companies     21.4.1   Close company status         The Company has at all times been a close company within the meaning of sections 414 and 415, ICTA 1988.     21.4.2   Close investment-holding company status         The Company has not in any accounting period beginning after 31st March, 1989 been a close investment-holding company as defined in section 13A, ICTA 1988.     21.4.3   Distributions         No distribution within section 418, ICTA 1988 has ever been made by the Company.     21.4.4   Loans to participators         Any loans or advances made or agreed to be made by the Company within sections 419 and 420 or 422, ICTA 1988 have been disclosed and the Company has not released or written off or agreed to release or write off the whole or any part of any such loans or advances. 21.5   Inheritance tax     21.5.1   No transfers of value and associated operations         The Company has made no transfers of value within sections 94 and 202, ITA nor has the Company received a transfer of value such that liability might arise under section 199, ITA nor has the Company been party to associated operations in relation to a transfer of value as defined by section 268, ITA.     21.5.2   Inland Revenue charge         There is no unsatisfied liability to inheritance tax attached to or attributable to the Shares or any asset of the Company and none of them are subject to an Inland Revenue charge as mentioned in section 237 and 238, ITA.     21.5.3   Power of sale, mortgage or charge         No asset owned by the Company nor the Shares are liable to be subject to any sale, mortgage or charge by virtue of section 212, ITA. 21.6   VAT     21.6.1   Returns and payments         (a)   The Company is a taxable person duly registered for the purposes of VAT.                 58 --------------------------------------------------------------------------------         (b)   The Company has complied with all statutory provisions, rules, regulations, orders and directions in respect of VAT, has promptly submitted accurate returns, and the Company maintains full and accurate VAT records, has never been subject to any interest, forfeiture, surcharge or penalty nor been given any notice under sections 59, 63 or 64, VATA nor been given a warning within section 76(2), VATA nor has the Company been required to give security under paragraph 4 of Schedule  11, VATA.         (c)   VAT has been duly paid or provision has been made in the Accounts for all amounts of VAT for which the Company is liable.     21.6.2   Taxable supplies and input tax credit         All supplies made by the Company are taxable supplies and the Company has not been and will not be denied full credit for all input tax by reason of the operation of sections 25 and 26, VATA and regulations made thereunder or for any other reasons and no VAT paid by the Company is not input tax as defined in section 24, VATA and regulations made thereunder.     21.6.3   VAT groups         The Company is not and has not been for VAT purposes a member of any group of companies and no act or transaction has been effected in consequence whereof the Company is or may be held liable for any VAT arising from supplies made by another company and no direction has been given nor will be given by H M Customs & Excise under Schedule 9A, VATA as a result of which the Company would be treated for the purposes of VAT as a member of a group.     21.6.4   Transactions between connected persons         The Company has not been or agreed to be party to any transaction or arrangement in relation to which a direction has been or could be made under paragraph 1 of Schedule 6, VATA or to which paragraph 2(3A) of Schedule 10, VATA applied.     21.6.5   Charge to VAT as agent or representative         The Company is not and has not agreed to become liable for VAT by virtue of sections 47 and 48, VATA.     21.6.6   VAT and Properties         The Company or its relevant associate for the purposes of paragraph 3(7) of Schedule 10, VATA has exercised the election to waive exemption from VAT (pursuant to paragraph 2 of Schedule 10, VATA) only in respect of those Properties listed (as having been the subject of such an election) in the Disclosure Documents and:         (a)   neither the Company nor its relevant associate has any intention or obligation to exercise such an election in respect of any other of the Properties;         (b)   all things necessary for the election to have effect have been done and in particular any notification and information required by paragraph 3(6) of Schedule 10, VATA has been given and any permission required by paragraph 3(9) of Schedule 10, VATA has been properly obtained;         (c)   a copy of the notification and of any permission obtained from H M Customs & Excise in connection with the election is included in the Disclosure Documents;                 59 --------------------------------------------------------------------------------         (d)   no election has or will be disapplied or rendered ineffective by virtue of the application of the provisions of paragraph 2 (3AA) of Schedule 10, VATA;         (e)   in no case has the Company charged VAT, whether on rents or otherwise, which is not properly chargeable; and         (f)   the Company has not agreed to refrain from making an election in relation to any of the Properties.     21.6.7   Capital goods scheme         The Company does not own and has not at any time within the period of ten years preceding the date hereof owned any assets which are capital items subject to the Capital Goods Scheme under Part XV of the VAT Regulations 1995.     21.6.8   Bad debt relief         The Company has not made any claim for bad debt relief under section 36, VATA and details of any claim it could make have been disclosed.     21.6.9   Self-billing         The Company has not entered into any self-billing arrangement in respect of supplies made by any other person nor has it at any time agreed to allow any such person to make out VAT invoices in respect of supplies made by the Company. 21.7   Stamp duty     21.7.1   Stamp duty         All stampable documents wheresoever executed (other than those which have ceased to have any legal effect) to which the Company is a party and which is a stampable document have been duly stamped or stamped with a particular stamp denoting that no stamp duty is chargeable. Since the Balance Sheet Date there have been and are no circumstances or transactions to which the Company is or has been a party such that a liability to stamp duty or any penalty in respect of such duty will arise on the Company.     21.7.2   Stamp duty reserve tax         Since the Balance Sheet Date the Company has not incurred any liability to or been accountable for any stamp duty reserve tax and there has been no agreement within section 87(1), FA 1986 which could lead to the Company incurring such a liability or becoming so accountable. 60 -------------------------------------------------------------------------------- SCHEDULE 6 Completion Part 1 On Completion, the Vendors shall deliver to the Purchaser as required by Clause 6.2: 1.certificates from each of the banks at which the Company maintains an account of the amount standing to the credit or debit of all such accounts as at the close of business two Business Days prior to Completion; 2.the cash book balances of the Company as at Completion with statements reconciling such cash book balances and the relevant cheque books with the balances on the bank accounts of the Company as shown by the certificates referred to in paragraph 1 above; 3.the cheque books relating to all the bank accounts of the Company together with confirmation that no cheques have been written by the Company since preparation of the statements referred to in paragraph 2; 4.evidence in the agreed terms that all debts and accounts (if any) between the Company and the Vendors and any Connected Person or Affiliate of any of the Vendors (of the other part) have been fully paid and settled above; 5.the Tax Deed duly executed as a deed by each of the parties thereto other than the Purchaser; 6.transfers of the Shares duly executed by the registered holders thereof in favour of the Purchaser or its nominee(s) together with the original relevant share certificates in the names of such registered holders (or an indemnity in respect thereof in a form acceptable to the Purchaser); 7.such waivers, consents or other documents (including any power of attorney under which any document required to be delivered under Part 1 of this schedule has been executed) in the agreed terms to enable the Purchaser or its nominee(s) to be registered as the holders of the Shares; 8.original certificates in respect of all issued shares in the capital of Sohonet Limited legally or beneficially owned by the Company (or an indemnity in respect thereof in a form acceptable to the Purchaser) and duly executed transfers of all such shares in Sohonet Limited as are held by any nominee or trustee for the Company in favour of such persons as the Purchaser shall direct; 9.irrevocable powers of attorney in the agreed terms executed by each of the holders of the Shares in favour of the Purchaser or its nominee(s) to enable the beneficiary (pending registration of the transfers of the Shares) to exercise all voting and other rights attaching to the Shares and to appoint proxies for this purpose; 10.the statutory registers and minute books (properly written up to the time immediately prior to Completion), the common seal (if any), the certificate of incorporation and (if applicable) any certificate of incorporation on change of name of the Company; 11.the documents of title to the Properties; 12.the written resignations in the agreed terms of those Directors specified by the Purchaser and the secretary or secretaries of the Company in the agreed form from their respective offices, such resignations to take effect from Completion; 13.the written resignation of the auditors of the Company in the agreed terms to take effect from Completion containing the statements referred to in section 394(1), CA 85 that they consider there are no such circumstances as are mentioned in that section and confirming that they have deposited or shall deposit that statement in accordance with section 394(2), CA 85 at the respective registered offices of the Company; 61 -------------------------------------------------------------------------------- 14.employment agreements in the agreed form, duly executed by Stephen John Clayton, Ronald Arthur Eagle, and Michael Henry Farrell; 15.a deed of release in the agreed form from each secured creditor of the Company; 16.evidence in a form satisfactory to the Purchaser of the amounts required to effect repayment of all amounts outstanding to the Company's credit providers in respect of their respective finance leases; 17.assignments of intellectual property in the agreed form, duly executed by Stephen John Clayton, Ronald Arthur Eagle, Michael Henry Farrell, Graham John Papworth and Martin Hartas Armitage; 18.detailed projections of anticipated Company statements of income and statements of cashflows for each of the 12 calendar months ending June 30, 2001 together with related balance sheets; and 19.a legal opinion in form and substance satisfactory to the Purchaser from the Vendor's solicitors. 62 -------------------------------------------------------------------------------- Part 2 On Completion, the Vendors shall cause a board meeting of the Company to be held at which: 1.the said transfers of the Shares shall be passed for registration and registered (subject to the same being duly stamped, which shall be at the cost of the Purchaser); 2.the resignations referred to in paragraphs 12 and 13 of Part 1 of this Schedule shall be tendered and accepted so as to take effect at the close of the meeting; 3.persons nominated by the Purchaser (in the case of directors subject to any maximum number imposed by the relevant articles of association) shall be appointed additional directors and appointed secretaries; 4.all existing instructions and authorities to bankers shall be revoked and shall be replaced with alternative instructions, mandates and authorities in such form as the Purchaser may require; 5.the registered office shall be changed as directed by the Purchaser; 6.the accounting reference date shall be changed as directed by the Purchaser; and 7.KPMG shall be appointed auditors; and 8.service agreements in respect of Messrs. Farrell, Clayton and Eagle shall be approved. 63 -------------------------------------------------------------------------------- SCHEDULE 7 Intellectual Property Part 1 Registered Intellectual Property [None] Part 2 Material Unregistered Intellectual Property Part 3 Licences—In     See the disclosure against warranty 18.3.1(a) in the Disclosure Letter Part 4 Licences—Out     See the disclosure against warranty 18.3.1(a) in the Disclosure Letter 64 -------------------------------------------------------------------------------- SCHEDULE 8 Estimated Indebtedness 65 -------------------------------------------------------------------------------- SIGNED by Stephen John Clayton     ) -------------------------------------------------------------------------------- SIGNED by Ronald Arthur Eagle     ) -------------------------------------------------------------------------------- SIGNED by Michael Henry Farrell     ) -------------------------------------------------------------------------------- SIGNED by Michael Henry Farrell as attorney for Diane Ellen Buck     ) -------------------------------------------------------------------------------- SIGNED by Graham Charles Papworth     ) -------------------------------------------------------------------------------- SIGNED by Graham Charles Papworth as attorney for Sybil Ellen Papworth)     ) -------------------------------------------------------------------------------- SIGNED by Graham Charles Papworth as attorney for Edmund Charles Papworth     ) -------------------------------------------------------------------------------- SIGNED by Graham Charles Papworth as attorney for Lucinda Jane Papworth     ) -------------------------------------------------------------------------------- SIGNED by Graham Charles Papworth as attorney for Martin Hartas Armitage     ) -------------------------------------------------------------------------------- SIGNED by ___________________ and     ) -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     )   for and on behalf of     ) -------------------------------------------------------------------------------- FOUR MEDIA COMPANY (UK) LIMITED   ) )   -------------------------------------------------------------------------------- Exhibit A Invoices -------------------------------------------------------------------------------- Exhibit B Form of Loan Note -------------------------------------------------------------------------------- QuickLinks TABLE OF CONTENTS SCHEDULE 1 The Vendors SCHEDULE 2 Directors of the Company SCHEDULE 3 Part 1 Leases SCHEDULE 4 The Company SCHEDULE 5 Part 1 General Warranties Part 2 Taxation Warranties SCHEDULE 6 Completion Part 1 Part 2 SCHEDULE 7 Intellectual Property Part 1 Registered Intellectual Property [None] Part 2 Material Unregistered Intellectual Property Part 3 Licences—In Part 4 Licences—Out SCHEDULE 8 Estimated Indebtedness Exhibit A Invoices Exhibit B Form of Loan Note

QuickLinks -- Click here to rapidly navigate through this document SOFTWARE LICENSE AND MAINTENANCE AGREEMENT This Software License and Maintenance Agreement ("Agreement") is made and entered into as of the 16th day of May, 2001 by and between Gentle Dental Service Corporation, a Washington corporation, with offices at 222 North Sepulveda Blvd., Suite 740, El Segundo, CA 90245 ("GDSC") and MON Acquisition Corp., a Florida corporation, with offices at One South School Avenue, Suite 1000, Sarasota, FL 34337 ("MON"). 1.  License Grant, Restrictions and Payment. 1.1  Subject to the provisions of this Agreement, GDSC grants to MON a worldwide, nonexclusive, nonsublicensable (except as expressly permitted by this Agreement), nontransferable (except as expressly permitted by this Agreement) right and license to use GDSC's proprietary computer software programs described on Exhibit A attached hereto (collectively the "Software"), media containing the Software, and the Documentation (as such term is defined below) on one computer server owned, controlled or operated by or for the benefit of MON at one location specified on Exhibit A (the "Installation Site"), provided that such Installation Site meets the computer hardware and software requirements specified on Exhibit A (the "Computer Hardware and Software Requirements") and the telecommunications requirements specified on Exhibit A (the "Telecommunications Requirements"), for an unlimited number of users at the MON facilities specified on Exhibit A (each a "User Site"), commencing upon the consummation of the Closing pursuant to that certain Purchase Agreement, dated April 17, 2001, among InterDent, Inc., GDSC, DentalCo Management Services of Maryland, Inc. and MON (the "Purchase Agreement") (the date of such Closing is referred to herein as the "Effective Date") and continuing thereafter for a period of five (5) years ("Initial License Term") unless terminated earlier in accordance with this Agreement. 1.1.1  MON shall have the right to make back-up or archival copies of the Software as is reasonably necessary for MON's security and testing purposes, but may not make any other copies (in whole or in part) except as explicitly provided in this Agreement, and such copies shall be stored at the Installation Site or other secure location. The foregoing right shall not be construed to permit MON to enable Installation Sites and/or User Sites in excess of the number permitted in Section 1.1, or to permit MON to create derivative works of the Software. Every such copy shall include the same copyright, trademark, restricted rights and other proprietary notices as are included by GDSC on the media containing the authorized copy(ies) of the Software originally provided by GDSC. 1.1.2  MON may transfer the license to use the Software from one Installation Site to another location and/or from one User Site to another without payment of any additional license fee, so long as the use remains consistent with the scope of the license for the Software as specified in this Section 1 (each of which shall then be considered the Installation Site or a User Site, as the case may be); provided that MON shall not transfer the license to use the Software to any Installation Site located outside of the United States without the prior written consent of GDSC; and provided further that MON's and GDSC's obligations under Sections 2 and 3 hereunder shall only arise upon MON's transfer of the license to use the Software from the Initial Installation Site (as defined in Exhibit A) to a new Installation Site. The license granted hereunder includes the right to access and use Software in connection with any associated or interconnected networks (excluding the Internet), peripherals, equipment or devices as specified in the Documentation. 1.1.3  The license granted hereunder shall include the right of other parties, including but not limited to MON's employees, agents, consultants and representatives to use the Software through the User Sites and/or at the Installation Site; provided however, that such use is controlled, operated and/or conducted by MON. Notwithstanding the foregoing, in the event MON enters into a facilities management, outsourcing or other comparable type agreement, wherein all or any part of certain computer hardware, software, network, or other information technology services are to be performed by one or more third parties (the "Sourcing Vendor") on behalf of MON, MON may sublicense its license under this Agreement to such Sourcing Vendor, provided that the Sourcing Vendor, MON and Licensor execute a supplemental agreement specifying the Sourcing -------------------------------------------------------------------------------- Vendor's commitment to be bound by this License Agreement, including without limitation the non-disclosure, confidentiality, use and other restrictions contained in this Agreement. The supplemental agreement is not intended to, and will not, modify or revise the terms and conditions contained in this Agreement, including the provisions relating to maintenance and fees, and confidentiality, non-disclosure, use and other restrictions. 1.1.4  MON may sublicense its license under this Agreement to MON's Affiliates (collectively referred to as "MON Affiliates"), provided that each such MON Affiliate, MON and Licensor execute a supplemental agreement specifying the MON Affiliate's commitment to be bound by this License Agreement, including without limitation the non-disclosure, confidentiality, use and other restrictions contained in this Agreement. The supplemental agreement is not intended to, and will not, modify or revise the terms and conditions contained in this Agreement, including the provisions relating to fees, confidentiality, non-disclosure, use and other restrictions. For purposes of this Agreement, "Affiliate" means with respect to any person or entity (the "Relevant Person"), any other person or entity which either (a) directly or indirectly owns or controls the Relevant Person, or (b) is directly or indirectly owned or controlled by the Relevant Person, or (c) is under direct or indirect common control with the Relevant Person. The term "control" (and its corollaries) includes, without limitation, ownership of equity or other interests representing a majority of total voting power in an entity, or ownership of equity or other interests sufficient to direct the management and/or operations of an entity. 1.2  Except as expressly authorized in this Agreement, MON will not, directly or indirectly (including causing or permitting any of the following to occur) (a) copy or modify the Software or Documentation; (b) reverse engineer, reprogram, decompile, translate or disassemble or otherwise attempt to derive the source code of the Software; or (c) distribute, disclose, rent, lease or transfer the Software to any third party. 1.3  All rights and licenses granted under or pursuant to this Agreement by GDSC to MON are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the United States Bankruptcy Code (the "Code"), licenses to rights to "intellectual property" as defined under the Code. The parties agree that MON, as licensee of such rights under this Agreement, shall retain and may fully exercise all of its rights and elections under the Code. The parties further agree that, in the event of the commencement of bankruptcy proceedings by or against GDSC under the Code, MON shall be entitled to retain all of its rights under this Agreement. 1.4  In consideration for the rights and licenses granted hereunder during the Initial License Term, MON shall pay GDSC a one-time license fee of two million dollars ($2,000,000.00) (the "License Fee") in accordance with the following payment schedule: (a) five hundred thousand dollars ($500,000.00) due upon the Effective Date; (b) seven hundred and fifty thousand dollars ($750,000.00) due on or before September 15, 2001; and (c) seven hundred and fifty thousand dollars ($750,000.00) due on or before March 15, 2002. 1.5  MON shall have the option to continue the license of the Software for an additional term of ten (10) years (the "Renewal License Term") (the Initial License Term and the Renewal License Term shall be collectively referred to herein as the "License Term"). MON shall notify GDSC in writing at least sixty (60) days prior to the expiration of the Initial License Term if it opts to continue to license the Software during the Renewal License Term. The license fee applicable to continuation of the Software license during the Renewal License Term shall be mutually agreed upon in good faith by the parties at least thirty (30) days prior to the expiration of the Initial License Term (such date thirty (30) days prior to the expiration of the Initial License Term shall be referred to herein as the "Deadline"), using as a benchmark the average price for the dental practice management software and systems then existing in the commercial marketplace, which are substantially comparable in utility and capacity to the Software hereunder, with the three (3) highest subscriber bases at that time. In the event the parties are unable to mutually agree on renewal license fees for the Renewal License Term prior to the Deadline, then the parties shall select a neutral third party knowledgeable in the industry related to the Software ("NTP"), which party shall be selected by mutual agreement of the parties within ten (10) days of the Deadline. -------------------------------------------------------------------------------- In the event the parties are unable to agree upon an NTP, each party shall select one NTP, the two NTPs so selected shall select a third NTP, and the three NTPs shall, by at least a majority vote, determine and communicate their decision in writing to both parties hereto as to an appropriate renewal license fee applicable to the Renewal License Term involved using the benchmark specified herein. The costs and expenses of the aforementioned process shall be borne equally by the parties. The communication of the NTPs' decision shall be binding upon both parties for purposes of establishing such renewal license fee applicable to the Renewal License Term, but shall not be construed as obligating MON to agree to the Renewal License Term if MON determines it is not in its best interests to do so; provided, however, that should MON determine not to agree to the Renewal License Term, MON shall reimburse GDSC for those costs and expenses it incurred in connection with the process to determine the renewal license fee. 2.  Delivery, Installation and Acceptance. 2.1  GDSC shall deliver the Software to MON at the Installation Site on or before the scheduled delivery date specified on Exhibit A (the "Scheduled Delivery Date"). GDSC agrees to pay reasonable and customary shipping, handling and in-transit insurance charges (limited to the amount of the replacement cost of the media) from GDSC's facilities to the Installation Site; provided, however, that delivery shall not be deemed complete until the Software is actually delivered to such Installation Site. 2.2  MON shall ensure, by its own efforts and at its own expense, that the Installation Site meets the Computer Hardware and Software Requirements and the Telecommunications Requirements. GDSC shall, thereafter, at no additional charge to MON, install and configure the Software at the Installation Site within thirty (30) days of the later of the date the Software is delivered or the date the Installation Site meets the Computer Hardware and Software Requirements and the Telecommunications Requirements. When the Software has been installed and configured at the Installation Site and has been made ready for use, the parties will promptly commence on-site acceptance testing of the Software. The on-site acceptance test will be conducted for the purpose of demonstrating the Software performs in accordance with the Documentation and any other acceptance test or other criteria and procedures mutually agreed upon by the parties in writing. The on-site acceptance test will be conducted by GDSC, with such assistance and support from MON as is reasonably requested by GDSC. Sample MON input, representative of MON production input, will be provided by MON and utilized by GDSC for the on-site acceptance test. 2.3  On the date that the Software successfully passes the on-site acceptance test ("Acceptance Date"), MON shall notify GDSC in writing of acceptance of the Software. If the Software does not successfully pass the on-site acceptance test, MON shall notify GDSC in writing specifying in reasonable detail in what respects the Software has failed to perform. GDSC shall correct any deficiencies disclosed by the on-site acceptance test and shall repeat the on-site acceptance test until the Software has successfully passed such test. 3.  Documentation and Training. 3.1  Upon delivery of the Software, GDSC agrees to deliver to MON a complete set of Documentation for the Software. For purposes of this Agreement, "Documentation" shall mean the specifications, any user, operator, training and supervisory reference manuals and guides and other documentation and operating instructions available and/or prepared by GDSC hereunder, in physical or electronic form, and sufficient to enable MON to use and operate and understand the use, operation and functionality of the Software. 3.2  GDSC agrees to provide to MON, at no additional charge, a one-time training session in the use, operation and support of the Software, sufficient for ten (10) MON personnel, who are sufficiently trained in the use and maintenance of the standard Microsoft programs that the Software utilizes, to use and operate the Software. As more fully described in Exhibit A, training in routine diagnostics and troubleshooting, as well as routine preventive maintenance techniques and standards for error reporting will be included in such training. The training session shall take place at a time and location mutually agreed upon by the parties. -------------------------------------------------------------------------------- 4.  Source Code Escrow. 4.1  Within ninety (90) days of the Effective Date, GDSC shall deliver to an independent, commercially recognized third party escrow agent, selected and designated by GDSC and reasonably acceptable to MON ("Escrow Agent"), in physical or electronic form: a current and complete copy of the Software, including source code in machine readable form; a copy of associated control statements required for operation, development, maintenance and use of the source code (including control statements for assembly, linkage and other utilities) in machine readable form; flow charts, data file and element descriptions, program specifications, data flows and any other documentation used to describe such programming. Software program listings will be fully self-documented with all appropriate comments on source code line entries and with subroutine headings and functional information, as appropriate. A current and complete copy of all of the foregoing and any other materials required by the terms of this Section 4 to be deposited in escrow is hereinafter referred to as the "Escrow Materials." 4.2  The Escrow Materials shall be deposited by GDSC in accordance with the provisions of this Section 4 and with the escrow deposit agreement signed by both parties hereto and the Escrow Agent, and substantially in the form attached as Exhibit B or in the form as it may be modified by the Escrow Agent ("Escrow Deposit Agreement"). 4.2.1  Within fifteen (15) days of the release by GDSC of any Update or within six (6) months of the last deposit hereunder, whichever occurs earlier, GDSC shall deliver to the Escrow Agent, for deposit in accordance with the Escrow Deposit Agreement, any and all changes to the Escrow Materials which correspond to changes, if any, made to the Software or shall notify the Escrow Agent that no changes were made during the preceding period. All materials deposited shall be considered "Escrow Materials" as the term is used herein. 4.3  In the event (i) GDSC is unwilling to maintain and/or support the Software in accordance with the provisions of Section 6 of this Agreement and such failure is not fully remedied within thirty (30) days of MON's notice to GDSC and is not the result of MON's failure to pay Maintenance Fees to GDSC which are due and owing in accordance with the terms and conditions of this Agreement; (ii) Maintenance and Technical Support Services are terminated pursuant to Section 6.4 because GDSC has not, through the exercise of commercially reasonable efforts, corrected a failure, malfunction, defect or nonconformity which prevents the Software from performing substantially in accordance with the Documentation and which results in a major or primary function or component of the Software being unusable or unavailable to MON, within seventy-five (75) days from the date MON notifies GDSC of the same; (iii) GDSC files a petition for reorganization or bankruptcy under the Code (provided such petition is not dismissed within sixty (60) days of filing); or (iv) a third party(ies) files a petition for involuntary bankruptcy against GDSC under the Code (provided such petition is not dismissed within sixty (60) days of filing); then notwithstanding any other rights and remedies to which MON may be entitled, MON shall immediately have the right to obtain a copy of the Escrow Materials from the Escrow Agent upon written notice as provided in the Escrow Deposit Agreement. In the event that the release conditions referred to in subparagraphs (i), (ii), (iii) or (iv) hereof occur prior to GDSC's delivery of the Escrow Materials to the Escrow Agent as required hereunder and the parties' execution and delivery of the Escrow Deposit Agreement, it is the intent of the parties that the Escrow Materials will be eligible for release by the Escrow Agent to MON as if the Escrow Deposit Agreement had been in full force and effect at such time, following the delivery of the Escrow Materials to the Escrow Agent and the parties execution and delivery of the Escrow Deposit Agreement. 4.4  Any release of Escrow Materials to MON shall remain subject to the confidentiality obligations in this Agreement. Upon release of the Escrow Materials to MON, MON shall have a perpetual right and license to use the Escrow Materials solely for its own internal maintenance and support requirements for the Software. 4.5  GDSC shall have the right, at any time on at least thirty (30) days' written notice to MON and the Escrow Agent, to select and designate a new commercially recognized escrow agent which is reasonably acceptable to MON to replace the Escrow Agent hereunder. Upon such notice, the Escrow -------------------------------------------------------------------------------- Agent shall completely, safely and securely transfer the Escrow Materials to the new escrow agent (which will then become the "Escrow Agent" for all purposes hereunder) at GDSC's sole cost and expense and the Escrow Agent shall confirm such transfer in writing to MON and GDSC. 5.  Ownership. MON acknowledges and agrees that, as between GDSC and MON, GDSC retains all right, title and interest (including all Intellectual Property Rights (as such term is defined below)) in and to the Software provided hereunder and does not convey any proprietary rights or other interest therein to MON, other than the licenses granted pursuant to the terms and conditions of this Agreement. For purposes of this Agreement, "Intellectual Property Rights" means all current and future worldwide copyrights, trade secrets, patents and other patent rights, utility models, mask work rights, moral rights, trademarks, trade names, service marks, and all other intellectual property rights, including all applications and registrations with respect thereto. 6.  Maintenance and Technical Support Services. 6.1  From the Acceptance Date and continuing thereafter in consideration of MON's payment of the applicable maintenance fee specified in Exhibit A ("Maintenance Fee"), GDSC agrees to provide MON with the maintenance and technical support services for the Software specified in this Section 6 ("Maintenance and Technical Support Services"). During the License Term and for a period of one (1) year thereafter, GDSC shall retain complete and accurate books, records and supporting documentation regarding the Maintenance and Technical Support Services provided to and the Maintenance Fees paid by MON. During the License Term and for a period of one (1) year thereafter upon reasonable advance notice to GDSC, GDSC shall provide MON or its external auditors with access to the aforementioned books, records and supporting documentation, for the purpose of conducting an audit. Any such audit will be conducted at MON's expense (except as otherwise provided below), only once annually, and during GDSC's normal business hours at the GDSC location where the relevant books, records and supporting documentation are kept in the normal course of business, and shall be conducted to minimize any disruption to GDSC's business activities. In the event that any such audit reveals that the Maintenance Fees paid by MON exceed the actual costs incurred by GDSC in providing the Maintenance and Technical Support Services by more than four percent (4%), GDSC will immediately pay the difference (i.e., GDSC's actual cost of providing Maintenance and Technical Support Services minus Maintenance Fees paid by MON) and interest thereon at a rate of one and one-half percent (1.5%) per month from the date the Maintenance Fees were paid by MON until the date of such audit, or the maximum amount allowable by law, whichever is less, together with the reasonable costs of such audit. 6.2  GDSC shall correct and repair the Software, following telephonic, electronic or other notice by MON to GDSC's maintenance and technical support staff ("GDSC Staff") of any failure, malfunction, defect or nonconformity which prevents the Software from performing substantially in accordance with the Documentation. 6.3  GDSC shall acknowledge by telephone (or in the same manner in which the request for service was received) a request for service and respond to such request for service at the same performance level and on the same basis as it then currently undertakes for its own benefit. 6.4  When requested by GDSC, MON shall provide GDSC with electronic access to the Software so that GDSC may provide support remotely. MON shall provide a remotely-accessible modem and dedicated telephone line for the aforementioned access, and GDSC shall bear the cost of its telephone calls to such modem. GDSC shall comply with any commercially reasonable security and/or other operational policies and procedures imposed by MON concerning remote access as provided to GDSC. If any failure, malfunction, defect or nonconformity cannot be satisfactorily corrected through telephone, electronic or other remote means, MON may request on-site assistance from GDSC and GDSC shall respond by having maintenance personnel, trained in the Software to be serviced, at the Installation Site where such Software is located within a time period after MON's initial request for service that is commensurate with the performance level it then currently undertakes for its own -------------------------------------------------------------------------------- benefit. GDSC shall use commercially reasonable efforts to correct the applicable failure, malfunction, defect or nonconformity which prevents the Software from performing substantially in accordance with the Documentation, however GDSC cannot guarantee that every failure, malfunction, defect or nonconformity can be satisfactorily corrected. In the event that GDSC cannot, through the exercise of commercially reasonable efforts, correct a failure, malfunction, defect or nonconformity which prevents the Software from performing substantially in accordance with the Documentation and which results in a major or primary function or component of the Software being unusable or unavailable to MON, within seventy-five (75) days from the date MON notifies GDSC of the same, MON's exclusive remedies shall be the right to terminate the Maintenance and Technical Support Services for the Software licensed hereunder and to exercise any of its rights under the Escrow Deposit Agreement. Should MON not elect to terminate the Maintenance and Technical Support Services, GDSC shall continue using commercially reasonable efforts to correct such failure, malfunction, defect or nonconformity for an additional period to be determined by GDSC, but in no event shall such additional period exceed thirty (30) days; if GDSC's efforts are unsuccessful at the conclusion of such period, the Maintenance and Technical Support Services for the Software licensed hereunder shall terminate. 6.5  GDSC shall provide MON with all revisions, updates, improvements, modifications and enhancements to the Software which are produced by GDSC ("Update"). GDSC shall install same and provide such services as are required, if any, to enable MON to continue MON's use of the Software as permitted hereunder. If any such Update adversely affects MON's use of the Software, MON's operations or other systems or processes, in MON's sole judgment, acting reasonably and in good faith, MON may refuse to accept same. If GDSC satisfactorily resolves the problems that gave rise to MON's refusal, MON shall permit GDSC to install the Update. If MON wishes to accept a current Update that requires the installation of a prior Update that MON has refused, MON must accept and permit the installation of the prior Update before receiving the current Update. For purposes of this Agreement, an Update once incorporated into the Software or Documentation shall be considered a part thereof for all purposes hereunder. 6.6  At MON's request and expense, GDSC may, in its reasonable discretion, produce and make available to MON any and all modifications to the Software to enable same to operate in conjunction with any new releases of the operating system identified in the Computer Hardware and Software Requirements, and any other modifications to the Software requested by MON. 6.7  GDSC shall provide revised and/or updated Documentation to correspond to any changes (including Updates) made to the Software, within thirty (30) days of such changes. 6.8  MON may terminate Maintenance and Technical Support Services for the Software licensed hereunder, at any time in whole or in part, upon thirty (30) days' written notice to GDSC. In the event that MON terminates Maintenance and Technical Support Services for the Software (except for a material breach by GDSC), it shall not be entitled to a pro-rata reimbursement of any pre-paid Maintenance Fees. 6.9  Maintenance and Technical Support Services will be provided for the version of the Software which is currently being offered by GDSC. Maintenance and Support Services will be provided for each prior Update of the Software ("Supported Version") for a period of eighteen (18) months following the release of the next Supported Version of the Software. 6.10  GDSC shall not be obligated to correct any failure, malfunction, defect or nonconformity which prevents the Software from performing substantially in accordance with the Documentation that result from the following: (a) an Excusable Delay; (b) use of the Software on equipment or with any other software products other than the equipment and software identified in the Computer Hardware and Software Requirements; (c) use of the Software by MON that deviates from the operating procedures specified in the applicable Documentation; (d) modification, customization, alteration or addition or attempted modification, customization, alteration or addition of the Software undertaken by MON or its agents, assigns, contractors, employees or others under MON's control without the prior written consent of GDSC, except for any Updates installed by MON under the direction or at the request of -------------------------------------------------------------------------------- GDSC; (e) MON's failure to implement Updates of the Software provided to MON at no additional charge or pursuant to Section 6.6, except for those Updates which are rejected by MON pursuant to the terms and conditions set forth in Section 6.5; and (f) failure by MON to reasonably respond to any reasonable action plan provided by GDSC pursuant to a Support Call by MON. 7.  Warranties. 7.1  GDSC represents and warrants to MON that: (a) it has the power and authority to enter into this Agreement and to perform its obligations hereunder and that its obligations hereunder are not in conflict with any other GDSC obligations; (b) the Software is free of any liens that would interfere with MON's use of the Software and Documentation as permitted hereunder; (c) all services performed by GDSC hereunder will be performed in a competent and professional manner by qualified personnel with the skill, training and background necessary to accomplish their assigned tasks, and will conform to MON's requirements hereunder; (d) GDSC is the owner of and/or is authorized to license the Software and Documentation furnished to MON hereunder; (e) the Software will perform substantially in accordance with its Documentation for a period of ninety (90) days following the Acceptance Date; and (f) immediately prior to the Scheduled Delivery Date, GDSC will scan the Software with a commercially recognized anti-virus software program, and will deliver the Software to MON free of any "virus", "worm", "trojan horse", "self destruction", "disabling", "lock out", or "metering" device (as such terms are understood in the computer industry) that may be found during such scan and which could impair MON's use of the Software. 7.2  In the event of any breach of clause (e) of Section 7.1, GDSC will, at its own expense and at no additional charge to MON, use its commercially reasonable efforts to supply MON with a corrected version of the Software in accordance with the terms and conditions of Section 6 of this Agreement. In the event of a breach of clause (c) of Section 7.1, GDSC will, at its own expense and at no additional charge to MON, use its commercially reasonable efforts to correct any material nonconforming aspect of its performance as soon as possible after MON has notified GDSC of such breach, consistent with Section 6 of this Agreement. Except for the gross negligence and willful misconduct of GDSC and/or as otherwise provided in Section 6, the foregoing states MON's sole and exclusive remedies and GDSC's sole liability in the event of a breach of clauses (e) or (c) of Section 7.1. 7.3  MON represents and warrants to GDSC that it has the power and authority to enter into this Agreement, and its obligations hereunder are not in conflict with any other MON obligations. 7.4  EXCEPT AS SPECIFICALLY PROVIDED IN SECTION 7 OF THIS AGREEMENT, NEITHER PARTY MAKES ANY OTHER REPRESENTATIONS OR WARRANTIES, AND THE WARRANTIES PROVIDED IN THIS SECTION 7 ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT OF THIRD PARTY RIGHTS. 8.  Intellectual Property Indemnity. 8.1  GDSC agrees to defend and/or handle at its own expense, any claim or action against MON, its affiliates and/or their respective officers, directors, employees and agents for actual or alleged infringement of any Intellectual Property Right, based upon the Software or Documentation furnished hereunder by GDSC or based on MON's use thereof. GDSC further agrees to indemnify and hold MON harmless from and against any and all liabilities, losses, costs, damages and expenses (including reasonable attorneys' fees) associated with any such claim or action. GDSC shall have the sole right to conduct the defense of any such claim or action and all negotiations for its settlement or compromise, unless otherwise mutually agreed to in writing. 8.2  If any Software or Documentation furnished hereunder become, or in GDSC's opinion are likely to become, the subject of any such claim or action, then, GDSC, at its sole expense may either: (a) procure for MON the right to continue using same as contemplated hereunder; (b) modify same to render same non-infringing (provided such modification does not adversely affect MON's use as -------------------------------------------------------------------------------- contemplated hereunder); or (c) replace same with equally suitable, functionally equivalent, compatible, non-infringing products, materials and/or services. 8.3  GDSC will have no liability for any claim alleging infringement of any Intellectual Property Right that results from the (a) use of other than the then-latest Update of the Software, solely to the extent such infringement could have been avoided by use of the then-latest Update of the Software, and such then-latest Update had been made available to MON at no additional charge or pursuant to Section 6.6, but MON, after having been notified by GDSC of actual or possible infringement, chose to continue to use the prior Update, (b) modification of the Software made by any party other than GDSC or GDSC's designee, (c) unauthorized use of a combination of the Software with other materials not provided by GDSC that is inconsistent with the Documentation therefor, or (d) use of the Software outside the scope of the license granted under this Agreement without the prior written consent of an officer of GDSC. 8.4  THE FOREGOING PROVISIONS IN THIS SECTION 8 STATE THE ENTIRE LIABILITY AND OBLIGATIONS OF GDSC, AND THE EXCLUSIVE REMEDY OF MON, WITH RESPECT TO ANY ACTUAL OR ALLEGED INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHT BY THE SOFTWARE OR DOCUMENTATION, AND (B) ANY BREACH OF THE WARRANTY IN SECTION 7.1(d). 9.  Confidential Information. 9.1  GDSC agrees to regard and preserve as confidential all information related to the business and activities of MON, the MON Affiliates and their respective customers, clients, suppliers and other entities with whom MON does business, that may be obtained by GDSC as a result of this Agreement (the "MON Confidential Information"). GDSC agrees to hold the MON Confidential Information in trust and confidence for MON, take such precautions (but no less than reasonable precautions) to protect the confidentiality of the MON Confidential Information and not to disclose the MON Confidential Information to any person, firm or enterprise, or use (directly or indirectly) the MON Confidential information for its own benefit or the benefit of any other party, unless authorized by MON in writing; provided, however, that it may disclose the MON Confidential Information to MON's employees, agents, contractors and advisors who need to know the MON Confidential Information to enable GDSC to perform its obligations and exercise its rights under this Agreement, who are advised of the confidential and proprietary nature of the MON Confidential Information and who are either subject to written nondisclosure obligations no less restrictive than those contained in this Agreement or who are otherwise subject to a duty of loyalty and confidentiality to GDSC. 9.2  MON agrees to regard and preserve as confidential all information related to the business and activities of GDSC and its customers, clients, suppliers and other entities with whom GDSC does business, that may be obtained by MON as a result of this Agreement (including without limitation the Software) (the "GDSC Confidential Information"). MON agrees to hold the GDSC Confidential Information in trust and confidence for GDSC, take such precautions (but no less than reasonable precautions) to protect the confidentiality of the GDSC Confidential Information and not to disclose the GDSC Confidential Information to any person, firm or enterprise, or use (directly or indirectly) any GDSC Confidential Information for its own benefit or the benefit of any other party, unless authorized by GDSC in writing; provided, however, that it may disclose the GDSC Confidential Information to MON's employees, agents, contractors and advisors who need to know the GDSC Confidential Information to enable MON to perform its obligations and exercise its rights under this Agreement, who are advised of the confidential and proprietary nature of the GDSC Confidential Information and who are either subject to written nondisclosure obligations no less restrictive than those contained in this Agreement or who are otherwise subject to a duty of loyalty and confidentiality to MON. 9.3  Information shall not be considered Confidential Information to the extent, but only to the extent, that such information is: (a) already known to the receiving party free of any restriction at the time it is obtained from the other party; (b) subsequently learned from an independent third party free of any restriction and without breach of this Agreement; (c) is or becomes publicly available through no -------------------------------------------------------------------------------- wrongful act of either party; or (d) is independently by one party without reference to any Confidential Information of the other. 9.4  If either party is directed to disclose the Confidential Information of the other party by operation of law or in connection with a judicial or governmental proceeding or inquiry, it will promptly notify the other party and will assist the other party in seeking a suitable protective order or assurance of confidential treatment and in taking any other steps deemed reasonably necessary by the other party to preserve the confidentiality of any such Confidential Information. 9.5  Each party acknowledges and agrees that, in the event of a breach or threatened breach of any of the foregoing provisions, the other will have no adequate remedy in money damages and, accordingly, shall be entitled to seek injunctive relief against such breach or threatened breach; provided, however, that no specification of a particular legal or equitable remedy shall be construed as a waiver, prohibition or limitation of any legal or equitable remedies in the event of a breach hereof. 10.  General. 10.1  Liability.     10.1.1  IN NO EVENT WILL EITHER PARTY BE LIABLE, TO THE OTHER OR TO ANY THIRD PARTY, FOR ANY SPECIAL, INDIRECT, INCIDENTAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, INCLUDING LOST PROFITS, IN ANY MANNER IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT, REGARDLESS OF THE FORM OF ACTION OR THE BASIS OF THE CLAIM OR WHETHER OR NOT THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED, HOWEVER, THAT THE FOREGOING LIMITATION OF LIABILITY SHALL NOT APPLY TO DAMAGES RESULTING FROM (A) THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH PARTY; (B) A BREACH OF SUCH PARTY'S CONFIDENTIALITY OBLIGATIONS HEREUNDER; AND/OR (C) IN THE CASE OF GDSC, GDSC'S INDEMNIFICATION OBLIGATIONS HEREUNDER.     10.1.2  IN ADDITION, EACH PARTY'S LIABILITY IN THE AGGREGATE UNDER THIS AGREEMENT WILL NOT, IN ANY EVENT, EXCEED THE AMOUNTS ACTUALLY PAID TO GDSC BY MON UNDER THIS AGREEMENT DURING THE TWELVE (12) MONTHS PRECEDING THE DATE THE CLAIM AROSE; PROVIDED, HOWEVER, THAT THE FOREGOING LIMITATION OF LIABILITY SHALL NOT APPLY TO DAMAGES RESULTING FROM (A) THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH PARTY; (B) A BREACH OF SUCH PARTY'S CONFIDENTIALITY OBLIGATIONS HEREUNDER; AND/OR (C) IN THE CASE OF GDSC, GDSC'S INDEMNIFICATION OBLIGATIONS HEREUNDER. 10.2  Excusable Delay. In no event shall either party be liable to the other for any delay or failure to perform due to causes beyond the reasonable control and without the fault or negligence of the party claiming excusable delay (each, an "Excusable Delay"). 10.3  Termination; Effect of Termination.     10.3.1  In the event of a material breach of this Agreement by GDSC, MON may (reserving cumulatively all other remedies and rights under this Agreement and in law and in equity) terminate this Agreement, in whole or in part, by giving GDSC thirty (30) days' written notice thereof; provided, however, that any such termination shall not be effective if the breach has been cured prior to the expiration of said thirty (30) days.     10.3.2  In the event of a material breach of this Agreement by MON, GDSC may (reserving cumulatively all other remedies and rights under this Agreement and in law and in equity) terminate this Agreement, in whole or in part, by giving MON thirty (30) days' written notice thereof; provided, however, that any such termination shall not be effective if the breach has been cured prior to the expiration of said thirty (30) days. --------------------------------------------------------------------------------     10.3.3  Upon termination: (a) all provisions of this Agreement shall terminate (subject to Section 10.11 of this Agreement); (b) MON shall remain obligated to pay GDSC any outstanding amounts due and payable to GDSC under this Agreement; (c) MON shall immediately discontinue use of the Software and Documentation (except as otherwise specified in Section 10.3.4) and GDSC Confidential Information and within ten (10) days certify in writing to GDSC that all copies of the Software, Documentation and GDSC Confidential Information have either been returned to GDSC or destroyed in accordance with GDSC's specific instructions; and (d) GDSC shall immediately discontinue use of MON Confidential Information and within ten (10) days certify in writing to MON that the MON Confidential Information, together with all copies thereof, have either been returned to MON or destroyed in accordance with MON's specific instructions.     10.3.4  In the event of any termination of this Agreement by MON pursuant to Section 10.3.1, MON shall, effective as of the date of such termination, have the continued right and license to use the Software and Documentation until such time as MON is able to replace the same with a substantially similar product and implement such product at the User Sites (not to exceed six (6) months), without any additional charge, but otherwise subject to and in accordance with the provisions of this Agreement. 10.4  Notices. Unless otherwise specified in this Agreement, all notices shall be in writing and delivered personally, mailed, first class mail, postage prepaid, or delivered by confirmed electronic or digital means, to the addresses set forth at the beginning of this Agreement and to the attention of the undersigned. Either party may change the addresses or addressees for notice by giving notice to the other. All notices shall be deemed given on the date personally delivered, when placed in the mail as specified or when electronic or digital confirmation is received. 10.5  Advertising or Publicity. Neither party shall use the name or marks, refer to or identify the other party in advertising or publicity releases, promotional or marketing correspondence to others without first securing the written consent of such other party. 10.6  Assignment. Neither party may assign this Agreement and/or any rights and/or obligations hereunder without the prior written consent of the other party and any such attempted assignment shall be void; provided however, that MON may assign this Agreement and/or any of its rights hereunder, and/or delegate any of its obligations hereunder to a MON Affiliate or a party acquiring all or substantially all of its assets upon written notice to GDSC, provided that such permitted assignee agrees in writing to be bound by and comply with all the terms and conditions of this Agreement. GDSC may assign this Agreement and/or any of its rights hereunder, and or delegate any of its obligations hereunder to a GDSC Affiliate or a party acquiring all or substantially all of its assets upon written notice to MON, provided that such permitted assignee agrees in writing to be bound by and comply with all of the terms and conditions of this Agreement. This Agreement shall be binding upon the parties' permitted assigns and successors and references to each party shall include such assigns and successors. 10.7  Governing Law, Jurisdiction and Attorneys' Fees. The provisions of this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (excluding any conflict of law rule or principle that would refer to the laws of another jurisdiction). Each party hereto irrevocably submits to the jurisdiction of the state and federal courts located in Wilmington, Delaware, in any action or proceeding arising out of or relating to this Agreement, and each party hereby irrevocably agrees that all claims in respect of any such action or proceeding must be brought and/or defended in any such court; provided, however, that matters which are under the exclusive jurisdiction of the federal courts shall be brought in the Federal District Court for the District of Delaware. Each party hereto consents to service of process by any means authorized by the applicable law of the forum in any action brought under or arising out of this Agreement, and each party irrevocably waives, to the fullest extent each may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING -------------------------------------------------------------------------------- HEREUNDER. In the event any suit or other legal proceeding is brought for the enforcement of any of the provisions of this Agreement, the parties hereto agree that the prevailing party shall be entitled to recover from the other party upon final judgment on the merits reasonable attorneys' fees (and sales taxes thereon, if any), including attorneys' fees for any appeal, and costs incurred in bringing such suit or proceeding. 10.8  Amendment and Waiver; Interpretation. No modification, course of conduct, amendment, supplement to or waiver of this Agreement or any provisions hereof shall be binding upon the parties unless made in writing and duly signed by both parties. At no time shall any failure or delay by either party in enforcing any provisions, exercising any option, or requiring performance of any provisions, be construed to be a waiver of same. If any of the provisions of this Agreement are held invalid, illegal or unenforceable, the remaining provisions shall be unimpaired. Headings are for reference and shall not affect the meaning of any of the provisions of this Agreement.  For the purposes of this Agreement, the term "including" means "including but not limited to" unless otherwise expressly indicated. 10.10  Entire Agreement. The exhibits attached to this Agreement are incorporated by reference and constitute a part of this Agreement as if fully set forth herein. This Agreement constitutes the entire agreement between the parties and supersedes any prior or inconsistent agreements, negotiations, representations and promises, written or oral, regarding the subject matter. 10.11  Survival. Any provisions of this Agreement which must survive the expiration or termination of this Agreement in order to give effect to their meaning will survive any such expiration or termination of this Agreement. 10.12  Dispute Escalation Process. The parties will attempt in good faith to promptly resolve any controversy or claim arising out of or relating to this Agreement by negotiations between executives of the parties. If a controversy or claim should arise, the Chief Information Officers, or their superiors, will meet in person or phone, as they decide, at least once and will attempt to resolve the matter. Either Chief Information Officer may require the other to meet within five (5) days at a mutually agreed upon time. If the matter has not been resolved within seven (7) days of their first meeting, or a request for such meeting if no meeting occurs, the Chief Information Officers shall refer the matter to senior executives, who shall have authority to settle the dispute (the "Senior Executives"). The Senior Executive for GDSC shall be its chief executive officer or his designee and the Senior Executive of MON shall be its chief executive officer, or his/her designee. Thereupon, the Chief Information Officers shall promptly prepare and exchange memoranda stating the issues in dispute, and their positions, summarizing the negotiations which have taken place, and attaching relevant documents. The Senior Executives will meet in person or by telephone within five (5) days of the end of the seven (7) day period referred to above, at a mutually agreed upon time and, if an in-person meeting is mutually agreed upon, a mutually agreed upon location. If the meeting is in person, the first meeting shall be held at the offices of the Chief Information Officer receiving the request to meet. If more than one in-person meeting is held, the in-person meetings shall be held in rotation at the offices of GDSC and MON. If the matter has not been resolved within ten (10) days of the first meeting of the Senior Executives (which period may be extended by mutual agreement), the parties may thereafter resort to litigation. During the course of negotiations between the representatives, all reasonable requests made by one party to the other for nonprivileged information will be honored in order that each of the parties may be fully informed of the circumstances relevant to the dispute. 10.13  Nothing in this Agreement will be construed as creating a joint venture, partnership or employment relationship between GDSC and MON. GDSC and MON are independent contractors. Neither party will have the right, power or implied authority to create any obligation or duty on behalf of the other party. 10.14  MON acknowledges that the Software and MON's use of it is subject to the laws of the United States, including laws regulating exports and transactions with non-U.S. persons and is subject to the laws of foreign countries, including laws regulating the import of products. MON covenants and agrees that it will not, itself or through any parent, subsidiary, Affiliate, employee, agent or other party, export, import, transfer or use the Software in violation of U.S. laws, including the Export -------------------------------------------------------------------------------- Administration Regulations, the International Traffic in Arms Regulations and the regulations administered by the Office of Foreign Assets Control of the Department of the Treasury, or other similar laws of any foreign country which pertain to the purchase, sale, license, transfer, importation or exportation of the subject goods, services and information. Upon written request, not more than once annually, MON shall provide verification of its use of the Software which shall include: (a) a statement that one copy of the Software is installed at the Installation Site; (b) the location of the Installation Site; and (c) the country(ies) in which MON and its sublicensees (if any) are actively using the Software. 10.15  This Agreement may be executed in counterparts, by manual or facsimile signature, each of which will be deemed an original and all of which together will constitute one and the same instrument. 10.16  In the event that GDSC proposes to sell, assign or transfer the Software to a third party that is not an Affiliate, and receives a bona fide offer from such third party, it shall deliver a written notice of the proposed transaction (the "Transaction Notice") to MON. The Transaction Notice shall contain a description of the proposed transaction and the terms thereof, the name of the third party proposing to purchase the Software, and a description of the consideration to be received by GDSC upon the sale of the Software. The delivery of the Transaction Notice shall constitute an irrevocable offer (the "Offer") by GDSC to sell the Software to MON on the terms identified as "material" by GDSC, acting reasonably and in good faith, that are contained in the Transaction Notice. Within ten (10) business days after delivery of the Transaction Notice, MON shall give notice to GDSC of its acceptance of the Offer (the "MON Notice"). If MON fails to deliver such notice within such ten (10) day period, it shall be deemed to have not exercised its right of first refusal under this Section 10.16. IN WITNESS WHEREOF, each party has caused this Agreement to be executed by its duly authorized representatives, as of the day, month and year first written above.   MON Acquisition Corp.     Gentle Dental Service Corporation By: /s/ STEVEN R. MATZKIN   By: /s/ MICHAEL T. FIORE   --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- Name: Steven R. Matzkin   Name: Michael T. Fiore   --------------------------------------------------------------------------------     --------------------------------------------------------------------------------   [Type or Print]     [Type or Print] Title: President   Title: President   --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- EXHIBIT A Software Compass Management System The Compass Management System provides various management reports. The Compass Management System receives data from the QSI System servers by various processes and programs and consolidates it into central data warehouses. Reporting is created from this data and can be made available by using an intranet support system or e-mail system, or through printed reports. Custom QSI Processes: -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Comp.dr Comp.clm ftpspl -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Batch Processes:     ar.bat -------------------------------------------------------------------------------- authos.bat -------------------------------------------------------------------------------- campautorun.bat -------------------------------------------------------------------------------- collect.bat -------------------------------------------------------------------------------- confirmautorun.bat -------------------------------------------------------------------------------- drillfill.bat -------------------------------------------------------------------------------- drprodautorun.bat -------------------------------------------------------------------------------- futuresautorun.bat -------------------------------------------------------------------------------- lostfnd.bat -------------------------------------------------------------------------------- mastersautorun.bat -------------------------------------------------------------------------------- ortscampautorun.bat -------------------------------------------------------------------------------- premiumcheckingautorun.bat -------------------------------------------------------------------------------- stats.bat -------------------------------------------------------------------------------- audit.bat -------------------------------------------------------------------------------- authosautorun.bat -------------------------------------------------------------------------------- cards.bat -------------------------------------------------------------------------------- collectautorun.bat -------------------------------------------------------------------------------- drillfillautorun.bat -------------------------------------------------------------------------------- drprodm.bat -------------------------------------------------------------------------------- goals.bat -------------------------------------------------------------------------------- lostfndautorun.bat -------------------------------------------------------------------------------- planact.bat -------------------------------------------------------------------------------- statsi.bat -------------------------------------------------------------------------------- statsim.bat -------------------------------------------------------------------------------- util.bat -------------------------------------------------------------------------------- statsiautorun.bat -------------------------------------------------------------------------------- auditautorun.bat -------------------------------------------------------------------------------- camp.bat -------------------------------------------------------------------------------- cardsautorun.bat -------------------------------------------------------------------------------- confirm.bat -------------------------------------------------------------------------------- demo.bat -------------------------------------------------------------------------------- drprod.bat -------------------------------------------------------------------------------- futures.bat -------------------------------------------------------------------------------- goalsautorun.bat -------------------------------------------------------------------------------- masters.bat -------------------------------------------------------------------------------- ortscamp.bat -------------------------------------------------------------------------------- premiumchecking.bat -------------------------------------------------------------------------------- recall.bat -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Programs and Databases:     -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- ar.mdb -------------------------------------------------------------------------------- collect.mdb -------------------------------------------------------------------------------- doctorproduction.mdb -------------------------------------------------------------------------------- futures.mdb -------------------------------------------------------------------------------- premiumchecking.mdb -------------------------------------------------------------------------------- statsi.mdb -------------------------------------------------------------------------------- util.mdb -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- audit.mdb -------------------------------------------------------------------------------- camp.mdb -------------------------------------------------------------------------------- confirm.mdb -------------------------------------------------------------------------------- doctorproductionme.mdb -------------------------------------------------------------------------------- goals.mdb -------------------------------------------------------------------------------- lost&fnd.mdb -------------------------------------------------------------------------------- ortscamp.mdb -------------------------------------------------------------------------------- statsime.mdb -------------------------------------------------------------------------------- authorizations.mdb -------------------------------------------------------------------------------- cards.mdb -------------------------------------------------------------------------------- demographics.mdb -------------------------------------------------------------------------------- drillfill.mdb -------------------------------------------------------------------------------- masters.mdb -------------------------------------------------------------------------------- planact.mdb -------------------------------------------------------------------------------- stats.mdb -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Reports:     -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- ageatoff -------------------------------------------------------------------------------- agecratoff -------------------------------------------------------------------------------- ageoff -------------------------------------------------------------------------------- ageoffsupp -------------------------------------------------------------------------------- auditchgexp -------------------------------------------------------------------------------- auditdelpay -------------------------------------------------------------------------------- authreturn -------------------------------------------------------------------------------- campmgmtarcgrp -------------------------------------------------------------------------------- campmgmtexamcap -------------------------------------------------------------------------------- campmgmtexpcap -------------------------------------------------------------------------------- campnewnotx -------------------------------------------------------------------------------- claimsnoort -------------------------------------------------------------------------------- demoptagesgrp -------------------------------------------------------------------------------- demorevzip -------------------------------------------------------------------------------- doctorproductionbt -------------------------------------------------------------------------------- monthlyutilreport -------------------------------------------------------------------------------- orstatus -------------------------------------------------------------------------------- outofbalnoort -------------------------------------------------------------------------------- planactallcy -------------------------------------------------------------------------------- planactcapcy -------------------------------------------------------------------------------- rptpostingreview -------------------------------------------------------------------------------- schreviewgraphoff -------------------------------------------------------------------------------- statsittl -------------------------------------------------------------------------------- statsttl -------------------------------------------------------------------------------- unbillednoort -------------------------------------------------------------------------------- ageatoffnoort -------------------------------------------------------------------------------- agecratoffnoort -------------------------------------------------------------------------------- ageoffnoort -------------------------------------------------------------------------------- ar90daysnoort -------------------------------------------------------------------------------- auditchgtx -------------------------------------------------------------------------------- authgrp2notsent -------------------------------------------------------------------------------- campinctx -------------------------------------------------------------------------------- campmgmtarcoff -------------------------------------------------------------------------------- campmgmtexamffs -------------------------------------------------------------------------------- campmgmtexpffs -------------------------------------------------------------------------------- campnongroup -------------------------------------------------------------------------------- claimsort -------------------------------------------------------------------------------- demoptzip -------------------------------------------------------------------------------- doctorproduction -------------------------------------------------------------------------------- doctorproductionrk -------------------------------------------------------------------------------- orcand -------------------------------------------------------------------------------- otcd -------------------------------------------------------------------------------- outofbalort -------------------------------------------------------------------------------- planactallly -------------------------------------------------------------------------------- planactcaply -------------------------------------------------------------------------------- schreview -------------------------------------------------------------------------------- statsioff -------------------------------------------------------------------------------- statsittlw -------------------------------------------------------------------------------- suppressed -------------------------------------------------------------------------------- unbilledort -------------------------------------------------------------------------------- ageatoffort -------------------------------------------------------------------------------- agecratoffort -------------------------------------------------------------------------------- ageoffort -------------------------------------------------------------------------------- ar90daysort -------------------------------------------------------------------------------- auditdel -------------------------------------------------------------------------------- authopen -------------------------------------------------------------------------------- campmgmt -------------------------------------------------------------------------------- campmgmtdpinc -------------------------------------------------------------------------------- campmgmtexamffscap -------------------------------------------------------------------------------- campmgmtexpffscap -------------------------------------------------------------------------------- campnoplan -------------------------------------------------------------------------------- demoptages -------------------------------------------------------------------------------- demorevref -------------------------------------------------------------------------------- doctorproductionat -------------------------------------------------------------------------------- lostfound -------------------------------------------------------------------------------- orscamp -------------------------------------------------------------------------------- outofbal -------------------------------------------------------------------------------- planactall -------------------------------------------------------------------------------- planactcap -------------------------------------------------------------------------------- prodvsgoals -------------------------------------------------------------------------------- schreviewgraph -------------------------------------------------------------------------------- statsioffw -------------------------------------------------------------------------------- statsoff -------------------------------------------------------------------------------- unbilled -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Intranet Delivery Processes:     -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- OTCMain.asp -------------------------------------------------------------------------------- Qdrillfill.asp -------------------------------------------------------------------------------- Raudit.asp -------------------------------------------------------------------------------- QOTC.asp -------------------------------------------------------------------------------- Rfill.asp -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- ROTC.asp -------------------------------------------------------------------------------- Qaudit.asp -------------------------------------------------------------------------------- --------------------------------------------------------------------------------     Installation Site:  Initially, the Software shall be located at the GDSC offices, at 222 North Sepulveda Blvd., Suite 740, El Segundo, CA 90245 (the "Initial Installation Site"). After a transitional period, MON may transfer the Software to a new Installation Site, pursuant to Section 1.1.2 of the Agreement. Until such transfer from the Initial Installation Site, the date of which shall be mutually agreed upon by GDSC and MON, acting reasonably and in good faith ("Transfer Date"), MON's obligations with respect to the Installation Site shall be suspended.     User Sites:  All existing and future MON-managed dental office locations, not to exceed one hundred (100) in the aggregate, that maintain an intranet connection with the Installation Site; provided, however, that MON may use the Software in accordance with the terms and conditions herein at an additional number of MON dental office locations for an additional license fee to be mutually agreed upon by the parties.     Scheduled Delivery Date:  Transfer Date Training Services: Adequate training will be provided to allow installation site personnel to accomplish: 1.Daily run control and maintenance of processes to capture and consolidate data. 2.Basic trouble detection and correction of source data. 3.Processes and procedures to accomplish the "Month-end" cycle. 4.Maintenance processes and procedures for the databases. 5.Backup and restore processes and procedures. 6.Maintenance and Technical Support Services assistance procedures and trouble call documentation requirements. -------------------------------------------------------------------------------- Maintenance Fee: Monthly Fee: $3375 during the first year of the Initial License Term.   GDSC will review the monthly fee on the first anniversary of the Effective Date and thereafter on an annual basis, and will be entitled to adjust the monthly fee for the subsequent year to reflect: (i) GDSC's actual costs in providing the Maintenance and Technical Support Services; plus (ii) a $500 help desk call fee (which includes 10 calls per month) adjusted pursuant to the Consumer Price Index for All Urban Consumers, All Items (base year 1982-84 = 100) for the United States, published by the United States Department of Labor, Bureau of Labor Statistics (the "Index").   The annual adjustment of the $500 help desk call fee shall be calculated in the following manner: The Index which is published most immediately preceding the first day of the next succeeding year of the License Term (the "Adjustment Index") shall be compared with the Index which is published most immediately preceding the Effective Date (the "Beginning Index"). If the Adjustment Index has increased over the Beginning Index, the $500 help desk call fee during the next succeeding year of the License Term shall be set by multiplying the $500 help desk call fee by a fraction, the numerator of which is the Adjustment Index and the denominator of which is the Beginning Index. If the Index is hereafter converted to a different standard reference base or otherwise revised, the adjustment shall be made with the use of such conversion factor, formula or table for converting the Index as may be published by the United States Department of Labor, Bureau of Labor Statistics.   GDSC's actual costs consist of a pro-rated portion of shared costs (i.e., costs that are not directly attributable to either party but which are required to provide the Maintenance and Technical Support Services). The pro-rated portion shall be calculated in the following manner: 30% of the aggregate total of i) 50% of the IT supervisor's budgeted salary; plus ii) 100% of the IT developer's budgeted salary. Additional call fee: $50 per hour (minimum one hour for calls in excess of 10 calls per month); the additional call fee will be reviewed and adjusted on an annual basis in the same manner as the help desk call fee. Ten (10) support calls per month are included in the monthly fee. Additional call fee applies for support calls in excess of ten (10) in a given month. Additional call fee also applies for calls arising from the causes identified in Section 6.10 of the Agreement. On each anniversary of the Effective Date during the Term, GDSC shall calculate the number of support calls it received from MON during the previous twelve (12) months (the "Annual Support Call Usage"). If the Annual Support Call usage exceeds one hundred twenty (120) calls, GDSC shall charge MON an aggregate equal to the additional call fee for each support call in excess of one hundred twenty (120) calls, less any additional call fees paid by MON during the previous twelve (12) months. If the Annual Support Call Usage is less than one hundred twenty (120) calls, GDSC shall issue a credit to MON in an aggregate amount equal to the additional call fee for each support call between the Annual Support Call Usage and one hundred twenty (120) calls, plus any additional call fees paid by MON during the previous twelve (12) months. --------------------------------------------------------------------------------     Computer Hardware and Software Requirements:  The Installation Site shall have the following computer hardware and software: Compass Server: Compaq Proliant 1850R or equivalent Processor: Dual Pentium II, 500 Mhz (Family 6, Mode 7, Stepping 2) Memory: 512 Mb of RAM Storage: 1-4.3 Gb Hard Drive   3-18.2 Gb Hard Drives Software: Windows NT Version 4.0   Microsoft Office 97 Professional   Monarch   Backup Exec Enterprise Edition Intranet Web Server: Compaq Proliant 1850R or equivalent Processor: Dual Pentium III, 550 Mhz (Family 6, Mode 7, Stepping 3) Memory: 256 Mb of RAM Storage: 2-9.1 Gb Hard Drives     2-18.2 Gb Hard Drives Software: Windows NT Version 4.0   Windows NT Version 4.0 Option Pack The User Sites shall have the following computer hardware and software: Processor: Sufficient to process the required software. Memory: Sufficient to process the required software. Storage: Sufficient to process the required software. Software: Microsoft Internet Explorer Version 5.0 or higher.   Monarch Report Explorer.   Microsoft Snap file viewer add-in.     Telecommunication Requirements:  The Installation Site shall have the following telecommunication capabilities: A TCP/IP protocol local area network with the Compass Server and the Intranet Server as nodes. A TCP/IP protocol wide area network with each QSI Server, designated User Site and the Installation Site LAN as nodes. -------------------------------------------------------------------------------- EXHIBIT B Form of Escrow Deposit Agreement [attached] -------------------------------------------------------------------------------- PREFERRED ESCROW AGREEMENT Account Number ______________________ This agreement ("Agreement") is effective            , 20      among DSI Technology Escrow Services, Inc. ("DSI"),             ("Depositor") and             ("Preferred Beneficiary"), who collectively may be referred to in this Agreement as the parties ("Parties").     A.  Depositor and Preferred Beneficiary have entered or will enter into a license agreement, development agreement, and/or other agreement regarding certain proprietary technology of Depositor (referred to in this Agreement as "the License Agreement").     B.  Depositor desires to avoid disclosure of its proprietary technology except under certain limited circumstances.     C.  The availability of the proprietary technology of Depositor is critical to Preferred Beneficiary in the conduct of its business and, therefore, Preferred Beneficiary needs access to the proprietary technology under certain limited circumstances.     D.  Depositor and Preferred Beneficiary desire to establish an escrow with DSI to provide for the retention, administration and controlled access of the proprietary technology materials of Depositor.     E.  The parties desire this Agreement to be supplementary to the License Agreement pursuant to 11 United States [Bankruptcy] Code, Section 365(n). ARTICLE 1—DEPOSITS 1.1  Obligation to Make Deposit. Upon the signing of this Agreement by the parties, Depositor shall deliver to DSI the proprietary technology and other materials ("Deposit Materials") required to be deposited by the License Agreement or, if the License Agreement does not identify the materials to be deposited with DSI, then such materials will be identified on Exhibit A. If Exhibit A is applicable, it is to be prepared and signed by Depositor and Preferred Beneficiary. DSI shall have no obligation with respect to the preparation, signing or delivery of Exhibit A. 1.2  Identification of Tangible Media. Prior to the delivery of the Deposit Materials to DSI, Depositor shall conspicuously label for identification each document, magnetic tape, disk, or other tangible media upon which the Deposit Materials are written or stored. Additionally, Depositor shall complete Exhibit B to this Agreement by listing each such tangible media by the item label description, the type of media and the quantity. Exhibit B shall be signed by Depositor and delivered to DSI with the Deposit Materials. Unless and until Depositor makes the initial deposit with DSI, DSI shall have no obligation with respect to this Agreement, except the obligation to notify the parties regarding the status of the account as required in Section 2.2 below. 1.3  Deposit Inspection. When DSI receives the Deposit Materials and Exhibit B, DSI will conduct a deposit inspection by visually matching the labeling of the tangible media containing the Deposit Materials to the item descriptions and quantity listed on Exhibit B. In addition to the deposit inspection, Preferred Beneficiary may elect to cause a verification of the Deposit Materials in accordance with Section 1.6 below. 1.4  Acceptance of Deposit. At completion of the deposit inspection, if DSI determines that the labeling of the tangible media matches the item descriptions and quantity on Exhibit B, DSI will date and sign Exhibit B and mail a copy thereof to Depositor and Preferred Beneficiary. If DSI determines that the labeling does not match the item descriptions or quantity on Exhibit B, DSI will (a) note the discrepancies in writing on Exhibit B; (b) date and sign Exhibit B with the exceptions noted; and (c) mail a copy of Exhibit B to Depositor and Preferred Beneficiary. DSI's acceptance of the deposit occurs upon the signing of Exhibit B by DSI. Delivery of the signed Exhibit B to Preferred Beneficiary is Preferred Beneficiary's notice that the Deposit Materials have been received and accepted by DSI. 1.5  Depositor's Representations. Depositor represents as follows: a.Depositor lawfully possesses all of the Deposit Materials deposited with DSI; -------------------------------------------------------------------------------- b.With respect to all of the Deposit Materials, Depositor has the right and authority to grant to DSI and Preferred Beneficiary the rights as provided in this Agreement; c.The Deposit Materials are not subject to any lien or other encumbrance; d.The Deposit Materials consist of the proprietary technology and other materials identified either in the License Agreement or Exhibit A, as the case may be; and e.The Deposit Materials are readable and useable in their current form or, if any portion of the Deposit Materials is encrypted, the decryption tools and decryption keys have also been deposited. 1.6  Verification. Preferred Beneficiary shall have the right, at Preferred Beneficiary's expense, to cause a verification of any Deposit Materials. Preferred Beneficiary shall notify Depositor and DSI of Preferred Beneficiary's request for verification. Depositor shall have the right to be present at the verification. A verification determines, in different levels of detail, the accuracy, completeness, sufficiency and quality of the Deposit Materials. If a verification is elected after the Deposit Materials have been delivered to DSI, then only DSI, or at DSI's election an independent person or company selected and supervised by DSI, may perform the verification. 1.7  Deposit Updates. Unless otherwise provided by the License Agreement, Depositor shall update the Deposit Materials within 60 days of each release of a new version of the product which is subject to the License Agreement. Such updates will be added to the existing deposit. All deposit updates shall be listed on a new Exhibit B and Depositor shall sign the new Exhibit B. Each Exhibit B will be held and maintained separately within the escrow account. An independent record will be created which will document the activity for each Exhibit B. The processing of all deposit updates shall be in accordance with Sections 1.2 through 1.6 above. All references in this Agreement to the Deposit Materials shall include the initial Deposit Materials and any updates. 1.8  Removal of Deposit Materials. The Deposit Materials may be removed and/or exchanged only on written instructions signed by Depositor and Preferred Beneficiary, or as otherwise provided in this Agreement. ARTICLE 2—CONFIDENTIALITY AND RECORD KEEPING 2.1  Confidentiality. DSI shall maintain the Deposit Materials in a secure, environmentally safe, locked facility which is accessible only to authorized representatives of DSI. DSI shall have the obligation to reasonably protect the confidentiality of the Deposit Materials. Except as provided in this Agreement, DSI shall not disclose, transfer, make available, or use the Deposit Materials. DSI shall not disclose the content of this Agreement to any third party. If DSI receives a subpoena or any other order from a court or other judicial tribunal pertaining to the disclosure or release of the Deposit Materials, DSI will immediately notify the parties to this Agreement unless prohibited by law. It shall be the responsibility of Depositor and/or Preferred Beneficiary to challenge any such order; provided, however, that DSI does not waive its rights to present its position with respect to any such order. DSI will not be required to disobey any order from a court or other judicial tribunal. (See Section 7.5 below for notices of requested orders.) 2.2  Status Reports. DSI will issue to Depositor and Preferred Beneficiary a report profiling the account history at least semi-annually. DSI may provide copies of the account history pertaining to this Agreement upon the request of any party to this Agreement. 2.3  Audit Rights. During the term of this Agreement, Depositor and Preferred Beneficiary shall each have the right to inspect the written records of DSI pertaining to this Agreement. Any inspection shall be held during normal business hours and following reasonable prior notice. -------------------------------------------------------------------------------- ARTICLE 3—GRANT OF RIGHTS TO DSI 3.1  Title to Media. Depositor hereby transfers to DSI the title to the media upon which the proprietary technology and materials are written or stored. However, this transfer does not include the ownership of the proprietary technology and materials contained on the media such as any copyright, trade secret, patent or other intellectual property rights. 3.2  Right to Make Copies. DSI shall have the right to make copies of the Deposit Materials as reasonably necessary to perform this Agreement. DSI shall copy all copyright, nondisclosure, and other proprietary notices and titles contained on the Deposit Materials onto any copies made by DSI. With all Deposit Materials submitted to DSI, Depositor shall provide any and all instructions as may be necessary to duplicate the Deposit Materials including but not limited to the hardware and/or software needed. 3.3  Right to Transfer Upon Release. Depositor hereby grants to DSI the right to transfer the Deposit Materials to Preferred Beneficiary upon any release of the Deposit Materials for use by Preferred Beneficiary in accordance with Section 4.5. Except upon such a release or as otherwise provided in this Agreement, DSI shall not transfer the Deposit Materials. ARTICLE 4—RELEASE OF DEPOSIT 4.1  Release Conditions. As used in this Agreement, "Release Condition" shall mean the following: a.Depositor is unwilling to maintain and/or support the Deposit Materials in accordance with the provisions of Section 6 of the License Agreement and such failure is not fully remedied within thirty (30) days of Preferred Beneficiary's notice to Depositor and is not the result of Preferred Beneficiary's failure to pay Maintenance Fees (as such term is defined in the License Agreement) to Depositor which are due and owing in accordance with the terms and conditions of the License Agreement; or b.Maintenance and Technical Support Services (as defined in the License Agreement) are terminated because Depositor has not, through the exercise of commercially reasonable efforts, corrected a failure, malfunction, defect or nonconformity which prevents the Deposit Materials from performing substantially in accordance with the Documentation (as defined in the License Agreement) which results in a major or primary function or component of the Deposit Materials being unusable or unavailable to Preferred Beneficiary within seventy-five (75) days from the date Preferred Beneficiary notifies Depositor of the same; c.Depositor files a petition for reorganization or bankruptcy under the United States Bankruptcy Code (provided such petition is not dismissed within sixty (60) days of filing); or d.a third party(ies) files a petition for involuntary bankruptcy against Depositor under the United States Bankruptcy Code (provided such petition is not dismissed within sixty (60) days of filing). 4.2  Filing For Release. If Preferred Beneficiary believes in good faith that a Release Condition has occurred, Preferred Beneficiary may provide to DSI written notice of the occurrence of the Release Condition and a request for the release of the Deposit Materials. Upon receipt of such notice, DSI shall provide a copy of the notice to Depositor by commercial express mail. 4.3  Contrary Instructions. From the date DSI mails the notice requesting release of the Deposit Materials, Depositor shall have ten business days to deliver to DSI contrary instructions ("Contrary Instructions"). Contrary Instructions shall mean the written representation by Depositor that a Release Condition has not occurred or has been cured. Upon receipt of Contrary Instructions, DSI shall send a copy to Preferred Beneficiary by commercial express mail. Additionally, DSI shall notify both Depositor and Preferred Beneficiary that there is a dispute to be resolved pursuant to Section 7.3 of this Agreement. Subject to Section 5.2 of this Agreement, DSI will continue to store the Deposit Materials without release pending (a) joint instructions from Depositor and Preferred Beneficiary; (b) dispute resolution pursuant to Section 7.3; or (c) order of a court. -------------------------------------------------------------------------------- 4.4  Release of Deposit. If DSI does not receive Contrary Instructions from the Depositor, DSI is authorized to release the Deposit Materials to the Preferred Beneficiary or, if more than one beneficiary is registered to the deposit, to release a copy of the Deposit Materials to the Preferred Beneficiary. However, DSI is entitled to receive any fees due DSI before making the release. Any copying expense in excess of $300 will be chargeable to Preferred Beneficiary. This Agreement will terminate upon the release of the Deposit Materials held by DSI. 4.5  Right to Use Following Release. Unless otherwise provided in the License Agreement, upon release of the Deposit Materials in accordance with this Article 4, Preferred Beneficiary shall have the right to use the Deposit Materials for the sole purpose of continuing the benefits afforded to Preferred Beneficiary by the License Agreement. Preferred Beneficiary shall be obligated to maintain the confidentiality of the released Deposit Materials. ARTICLE 5—TERM AND TERMINATION 5.1  Term of Agreement. The initial term of this Agreement is for a period of one year. Thereafter, this Agreement shall automatically renew from year-to-year unless (a) Depositor and Preferred Beneficiary jointly instruct DSI in writing that the Agreement is terminated; or (b) DSI instructs Depositor and Preferred Beneficiary in writing that the Agreement is terminated for nonpayment in accordance with Section 5.2 or by resignation in accordance with Section 5.3. If the Deposit Materials are subject to another escrow agreement with DSI, DSI reserves the right, after the initial one year term, to adjust the anniversary date of this Agreement to match the then prevailing anniversary date of such other escrow arrangements. 5.2  Termination for Nonpayment. In the event of the nonpayment of fees owed to DSI, DSI shall provide written notice of delinquency to all parties to this Agreement. Any party to this Agreement shall have the right to make the payment to DSI to cure the default. If the past due payment is not received in full by DSI within one month of the date of such notice, then DSI shall have the right to terminate this Agreement at any time thereafter by sending written notice of termination to all parties. DSI shall have no obligation to take any action under this Agreement so long as any payment due to DSI remains unpaid. 5.3  Termination by Resignation. DSI reserves the right to terminate this Agreement, for any reason, by providing Depositor and Preferred Beneficiary with 60-days' written notice of its intent to terminate this Agreement. Within the 60-day period, the Depositor and Preferred Beneficiary may provide DSI with joint written instructions authorizing DSI to forward the Deposit Materials to another escrow company and/or agent or other designated recipient. If DSI does not receive said joint written instructions within 60 days of the date of DSI's written termination notice, then DSI shall destroy, return or otherwise deliver the Deposit Materials in accordance with Section 5.4. 5.4  Disposition of Deposit Materials Upon Termination. Subject to the foregoing termination provisions, and upon termination of this Agreement, DSI shall destroy, return, or otherwise deliver the Deposit Materials in accordance with Depositor's instructions. If there are no instructions, DSI may, at its sole discretion, destroy the Deposit Materials or return them to Depositor. DSI shall have no obligation to destroy or return the Deposit Materials if the Deposit Materials are subject to another escrow agreement with DSI or have been released to the Preferred Beneficiary in accordance with Section 4.4. 5.5  Survival of Terms Following Termination. Upon termination of this Agreement, the following provisions of this Agreement shall survive: a.Depositor's Representations (Section 1.5); b.The obligations of confidentiality with respect to the Deposit Materials; c.The rights granted in the sections entitled Right to Transfer Upon Release (Section 3.3) and Right to Use Following Release (Section 4.5), if a release of the Deposit Materials has occurred prior to termination; d.The obligation to pay DSI any fees and expenses due; -------------------------------------------------------------------------------- e.The provisions of Article 7; and f.Any provisions in this Agreement which specifically state they survive the termination of this Agreement. ARTICLE 6—DSI'S FEES 6.1  Fee Schedule. DSI is entitled to be paid its standard fees and expenses applicable to the services provided. DSI shall notify the party responsible for payment of DSI's fees at least 60 days prior to any increase in fees. For any service not listed on DSI's standard fee schedule, DSI will provide a quote prior to rendering the service, if requested. 6.2  Payment Terms. DSI shall not be required to perform any service unless the payment for such service and any outstanding balances owed to DSI are paid in full. Fees are due upon receipt of a signed contract or receipt of the Deposit Materials whichever is earliest. If invoiced fees are not paid, DSI may terminate this Agreement in accordance with Section 5.2. ARTICLE 7—LIABILITY AND DISPUTES 7.1  Right to Rely on Instructions. DSI may act in reliance upon any instruction, instrument, or signature reasonably believed by DSI to be genuine. DSI may assume that any employee of a party to this Agreement who gives any written notice, request, or instruction has the authority to do so. DSI will not be required to inquire into the truth or evaluate the merit of any statement or representation contained in any notice or document. DSI shall not be responsible for failure to act as a result of causes beyond the reasonable control of DSI. 7.2  Indemnification. Depositor and Preferred Beneficiary each agree to indemnify, defend and hold harmless DSI from any and all claims, actions, damages, arbitration fees and expenses, costs, attorney's fees and other liabilities ("Liabilities") incurred by DSI relating in any way to this escrow arrangement unless such Liabilities were caused solely by the negligence or willful misconduct of DSI. 7.3  Dispute Resolution. Any dispute relating to or arising from this Agreement shall be resolved by arbitration under the Commercial Rules of the American Arbitration Association. Three arbitrators shall be selected. The Depositor and Preferred Beneficiary shall each select one arbitrator and the two chosen arbitrators shall select the third arbitrator, or failing agreement on the selection of the third arbitrator, the American Arbitration Association shall select the third arbitrator. However, if DSI is a party to the arbitration, DSI shall select the third arbitrator. Unless otherwise agreed by Depositor and Preferred Beneficiary, arbitration will take place in San Diego, California, U.S.A. Any court having jurisdiction over the matter may enter judgment on the award of the arbitrator(s). Service of a petition to confirm the arbitration award may be made by First Class mail or by commercial express mail, to the attorney for the party or, if unrepresented, to the party at the last known business address. 7.4  Controlling Law. This Agreement is to be governed and construed in accordance with the laws of the State of California, without regard to its conflict of law provisions. 7.5  Notice of Requested Order. If any party intends to obtain an order from the arbitrator or any court of competent jurisdiction which may direct DSI to take, or refrain from taking any action, that party shall: a.Give DSI at least two business days' prior notice of the hearing; b.Include in any such order that, as a precondition to DSI's obligation, DSI be paid in full for any past due fees and be paid for the reasonable value of the services to be rendered pursuant to such order; and c.Ensure that DSI not be required to deliver the original (as opposed to a copy) of the Deposit Materials if DSI may need to retain the original in its possession to fulfill any of its other duties. -------------------------------------------------------------------------------- ARTICLE 8—GENERAL PROVISIONS 8.1  Entire Agreement. This Agreement, which includes Exhibits described herein, embodies the entire understanding among the parties with respect to its subject matter and supersedes all previous communications, representations or understandings, either oral or written. DSI is not a party to the License Agreement between Depositor and Preferred Beneficiary and has no knowledge of any of the terms or provisions of any such License Agreement. DSI's only obligations to Depositor or Preferred Beneficiary are as set forth in this Agreement. No amendment or modification of this Agreement shall be valid or binding unless signed by all the parties hereto, except that Exhibit A need not be signed by DSI, Exhibit B need not be signed by Preferred Beneficiary and Exhibit C need not be signed. 8.2  Notices. All notices, invoices, payments, deposits and other documents and communications shall be given to the parties at the addresses specified in the attached Exhibit C. It shall be the responsibility of the parties to notify each other as provided in this Section in the event of a change of address. The parties shall have the right to rely on the last known address of the other parties. Unless otherwise provided in this Agreement, all documents and communications may be delivered by First Class mail. 8.3  Severability. In the event any provision of this Agreement is found to be invalid, voidable or unenforceable, the parties agree that unless it materially affects the entire intent and purpose of this Agreement, such invalidity, voidability or unenforceability shall affect neither the validity of this Agreement nor the remaining provisions herein, and the provision in question shall be deemed to be replaced with a valid and enforceable provision most closely reflecting the intent and purpose of the original provision. 8.4  Successors. This Agreement shall be binding upon and shall inure to the benefit of the successors and assigns of the parties. However, DSI shall have no obligation in performing this Agreement to recognize any successor or assign of Depositor or Preferred Beneficiary unless DSI receives clear, authoritative and conclusive written evidence of the change of parties. 8.5  Regulations. Depositor and Preferred Beneficiary are responsible for and warrant compliance with all applicable laws, rules and regulations, including but not limited to customs laws, import, export, and re-export laws and government regulations of any country from or to which the Deposit Materials may be delivered in accordance with the provisions of this Agreement.   Depositor     Preferred Beneficiary By: --------------------------------------------------------------------------------   By: -------------------------------------------------------------------------------- Name: --------------------------------------------------------------------------------   Name: -------------------------------------------------------------------------------- Title: --------------------------------------------------------------------------------   Title: -------------------------------------------------------------------------------- Date: --------------------------------------------------------------------------------   Date: --------------------------------------------------------------------------------   DSI Technology Escrow Services, Inc.       By: --------------------------------------------------------------------------------       Name: --------------------------------------------------------------------------------       Title: --------------------------------------------------------------------------------       Date: --------------------------------------------------------------------------------       -------------------------------------------------------------------------------- EXHIBIT A MATERIALS TO BE DEPOSITED Account Number ______________________ Depositor represents to Preferred Beneficiary that Deposit Materials delivered to DSI shall consist of the following:   Depositor     Preferred Beneficiary By: --------------------------------------------------------------------------------   By: -------------------------------------------------------------------------------- Name: --------------------------------------------------------------------------------   Name: -------------------------------------------------------------------------------- Title: --------------------------------------------------------------------------------   Title: -------------------------------------------------------------------------------- Date: --------------------------------------------------------------------------------   Date: -------------------------------------------------------------------------------- EXHIBIT B DESCRIPTION OF DEPOSIT MATERIALS Depositor Company Name Account Number Product Name Version (Product Name will appear as the Exhibit B Name on Account History report) DEPOSIT MATERIAL DESCRIPTION: Quantity   Media Type & Size Label Description of Each Separate Item     Disk 3.5" or ____   --------------------------------------------------------------------------------           DAT tape ____ mm   --------------------------------------------------------------------------------           CD-ROM   --------------------------------------------------------------------------------           Data cartridge tape ____   --------------------------------------------------------------------------------           TK 70 or ____ tape   --------------------------------------------------------------------------------           Magnetic tape ____   --------------------------------------------------------------------------------           Documentation   --------------------------------------------------------------------------------           Other _________________   --------------------------------------------------------------------------------       PRODUCT DESCRIPTION:     Environment -------------------------------------------------------------------------------- DEPOSIT MATERIAL INFORMATION: Is the media or are any of the files encrypted? Yes / No If yes, please include any passwords and the decryption tools. Encryption tool name __________________________ Version ___________________ Hardware required _______________________________________________________ Software required ________________________________________________________ Other required information _______________________________________________________ I certify for Depositor that the above described Deposit Materials have been transmitted to DSI:   DSI has inspected and accepted the above materials (any exceptions are noted above): Signature     Signature     --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- Print Name     Print Name     --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- Date     Date Accepted     --------------------------------------------------------------------------------     --------------------------------------------------------------------------------       Exhibit B#           -------------------------------------------------------------------------------- Send materials to: DSI, 9265 Sky Park Ct., Suite 202, San Diego, CA 92123      (858) 499-1600 -------------------------------------------------------------------------------- EXHIBIT C DESIGNATED CONTACT Account Number ______________________ Notices, deposit material returns and communications to Depositor should be addressed to:   Invoices to Depositor should be addressed to: Company Name:           --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- Address:           --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- Designated Contact:     Contact:     --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- Telephone:           --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- Facsimile:     P.O.#, if required:   --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- E-mail:     E-mail:     --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- Verification Contact:           --------------------------------------------------------------------------------                 Notices and communications to Preferred Beneficiary should be addressed to:   Invoices to Preferred Beneficiary should be addressed to: Company Name:           --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- Address:           --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- Designated Contact:     Contact:     --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- Telephone:           --------------------------------------------------------------------------------   -------------------------------------------------------------------------------- Facsimile:     P.O.#, if required:   --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- E-mail:     E-mail:     --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- Requests from Depositor or Preferred Beneficiary to change the designated contact should be given in writing by the designated contact or an authorized employee of Depositor or Preferred Beneficiary.           Contracts, Deposit Materials and notices to DSI should be addressed to:   Invoice inquiries and fee remittances to DSI should be addressed to:           DSI Technology Escrow Services, Inc. Contract Administration 9265 Sky Park Court, Suite 202 San Diego, CA 92123 Telephone: (858) 499-1600 Facsimile: (858) 694-1919 E-mail: [email protected]   DSI Technology Escrow Services, Inc. PO Box 45156 San Francisco, CA 94145-0156 (858) 499-1636 (858) 499-1637 Date:______________________ -------------------------------------------------------------------------------- QuickLinks SOFTWARE LICENSE AND MAINTENANCE AGREEMENT EXHIBIT B EXHIBIT C

EXHIBIT 10.2 FIRST AMENDMENT TO SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF DUKE-WEEKS REALTY LIMITED PARTNERSHIP             The undersigned, as the General Partner of Duke-Weeks Realty Limited Partnership (the "Partnership", hereby amends the Partnership's Second Amended and Restated Agreement of Limited Partnership, as heretofore amended (the "Partnership Agreement"), pursuant to Sections 4.02(a) and 9.05(a)(v) of the Partnership Agreement, to add a new Exhibit O to read as provided in the attached Exhibit O. In all other respects, the Partnership Agreement shall continue in full force and effect as amended hereby. Any capitalized terms used in this agreement and not defined herein have the meanings given to them in the Partnership Agreement. Dated:  February 1, 2001.                           DUKE-WEEKS REALTY CORPORATION,               as General Partner                                   By:  --------------------------------------------------------------------------------                   Matthew A. Cohoat                   Senior Vice President and Corporate Controller                                                     Exhibit O             Series I Preferred Units. Pursuant to authority granted under Section 4.02(a) of this Agreement, the General Partner hereby establishes a series of preferred Units designated the 8.45% Series I Cumulative Redeemable Preferred Units (Liquidation Preference $250.00 Per Unit)(the "Series I Preferred Units") on the following terms:           (a)      Number. The number of authorized units of the Series I Preferred Units shall be 345,000 and shall at all times be equal to the number of 8.45% Series I Cumulative Redeemable Preferred Shares ("Series I Preferred Shares) issued by the General Partner and then outstanding. Series I Preferred Units shall be issued only to and held only by the General Partner.           (b)      Relative Seniority. In respect of rights to receive dividends and to participate in distributions or payments in the event of any liquidation, dissolution or winding up of the Partnership, the Series I Preferred Units shall rank (i) on a parity with any class or series of Units of the Partnership ("Parity Units") ranking, as to the payment of Distributions and as to the distribution of assets upon liquidation, dissolution or winding up (whether or not the Distribution rates, Distribution payment dates or redemption or liquidation prices per Unit thereof are different from those of the Series I Preferred Units) if the holders of such class or series of Units and the Series I Preferred Units shall be entitled to the receipt of Distributions and of amounts distributable upon liquidation, dissolution or winding up (taking into account the effects of allocations of Profits, Losses and other items) in proportion to their respective amounts of accrued and unpaid Distributions per Unit or liquidation preferences, without preference or priority one over the other, (ii) senior to any class or series of Units of the Partnership ranking, as to Distributions or upon liquidation, junior to the Series I Preferred Units (collectively, "Junior Units") and (iii) senior to the Common Units and any other class or series of Units of the Partnership ranking, as to Distributions and upon liquidation, junior to the Series I Preferred Units (collectively, "Fully Junior Units"). In the event of a Terminating Capital Transaction and/or a liquidation, dissolution or winding up of the Partnership, holders of Series I Preferred Units shall be entitled to such Distributions as provided in Section 4.04 of the Partnership Agreement, taking into account the required allocations of Profits, Losses and other items to the Partnership as provided in Section 4.06 of the Partnership Agreement. Distributions to the holder of Series I Preferred Units will be made prior to Distributions to holders of Junior Units or Fully Junior Units or to other Partners in accordance with Capital Account positive balances pursuant to Section 4.04(d). Nothing contained in Section 4.06 of the Partnership Agreement or this Exhibit O shall prohibit the Partnership from issuing additional Units which are Parity Units with Series I Preferred Units. (c)      Distributions.           (1)      The General Partner, as holder of the then outstanding Series I Preferred Units, shall be entitled to receive, when and as declared by the General Partner out of any funds legally available therefor, cumulative Distributions at an initial rate of 8.45% per Unit per year, payable in equal amounts of $5.28125 per Unit quarterly in cash on the last day of each March, June, September and December or, if not a Business Day (as hereinafter defined), the next succeeding Business Day beginning on March 31, 2001 (each such day being hereinafter called a “Quarterly Distribution Date” and each period ending on a Quarterly Distribution Date being hereinafter called a “Distribution Period”).  Distributions shall be payable to the General Partner as holder of the Series I Preferred Units at the close of business on the applicable record date (the “Record Date”), which shall be on such date designated by the Partnership for the payment of Distributions that is not more than 30 nor less than 10 days prior to such Quarterly Distribution Date. The amount of any distribution payable for any Distribution Period shorter than a full Distribution Period (including the first Dividend Period) shall be prorated and computed on the basis of a 360-day year of twelve 30-day months.  Distributions on each Series I Preferred Unit shall accrue and be cumulative from and including the date of original issue thereof, whether or not (i) Distributions on such units are earned and declared, (ii) the Partnership has earnings, or (iii) on any Quarterly Distribution Date there shall be funds legally available for the payment of Distributions.  Distributions paid on the Series I Preferred Units in an amount less than the total amount of such Distributions at the time accrued and payable on such units shall be allocated pro rata on a per Unit basis among all such Series I Preferred Units at the time outstanding.  Except as provided in subparagraph (e)(2)(v) and the last sentence of this paragraph, unless the full cumulative Distributions on the Series I Preferred Units have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past Distribution Periods and the then current Distribution Period, no Distributions (other than Distributions payable solely in Common Units or other Fully Junior Units) shall be declared or paid or set aside for payment or other Distribution made upon the Common Units or any other units of Partnership interest ranking junior to or on a parity with the Series I Preferred Units as to Distributions or upon liquidation, nor shall any Common Units, or any other units of Partnership interest ranking junior to or on a parity with the Series I Preferred Units as to Distributions or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of such units) by the Partnership or any subsidiary of the Partnership (except for conversion into or exchange for such capital units of the Partnership ranking junior to the Series I Preferred Units as to Distributions and upon liquidation).  If accrued Distributions on the Series I Preferred Units for all prior Distribution Periods have not been paid in full, then any Distribution declared on the Series I Preferred Units for any Distribution Period and on any series of preferred units at the time outstanding ranking on a parity as to the Distributions with the Series I Preferred Units will be declared ratably in proportion to accrued and unpaid Distributions on the Series I Preferred Units and such series of preferred units at the time outstanding ranking on a parity as to Distributions with the Series I Preferred Units.           “Business Day” shall mean any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in New York City are authorized or required by law, regulation or executive order to close.           (2)      The amount of any Distributions accrued on any Series I Preferred Units at any Quarterly Distribution Date shall be the amount of any unpaid Distributions accumulated thereon, to and including such Quarterly Distribution Date, whether or not earned or declared, and the amount of Distributions accrued on any units of Series I Preferred Units at any date other than a Quarterly Distribution Date shall be equal to the sum of the amount of any unpaid Distributions accumulated thereon, to and including the last preceding Quarterly Distribution Date, whether or not earned or declared, plus an amount calculated on the basis of the annual Distribution rate of 8.45% per unit, for the period after such last preceding Quarterly Distribution Date to and including the date as of which the calculation is made based on a 360-day year of twelve 30-day months.           (3)      Except as provided in this Exhibit O, the Series I Preferred Units shall not be entitled to participate in the earnings or assets of the Partnership.           (4)      Any Distribution payment made on the Series I Preferred Units shall be first credited against the earliest accrued but unpaid Distribution due with respect to such units which remains payable.           (5)      If, for any taxable year, the Partnership elects to designate as “capital gain Distributions” (as defined in Section 857 of the Code), any portion (the “Capital Gains Amount”) of the Distributions paid or made available for the year to holders of all classes of Units (the “Total Distributions”), then the portion of the Capital Gains Amount that shall be allocated to the holders of the Series I Preferred Units shall be the amount that the total Distributions paid or made available to the holders of the Series I Preferred Units for the year bears to the Total Distributions.             (6)      No Distributions on the Series I Preferred Units shall be authorized by the General Partner or be paid or set apart for payment by the Partnership at such time as the terms and provisions of any agreement of the Partnership, including any agreement relating to its indebtedness, prohibit such authorization, payment or setting apart for payment or provide that such authorization, payment or setting apart for payment would constitute a breach thereof or a default thereunder, or if such authorization or payment shall be restricted or prohibited by law.  Notwithstanding the foregoing, Distributions on the Series I Preferred Units will accrue whether or not the Partnership has earnings, whether or not there are funds legally available for the payment of such Distributions and whether or not such Distributions are authorized. (d)      Liquidation Rights.           (1)      Upon the voluntary or involuntary dissolution, liquidation or winding up of the Partnership, the holders of the Series I Preferred Units then outstanding shall be entitled to receive and to be paid out of the assets of the Partnership available for distribution to the Partners, before any payment or distribution shall be made on any Junior Units, the amount of $250.00 per Series I Preferred Unit, plus accrued and unpaid Distributions thereon.           (2)      After the payment to the holders of the Series I Preferred Units of the full preferential amounts provided for in this Exhibit O, the holders of the Series I Preferred Units, as such, shall have no right or claim to any of the remaining assets of the Partnership.           (3)      If, upon any voluntary or involuntary dissolution, liquidation, or winding up of the Partnership, the amounts payable with respect to the preference value of the Series I Preferred Units and any other units of the Partnership ranking as to any such distribution on a parity with the Series I Preferred Units are not paid in full, the holders of the Series I Preferred Units and of such other units will share ratably in any such distribution of assets of the Partnership in proportion to the full respective preference amounts to which they are entitled.           (4)      Neither the sale, lease, transfer or conveyance of all or substantially all of the property or business of the Partnership, nor the merger or consolidation of the Partnership into or with any other entity or the merger or consolidation of any other entity into or with the Partnership, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purposes of this Exhibit O. (e)      Redemption by the Partnership.           (1)      Optional Redemption.  The General Partner shall cause the Partnership to redeem one Series I Preferred Unit for each Series I Preferred Share redeemed by the General Partner, at a price per Series I Preferred Unit (the “Series I Redemption Price”), payable in cash, of $250.00, together with all accrued and unpaid Distributions to and including the date fixed for redemption (the “Series I Redemption Date”).  The Series I Preferred Units have no stated maturity and will not be subject to any sinking fund or mandatory redemption provisions.           (2)      Procedures of Redemption.           (i)       The General Partner shall provide the Partnership with a copy of any notice of redemption given by the General Partner pursuant to Section (e)(2)(i) of Exhibit I to its Second Amended and Restated Articles of Incorporation, as amended.  No failure to give such notice or any defect therein or in the mailing thereof shall affect the validity of the proceedings for the redemption of any Series I Preferred Units.           (ii)      If notice has been mailed by the General Partner in accordance with Section (e)(2)(i) of Exhibit I to its Second Amended and Restated Articles of Incorporation, as amended, and provided that on or before the Series I Redemption Date specified in such notice all funds necessary for such redemption shall have been irrevocably set aside by the Partnership, separate and apart from its other funds in trust for the pro rata benefit of the holders of the Series I Preferred Units so called for redemption, so as to be, and to continue to be available therefor, then, from and after the Series I Redemption Date, Distributions on the Series I Preferred Units so called for redemption shall cease to accumulate, and said units shall no longer be deemed to be outstanding and shall not have the status of Series I Preferred Units and all rights of the General Partner as holder thereof (except the right to receive the Series I Redemption Price) shall cease.  Upon surrender, in accordance with such notice, of the certificates for any Series I Preferred Units so redeemed (properly endorsed or assigned for transfer, if the Partnership shall so require and the notice shall so state), such Series I Preferred Units shall be redeemed by the Partnership at the Series I Redemption Price.  In case fewer than all the Series I Preferred Units represented by any such certificate are redeemed, a new certificate or certificates shall be issued representing the unredeemed Series I Preferred Units without cost to the holder thereof.           (iii)     Any funds deposited with a bank or trust company for the purpose of redeeming Series I Preferred Units shall be irrevocable except that:           (A)     the Partnership or the General Partner, as the case may be, shall be entitled to receive from such bank or trust company the interest or other earnings, if any, earned on any money so deposited in trust; and           (B)     any balance of monies so deposited and unclaimed by the General Partner, as holder of the Series I Preferred Units entitled thereto at the expiration of two years from the applicable Series I Redemption Date shall be repaid, together with any interest or other earnings earned thereon, to the Partnership, and after any such repayment, the General Partner as holder of the units entitled to the funds so repaid to the Partnership shall look only to the Partnership for payment without interest or other earnings.           (iv)     No Series I Preferred Units may be redeemed except from proceeds from the sale or other issuance of other equity interests of the Partnership. (v)      Unless full accumulated distributions on all Series I Preferred Units shall have been or contemporaneously are declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past Distribution Periods and the then current Distribution Period, no Series I Preferred Units shall be redeemed or purchased or otherwise acquired directly or indirectly by the Partnership or any subsidiary of the Partnership (except by conversion into or exchange for Fully Junior Units) and no preferred units of the Partnership shall be redeemed unless all outstanding Series I Preferred Units are simultaneously redeemed; provided, however, that the foregoing shall not prevent the redemption of Series I Preferred Units to preserve the REIT status of the General Partner or the purchase or acquisition of Series I Preferred Units pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding Series I Preferred Units.  Notwithstanding the foregoing, in the case of a Redemption Request (as defined below) which has not been fulfilled at the time the General Partner gives notice of its election to redeem all or any Series I Preferred Shares, the Series I Preferred Units which are the subject of such pending Redemption Request shall be redeemed prior to any other Series I Preferred Units.   (f)       Voting Rights.  Except as required by law, and as set forth below, the holders of the Series I Preferred Units shall not be entitled to vote at any meeting for any purpose or otherwise to participate in any action taken by the Partnership or the Partners, or to receive notice of any meeting of Partners.          (1)      So long as any Series I Preferred Units remain outstanding, the Partnership will not, without the affirmative vote or consent of the holders of at least two-thirds of the Series I Preferred Units outstanding at the time, given in person or by proxy, either in writing or at a meeting (such series voting separately as a class), (i) authorize or create, or increase the authorized or issued amount of, any class or series of units ranking prior to the Series I Preferred Units with respect to the payment of Distributions or the distribution of assets upon liquidation, dissolution or winding up or reclassify any authorized units of the Partnership into such units, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such units; or (ii) amend, alter or repeal the provisions of the Partnership’s Amended and Restated Agreement of Limited Partnership, as amended, whether by merger, consolidation or otherwise (an “Event”), so as to materially and adversely affect any right, preference, privilege or voting power of the Series I Preferred Units or the holders thereof; provided, however, with respect to the occurrence of any of the Events set forth in (ii) above, so long as the Series I Preferred Units remain outstanding with the terms thereof materially unchanged, taking into account that upon the occurrence of an Event, the Partnership may not be the surviving entity, the occurrence of any such Event shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting power of holders of Series I Preferred Units and provided further that (x) any increase in the amount of the authorized preferred units or the creation or issuance of any other series of preferred units, or (y) any increase in the amount of authorized Series I Preferred Units or any other preferred units, in each case ranking on a parity with or junior to the Series I Preferred Units with respect to payment of Distributions or the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers.                    The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding Series I Preferred Units shall have been redeemed or called for redemption and sufficient funds shall have been deposited in trust to effect such redemption.       (2)      On each matter submitted to a vote of the holders of Series I Preferred Units in accordance with this Exhibit O, or as otherwise required by law, each Series I preferred Unit shall be entitled to ten (10) votes, each of which ten (10) votes may be directed separately by the holder thereof.

QuickLinks -- Click here to rapidly navigate through this document Exhibit 10.01 Amendment of Foundry Agreement Date:   September 17, 2001 --------------------------------------------------------------------------------     To:   Tower Semiconductor Ltd.         The undersigned, QuickLogic Corporation, hereby agrees to amend the terms of the Foundry Agreement dated December 11, 2000 entered into with Tower Semiconductor Ltd. (the "Company")(the "Foundry Agreement") as set forth below: 1.75% of the credits QuickLogic Corporation received, pursuant to Schedule 6.4 of the Foundry Agreement as of the date hereof and totaling the aggregate amount of $5,337,356 (the "Credits"), will be converted into fully-paid and non-assessable ordinary shares of the Company; 2.such conversion of the Credits into equity will be effective as of five trading days from the Company's receipt of shareholder approval of this amendment to the Share Purchase Agreement; 3.upon conversion of the Credits, QuickLogic Corporation shall be promptly issued 418,616 ordinary shares of the Company equivalent to the aggregate amount of the Credits divided by $12.75.     All other provisions of the Foundry Agreement shall remain unchanged.     QuickLogic Corporation understands this amendment to the Foundry Agreement is subject to the approval of each of Bank Hapoalim B.M., Bank Leumi Le-Israel, the Company's Audit Committee, Board of Directors as well as shareholders approval with respect to similar agreements between the Company and SanDisk Corporation, Macronix International (BVI) Ltd., and Alliance Semiconductor, each, for the conversion of credits into equity and certain Israeli regulatory authorities (including both the Investment Center and the Office of the Chief Scientist) and will take effect immediately after such approvals have been obtained. It is further understood that such shareholder approval requires approval by (i) the majority of votes cast at the shareholders meeting, including at least one third of all votes of the non-controlling members who are present in person or by proxy and vote on the matter or (ii) the majority of votes cast on the matter at the shareholder meeting, provided that the total votes cast in opposition to this amendment of the Share Purchase Agreement by the non-controlling members does not exceed 1% of all the voting rights in the Company.     Sincerely,         /S/ Arthur O. Whipple     By:   Arthur O. Whipple     Title:   Chief Financial Officer By signing below please indicate the Company's acceptance of the terms of the proposed amendment to the Share Purchase Agreement.    -------------------------------------------------------------------------------- Tower Semiconductor Ltd.     By:   --------------------------------------------------------------------------------     Title:   --------------------------------------------------------------------------------     -------------------------------------------------------------------------------- QuickLinks Exhibit 10.01

Exhibit 10.2 AMENDMENT NO. 1 TO AMENDED AND RESTATED GENERAL CREDIT AND SECURITY AGREEMENT              THIS AMENDMENT NO. 1 TO AMENDED AND RESTATED GENERAL CREDIT AND SECURITY AGREEMENT, dated as of May 22, 2001 (the “Amendment”), by and between MBC Holding Company, a Minnesota corporation (“Borrower”), and Bremer Business Finance Corporation, a Minnesota corporation (the “Lender”). WITNESSETH:              WHEREAS, Borrower and Lender are the parties to that certain Amended and Restated General Credit and Security Agreement dated as of March 29, 2001 (the “Original Agreement”); and              WHEREAS, Borrower and the Lender desire to amend the Original Agreement.              NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged by the parties hereto, it is agreed as follows:              1.          Defined Terms.  All capitalized terms used in this Amendment shall, except where the context otherwise requires, have the meanings set forth in the Original Agreement, as amended hereby.              2.          Amendments.  The Original Agreement is hereby amended as follows:              (a)         The Original Agreement is generally amended so that each reference to “Mark Anthony Brands, Inc.” shall be deemed to be a reference to “Mark Anthony Brewing, Inc. (‘Mark Anthony’).”              (b)        The definition of “Approved Project Costs” appearing in Paragraph 2 of the Original Agreement is amended by changing the reference to Paragraph 17(n) to a reference to Paragraph 17(p).”              (c)         Subpart (b)(ii) of the definition of “Maturity Date” appearing in Paragraph 2 of the Original Agreement is amended by extending the scheduled Maturity Date of Term Loan A from “April 1, 2006” to “May 1, 2006.”              (d)        Subpart (b)(iii) of the definition of “Maturity Date” appearing in Paragraph 2 of the Original Agreement is amended by shortening the scheduled Maturity Date of Term Loan B from “April 1, 2006” to “May 1, 2005.”              (e)         Subparagraph (f) of the definition of “Eligible Receivables” appearing in Paragraph 2 of the Original Agreement is amended in its entirety to read as follows:              “(f)       it is a valid, legally enforceable and unconditional obligation of the Account Debtor with respect thereto and is not subject to setoff, counterclaim, credit or allowance (except any credit (including without limitation, credits for returned kegs or pallets ) or allowance which has been deducted in computing the net amount of the applicable invoice as shown in the original schedule or Borrowing Base Certificate furnished to Lender identifying or including such Receivable) or adjustment by the Account Debtor with respect thereto, or to any claim by such Account Debtor denying liability thereunder in whole or in part, and such Account Debtor has not refused to accept any of the goods or services which are the subject of such Receivable or offered or attempted to return any of such goods; provided, however, that, so long as the Mark Anthony Indemnity Agreement remains in force and effect, no MHL Receivable shall be an Eligible Receivable under this subparagraph (f) unless Mark Anthony has accepted the invoice evidencing such MHL Receivable pursuant to a written acceptance in form and substance satisfactory to the Lender.”              (f)         The definitions of “Loan Documents” and “Measurement Period” appearing in Paragraph 2 of the Original Agreement are respectively amended in their entireties to read as follows:              “‘Loan Document(s)’ shall mean individually or collectively, as the case may be, this Agreement, the Notes, the Support Agreements, the Project Letter of Credit, the Collateral Assignment  and any and all other documents executed, delivered or referred to herein or therein, as originally executed and as amended, modified or supplemented from time to time.              ‘Measurement Period’ shall mean, at any  Measurement Date, the Borrower’s four consecutive fiscal quarters ending on such Measurement Date.”              (g)        Paragraph 2 of the Original Agreement is amended by adding the following new definitions in proper alphabetical order:              “‘Collateral Assignment’ shall mean the Collateral Assignment of lease dated as of even with Amendment No. 1 to Amended and Restated General Credit and Security Agreement dated as of May 22, 2001 between Borrower and Lender, as originally executed and as it may be amended, modified, supplemented or restated from time to time.”              ‘Intercreditor Agreement’ shall mean the Amended and Restated Intercreditor Agreement dated as of May 22, 2001 among Lender, Mark Anthony and Stearns Bank National Association, as originally executed and as it may be amended, modified, supplemented or restated from time to time              ‘Mark Anthony Indemnity Agreement’ shall mean that certain Financial Assistance and Indemnity Agreement dated as of  May 22, 2001 between Borrower and Mark Anthony, as amended, modified or supplemented with any Lender consent required by Paragraph 18(r) hereof and Section 23 of the Intercreditor Agreement.              ‘Mark Anthony Supply Agreement’ shall mean that certain Contract Manufacturing Supply Agreement dated as of September 22, 1999, between Mark Anthony, as the assignee of Mark Anthony International SRL, as amended by an Amendment to Contract Manufacturing Supply Agreement dated as of May 22, 2001 (the ‘MA Supply Agreement Amendment’), and as it may be further amended, modified or supplemented with any Lender consent required by Paragraph 18(r) hereof and Section 23 of the Intercreditor Agreement.”              (h)        Paragraph 18 of the Original Agreement is amended by adding the following new subparagraph (r):              “(r)       Amend, modify, or supplement any provision of, or waive any other party’s compliance with any of the terms of, the Mark Anthony Supply Agreement or the Mark Anthony Indemnity Agreement in any manner which: (a) requires Borrower to pay any additional consideration under such agreement or otherwise imposes any financial obligation or burden on the Borrower; (b) could reasonably be expected to result in an Material Adverse Occurrence; or (c) impairs any of Bremer’s rights in the Collateral pursuant to this Agreement, any other Loan Document or the Intercreditor Agreement or is otherwise adverse to the rights and benefits of Lender under this Agreement, any other Loan Document or the Intercreditor Agreement.              (i)          Paragraph 20(p) of the Original Agreement is amended in its entirety to read as follows:              “(p)      Lender determines that the remaining un-advanced balance of the Term Loan A Commitment  is insufficient to fully pay all of the then unpaid Project Costs  and Borrower  fails to deposit with the Lender, within five (5) Business Days after demand, sufficient funds to cover such deficiency; or.”              (j)          Paragraph 20 of the Original Agreement is further amended by adding the following new subparagraph (r):              “(r)       If the amount in default under the Mark Anthony Indemnity Agreement is at least $100,000.00 and Borrower fails to cure such defaults within 30 days after Mark Anthony notifies Bremer of the occurrence thereof pursuant to Section 23 of the Intercreditor Agreement.”              3.          Effective Date. This Amendment shall become effective as of the date hereof on the date (the ‘Effective Date’) when, and only when, the Lender shall have received counterparts of this Amendment executed by Borrower, and the Lender shall have received all of the following in form and substance satisfactory to the Lender, unless waived in writing by the Lender:              (a)         A replacement Term Note A (the “Replacement Term Note A”) in a form provided by the Lender appropriately completed and duly executed by the Borrower;              (b)        A replacement Term Note B (the “Replacement Term Note B”) in a form provided by the Lender appropriately completed and duly executed by the Borrower;              (c)         A certified copy of the Mark Anthony Supply Agreement and the Mark Anthony Indemnity Agreement;              (d)        The Collateral Assignment appropriately completed and duly executed by Borrower together with a  consent thereto appropriately completed and duly executed by Gopher and Stearns Bank National Association;              (e)         The Intercreditor Agreement appropriately completed and duly executed by Mark Anthony and  Stearns Bank National Association; and              (f)         Such other documents as the Lender may reasonably require.              4.          Representations and Warranties.  To induce the Lender to enter into this Amendment, the Borrower represents and warrants to the Lender as follows:              (a)         The execution, delivery and performance by the Borrower of this Amendment, the Replacement Term Note A, the Replacement Term Note B,  and any other documents to which the Borrower is a party have been duly authorized by all necessary corporate action, do not require any approval or consent of, or any registration, qualification or filing with, any governmental agency or authority or any approval or consent of any other Person (including, without limitation, any stockholder or member), do not and will not conflict with, result in any violation of or constitute any default under, any provision of the Borrower’s articles of incorporation or by-laws, any agreement binding on or applicable to the Borrower or any of its property, or any law or governmental regulation or court decree or order, binding upon or applicable to the Borrower or of any of its property and will not result in the creation or imposition of any Security Interest or other lien or encumbrance in or on any of its property pursuant to the provisions of any agreement applicable to Borrower or any of its property;              (b)        The representations and warranties contained in Paragraph 16 of the Original Agreement are true and correct as of the date hereof as though made on that date after giving effect to the Amendment;              (c)         (i) No events have taken place and no circumstances exist at the date hereof which would give Borrower the right to assert a defense, offset or counterclaim to any claim by the Lender for payment of the Obligations; and (ii) Borrower hereby releases and forever discharges the Lender and its successors, assigns, directors, officers, agents, employees and participants from any and all actions, causes of action, suits, proceedings, debts, sums of money, covenants, contracts, controversies, claims and demands, at law or in equity, which Borrower ever had or now has against the Lender or its successors, assigns, directors, officers, agents, employees or participants by virtue of their relationship to Borrower in connection with the Loan Documents and the transactions related thereto;              (d)        The Original Agreement as amended by this Amendment, the Replacement Term Note A and the Replacement Term Note B are the legal, valid and binding obligations of the Borrower and are enforceable in accordance with their respective terms, subject only to bankruptcy, insolvency, reorganization, moratorium or similar laws, rulings or decisions at the time in effect affecting the enforceability of rights of creditors generally and to general equitable principles which may limit the right to obtain equitable remedies; and              (e)         No Default or Event of Default and no Material Adverse Occurrence has occurred and is continuing as of the date hereof after giving effect to this Amendment.              5.          Reference to and Effect on the Loan Documents.              (a)         From and after the effective date of this Amendment, each reference in:              (i)          the Original Agreement to “this Agreement,” “herein,” “hereof,” “hereby” or words of like import referring to the Agreement and each reference in any other Loan Document to the “Credit Agreement,” the “Loan Agreement,” “therein,” “thereof,” “thereby” or words of like import referring to the Original Agreement shall mean and be a reference to the Original Agreement as amended by this Amendment;              (ii)         any Loan Document to the “Term Note A”, “thereunder”, “thereof”, “therein” or words of like import referring to the Term Note A shall mean and be a reference to the Replacement Term Note A executed and delivered pursuant to this Amendment; and              (iii)        any Loan Document to the “Term Note B”, “thereunder”, “thereof”, “therein” or words of like import referring to the Term Note B shall mean and be a reference to the Replacement Term Note B executed and delivered pursuant to this Amendment              (b)        Except as specifically set forth above, the Original Agreement remains in full force and effect and is hereby ratified and confirmed.              (c)         The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of Lender under the Original Agreement or any other Loan Document, nor constitute a waiver of any provision of the Original Agreement or any such Loan Document.              6.          Costs and Expenses.  Borrower agrees to pay on demand all costs and expenses of Lender in connection with the preparation, reproduction, execution and delivery of this Amendment and the other documents to be delivered hereunder or thereunder, including its reasonable attorneys’ fees and legal expenses.              7.          Governing Law.  This Amendment shall be governed by and construed in accordance with the laws of the State of Minnesota.              8.          Headings.  Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.              IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by the respective officers thereunto duly authorized as of the date first above written.     MBC Holding Company           By:       --------------------------------------------------------------------------------     Its:         -------------------------------------------------------------------------------- Subscribed and sworn to before me this _____ day of May, 2001.                       --------------------------------------------------------------------------------       Notary Public           Bremer Business Finance Corporation           By:       --------------------------------------------------------------------------------       Its:       --------------------------------------------------------------------------------   REPLACEMENT TERM NOTE A $4,400,000.00 St. Paul, MN   May 22, 2001              FOR VALUE RECEIVED, the undersigned, MBC HOLDING COMPANY, a Minnesota corporation (the “Borrower”), promises to pay to the order of BREMER BUSINESS FINANCE CORPORATION, a Minnesota corporation (the “Lender”),  the principal sum of Four  Million Four Hundred Thousand and No/100ths Dollars ($4,400,000.00) or, if less, the  aggregate unpaid principal amount of the Term Loan A borrowed by the Borrower under the Credit Agreement in:  (a) fifty-nine (59) consecutive, equal monthly installments of $73,334.00 each, such installments shall be due and payable on each Monthly Payment Date, commencing on June 1, 2001, and continuing through, to and including April 1, 2006; and (b) a sixtieth (60th  and final installment equal to the entire remaining principal balance hereof shall be due and payable on May 1, 2006.              All disbursement of the Term Loan A proceeds and all payments of principal shall be recorded by the Lender in its records which records shall be conclusive evidence of the subject matter thereof, absent manifest error.              The Borrower further promises to pay to the order of the Lender interest on the outstanding principal balance of the Term Loan A  from time to time outstanding from the date hereof until paid in full at a fluctuating annual rate equal to the sum of the Reference Rate plus 2% per annum (the “Lender Rate”); provided, however, that:              (a)         if, and so long as, the Lender has sold a participation in Term Loan A and the purchaser of such participation has agreed to a rate which is lower  than the Lender Rate on such participation (such lower rate being the “Participant Rate”), then the Lender agrees that the rate of interest on the portion of the Term Loan A subject to such participation shall be equal to the Participant Rate; and/or              (b)        notwithstanding anything to the contrary contained herein, upon the occurrence and during the continuance of any Event of Default, the rate of interest hereunder shall be the Default Rate. Interest accrued through a calendar month shall be due and payable on the first day of the following calendar month, commencing on June 1, 2001, and at maturity.  Interest payable after maturity shall be payable on demand.  Each change in the fluctuating interest rate shall take effect simultaneously with the corresponding change in the Reference Rate.              The Borrower shall have the right, by giving written notice to the Lender by not later than 2:00 p.m. (St. Paul time) on the Business Day of such payment, to voluntarily prepay this Note  in whole or in part at any time without premium or penalty; provided, however, that: (a) any  such voluntary prepayment which prepays this Note in full shall be accompanied by accrued interest; and (b) any partial prepayment shall be applied to installments due on this Note in the inverse order of their maturities.              All payments of principal and interest under this Note shall be made in lawful money of the United States of America in immediately available funds to the Lender at the Lender’s office at 445 Minnesota Street, St, Paul, MN 55101, or at such other place as may be designated by the Lender to the Borrower in writing.              This Note is the Term Note A referred to in, and evidences indebtedness incurred under, an Amended and Restated  General Credit and Security Agreement dated as of March 29, 2001 (herein, as it may be amended, modified or supplemented from time to time, called the “Credit Agreement;” capitalized terms not otherwise defined herein being used herein as therein defined) between the Borrower and the Lender, to which Credit Agreement reference is made for a statement of the terms and provisions thereof, including those under which the Borrower is permitted and required to make prepayments and repayments of principal of such indebtedness and under which such indebtedness may be declared to be immediately due and payable.              All parties hereto, whether as makers, endorsers or otherwise, severally waive presentment, demand, protest and notice of dishonor in connection with this Note.              This Note is made under and governed by the internal laws of the State of Minnesota.              This Note is being executed and delivered in replacement of, but not in payment of, that certain Term Note A dated March 29, 2001 made by the Borrower payable to the order of the Lender in the original principal amount of $4,400,000.00; provided, however, that interest accruing on the replaced note through the date hereof shall be payable on June 1, 2001.   MBC Holding Company               By       --------------------------------------------------------------------------------       Its       --------------------------------------------------------------------------------     Subscribed and sworn to before me this _____ day of May, 2001.                       --------------------------------------------------------------------------------       Notary Public         REPLACEMENT TERM NOTE B $600,000.00 St. Paul, MN   May 22, 2001              FOR VALUE RECEIVED, the undersigned, MBC HOLDING COMPANY, a Minnesota corporation (the “Borrower”), promises to pay to the order of BREMER BUSINESS FINANCE CORPORATION, a Minnesota corporation (the “Lender”),  the principal sum of Six Hundred Thousand  and No/100ths Dollars ($600,000.00) or, if less, the  aggregate unpaid principal amount of the Term Loan B borrowed by the Borrower under the Credit Agreement in: (a) forty-seven( 47) consecutive, equal monthly installments of $12,500.00 each, such installments shall be due and payable on each Monthly Payment Date, commencing on June 1, 2001, and continuing through, to and including April 1, 2005; and  (b) a forty-eighth (48th ) and final installment equal to the entire remaining principal balance hereof shall be due and payable on May 1, 2005.              All disbursement of the Term Loan B proceeds and all payments of principal shall be recorded by the Lender in its records which records shall be conclusive evidence of the subject matter thereof, absent manifest error.              The Borrower further promises to pay to the order of the Lender interest on the outstanding principal balance of the Term Loan B  from time to time outstanding from the date hereof until paid in full at a fluctuating annual rate equal to the sum of the Reference Rate plus 2%  per annum (the “Lender Rate”); provided, however, that notwithstanding anything to the contrary contained herein, upon the occurrence and during the continuance of any Event of Default, the rate of interest hereunder shall be the Default Rate.  Interest accrued through a calendar month shall be due and payable on the first day of the following calendar month, commencing on June 1, 2001, and at maturity.  Interest payable after maturity shall be payable on demand.  Each change in the fluctuating interest rate shall take effect simultaneously with the corresponding change in the Reference Rate.              The Borrower shall have the right, by giving written notice to the Lender by not later than 2:00 p.m. (St. Paul time) on the Business Day of such payment, to voluntarily prepay this Note  in whole or in part at any time without premium or penalty; provided, however, that: (a) any  such voluntary prepayment which prepays this Note in full shall be accompanied by accrued interest; and (b) any partial prepayment shall be applied to installments due on this Note in the inverse order of their maturities.              All payments of principal and interest under this Note shall be made in lawful money of the United States of America in immediately available funds to the Lender at the Lender’s office at 445 Minnesota Street, St, Paul, MN 55101, or at such other place as may be designated by the Lender to the Borrower in writing.              This Note is the Term Note B referred to in, and evidences indebtedness incurred under, an Amended and Restated  General Credit and Security Agreement dated as of March 29, 2001 (herein, as it may be amended, modified or supplemented from time to time, called the “Credit Agreement;” capitalized terms not otherwise defined herein being used herein as therein defined) between the Borrower and the Lender, to which Credit Agreement reference is made for a statement of the terms and provisions thereof, including those under which the Borrower is permitted and required to make prepayments and repayments of principal of such indebtedness and under which such indebtedness may be declared to be immediately due and payable.              All parties hereto, whether as makers, endorsers or otherwise, severally waive presentment, demand, protest and notice of dishonor in connection with this Note.              This Note is made under and governed by the internal laws of the State of Minnesota.              This Note is being executed and delivered in replacement of, but not in payment of, that certain Term Note B dated March 29, 2001 made by the Borrower payable to the order of the Lender in the original principal amount of $600,000.00; provided, however, that interest accruing on the replaced note through the date hereof shall be payable on June 1, 2001.     MBC Holding Company                             By         --------------------------------------------------------------------------------       Its         --------------------------------------------------------------------------------   Subscribed and sworn to before me this _____ day of May, 2001.                             --------------------------------------------------------------------------------         Notary Public          

Exhibit 10.15(D) TERM LOAN AND SECURITY AGREEMENT DATED AS OF DECEMBER 31, 2000            TERM LOAN AGREEMENT dated as of December 31, 2000 between PHARMACEUTICAL FORMULATIONS INC., 460 Plainfield Avenue, Edison, New Jersey 08818, a Delaware corporation (the "Borrower"), and ICC INDUSTRIES INC., 460 Park Avenue, New York, New York 10022, a New York corporation (the "Lender"). RECITALS            WHEREAS, the Lender and the Borrower have previously entered into a Term Loan and Security Agreement dated as of September 30, 2000 (the "Prior Loan Agreement"), and Borrower executed a Promissory Note dated September 30, 2000 (the "Prior Promissory Note") in the amount of eleven million eight hundred thirty-seven thousand one hundred dollars ($11,837,100), which covered loans made by Lender to Borrower in the amounts and on the dates set forth in Exhibit A and B attached hereto.            WHEREAS, the Lender has loaned to Borrower or has paid to Austin Chemical on behalf of Borrower additional sums totaling four million five hundred and sixty-seven thousand dollars ($4,567,000), in the amounts and on the dates set forth in Exhibit C attached hereto; and            WHEREAS, Lender's loans to Borrower as of this date now total sixteen million four hundred four thousand one hundred dollars ($16,404,100)            WHEREAS, the parties have agreed that the loans from Lender to Borrower shall be governed by the terms and conditions of this Term Loan and Security Agreement, and that payment shall be made in accordance with the payment schedule set forth in a Promissory Note of even date to be executed by Borrower in the form of Exhibit D attached hereto; and            NOW, THEREFORE, in consideration of the foregoing and the covenants contained herein, the Borrower and the Lender agree as follows: ARTICLE I AMOUNTS AND TERMS OF THE ADVANCES            SECTION 1.1. The Loan. The parties agree that the loans outstanding from Lender to Borrower totaling $16,404,100 shall be governed by the terms and conditions hereinafter set forth, and said loans shall hereinafter referred to as the "Loan".            SECTION 1.2. Interest and Repayment. The Borrower shall repay, and shall pay interest on, the aggregate unpaid principal amount of the Loan in accordance with the Note, evidencing the indebtedness resulting from such Loan and delivered to the Lender pursuant to Article II.            SECTION 1.3. Optional Prepayments. The Borrower may prepay, without any penalty, the Note in whole or in part with any accrued interest due on the amount prepaid.            SECTION 1.4. Conversion of Invoices. The amounts due to Lender under the invoices identified in Exhibits A and B are no longer due and payable under the terms set forth in said invoices. Instead, said indebtedness to Lender is hereby converted to the indebtedness covered by the Loan set forth herein.            SECTION 1.5. Payments and Computations. The Borrower shall make each payment under any Loan Document (as hereinafter defined) not later than 3:00 p.m. (New York City time) on the day when due in lawful money of the United States of America to the Lender at its address referred to in Section 6.2 in same day funds. All computations of interest under the Note shall be made by the Lender on the basis of a year of 360 days, for the actual number of days elapsed (including the first day but excluding the last day).            SECTION 1.6. Payment on Non-Business Days. Whenever any payment to be made hereunder or under the Note shall be stated to be due on a Saturday, Sunday or a public or bank holiday or the equivalent for banks generally under the laws of the State of New York (any other day being a "Business Day"), such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest. ARTICLE II CONDITIONS OF LENDING            SECTION 2.1. Conditions of Lending. At the option of the Lender, the obligation of the Lender to make the Loan is subject to the satisfaction of the following conditions precedent:              (A) The Lender shall have received the Note, dated as of the date hereof, in form and substance satisfactory to the Lender;              (B) The following statements shall be true as of the date hereof:              (i) The representations and warranties contained in Section 3.1 of this Agreement are correct on and as of the date hereof; and              (ii) No event has occurred and is continuing, or would result from such Loan, which constitutes an Event of Default (as hereinafter defined);              (C) The Lender shall have received a certified copy of the resolutions of the Board of Directors of Borrower, approving each Loan Document to which it is a party, and of all documents evidencing other necessary corporate action, if any, with respect to each such Loan Document;              (D) The Lender shall have received such other approvals, opinions or documents as the Lender may reasonably request. ARTICLE III REPRESENTATIONS AND WARRANTIES            SECTION 3.1. Representations and Warranties of the Borrower. The Borrower represents and warrants as follows:              (A) The Borrower is a corporation duly incorporated and validly existing under the laws of the state of Delaware, has the power to transact the business in which it is now engaged and is duly qualified as a foreign corporation under the laws of each jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification.              (B) The execution, delivery and performance by the Borrower of this Agreement are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action and do not contravene the Borrower's charter or by-laws.              (C) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Borrower of this Agreement.              (D) This Agreement is a legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms.              (E) The proceeds of the Loan will be used solely for the purpose of Borrower's working capital and will not be used to acquire any security in any transaction which is subject to Sections 13 and 14 of the Securities Exchange Act of 1934. ARTICLE IV COVENANTS OF THE BORROWER            SECTION 4.1. Affirmative Covenant. So long as the Note shall remain unpaid, the Borrower will, unless the Lender shall otherwise consent in writing:              (A) Compliance with Laws, Etc. Comply, in all material respects, with all applicable laws, rules, regulations and orders.            SECTION 4.2. Negative Covenant. So long as the Note shall remain unpaid, the Borrower will not, without the written consent of the Lender, other than those liens that presently exist, create or suffer to exist any lien, security interest or other encumbrance upon or with respect to any of its properties or assets, whether now owned or hereafter acquired, or assign any right to receive income. ARTICLE V SECURITY INTEREST            SECTION 5.1. Security Interest. The Borrower has granted Lender a subordinated security interest in all of its assets, which shall secure Borrower's loans under this Agreement. That security interest is reflected by a UCC 1 filing which has been filed with the State of New Jersey and County of Middlesex. ARTICLE VI EVENTS OF DEFAULT            SECTION 6.1. Events of Default. If any of the following events ("Events of Default") shall occur and be continuing:              (A) The Borrower shall fail to pay any installment of principal of, or interest on, the Note within five Business Days of the date when due; or              (B) Any representation or warranty made by Borrower under or in connection with any Loan Document shall prove to have been incorrect in any material respect when made which is not cured within five (5) Business Days of receiving notice of such breach by Lender; or              (C) Borrower shall fail to perform or observe any other term, covenant or agreement contained in any Loan Document on their respective parts to be performed or observed; or              (D) Borrower shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against Borrower seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property; or Borrower shall take any corporate action to authorize any of the actions set forth above in this subsection (D); or              (E) Any judgment or order for the payment of money shall be rendered against Borrower and enforcement proceedings shall have been commenced by any creditor upon such judgment or order. ARTICLE VII MISCELLANEOUS            SECTION 7.1. Amendment, Etc. No amendment or waiver of any provision of this Agreement or the Note, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Lender and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.            SECTION 7.2. Notices, Etc. Any notice, demand, request or other communication hereunder shall be in writing and shall be delivered by personal service or mailed certified mail, postage prepaid, return receipt requested, to the parties at the addresses for such notices set forth below, with a copy also sent by telefax to the telefax number listed below. Such notices shall be effective upon receipt by the respective addresses thereof. The parties hereto may change their respective addresses for such notices by delivering or mailing to the other party hereto, as aforesaid, a notice of such change.   If to the Borrower: Pharmaceutical Formulations Inc. 460 Plainfield Avenue Edison, New Jersey 08818           Attention: President Fax No.: 732-819-3330 If to the Lender: ICC Industries Inc. 460 Park Avenue New York, New York 10022           Attention: President Fax No.: 212-521-1949            SECTION 7.3. No Waiver; Remedies. No failure on the part of the Lender to exercise, and no delay in exercising, any right under any Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right under any Loan Document preclude any other or further exercise thereof or the exercise of any other right. The remedies provided in the Loan Documents are cumulative and not exclusive of any remedies provided by law.            SECTION 7.4. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles consistently applied, except as otherwise stated herein.            SECTION 7.5. Costs, Expenses and Taxes. The Borrower agrees to pay on demand all costs and expenses in connection with the preparation, execution, delivery, filing, recording and administration of the Loan Documents and the other documents to be delivered under the Loan Documents, including, without limitation, the fees and out-of-pocket expenses of counsel for the Lender, with respect thereto and with respect to advising the Lender as to its rights and responsibilities under the Loan Documents, and all costs and expenses, if any (including counsel fees and expenses), in connection with the enforcement of the Loan Documents and the other documents to be delivered under the Loan Documents. In addition, the Borrower shall pay any and all stamp and other taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of the Loan Documents and the other documents to be delivered under the Loan Documents, and agrees to save the Lender harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes and fees.            SECTION 7.6. Right of Set-Off. Upon the occurrence and during the continuance of any Event of Default the Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Lender to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under any Loan Document, irrespective of whether or not the Lender shall have made any demand under such Loan Document and although such obligations may be unmatured. The Lender agrees promptly to notify the Borrower after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Lender under this section are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Lender may have.            SECTION 7.7. Prior Agreement. This Term Loan and Security Agreement amends and restates the Prior Loan Agreements dated as of April 1, 1999, July 1, 2000 and September 30, 2000.            SECTION 7.8. Binding Effect; Governing Law; Jurisdiction.              (A) This Agreement shall be binding upon and inure to the benefit of the Borrower and the Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lender. This Agreement and the Note shall be governed by, and construed in accordance with, the laws of the State of New York.              (B) The Borrower agrees that any legal action or proceeding with respect to this Agreement or to enforce any judgment obtained against the Borrower in connection herewith may be brought by the Lender in the courts of the State of New York or in the United States District Court for the Southern District of New York, or any other court to the jurisdiction of which the Borrower or any of the Borrower's property is or may be subject. The Borrower irrevocably submits to the jurisdiction of the courts of the State of New York or of the United States District Court for the Southern District of New York, and irrevocably waives any present or future claim that any such court is an inconvenient forum, in connection with any action or proceeding arising out of this Agreement.            IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. PHARMACEUTICAL FORMATIONS INC. (Borrower) By: /s/ James C. Ingram Name: James C. Ingram Title: President ICC INDUSTRIES INC. (Lender) By: /s/ Susan Aibinder Name: Susan Aibinder Title: VP/Treasurer EXHIBIT A EXHIBIT A - LOANS MADE BY LENDER ICC INDUSTRIES INC. Original Loan - $3,000,000 made April 1, 1999 Additional Loans as of July 1, 2000: Date Amount of Loan of Loan -------------- ------- $312,100.00 03/23/00 $450,000.00 03/30/00 $150,000.00 04/17/00 $ 75,000.00 04/18/00 $180,000.00 04/24/00 $200,000.00 04/25/00 $ 40,000.00 04/26/00 $ 50,000.00 05/01/00 $165,000.00 05/02/00 $100,000.00 05/03/00 $145,000.00 05/05/00 $100,000.00 05/08/00 $175,000.00 05/09/00 $ 30,000.00 05/10/00 $100,000.00 05/11/00 $150,000.00 05/18/00 $ 80,000.00 05/19/00 $140,000.00 05/22/00 $100,000.00 05/23/00 $ 50,000.00 05/25/00 $120,000.00 05/26/00 $525,000.00 05/26/00 $155,000.00 05/30/00 $190,000.00 05/31/00 $ 75,000.00 06/01/00 $225,000.00 06/02/00 $125,000.00 06/05/00 $135,000.00 06/06/00 $100,000.00 06/08/00 $ 50,000.00 06/09/00 $100,000.00 06/12/00 $100,000.00 06/20/00 $ 30,000.00 06/21/00 $ 30,000.00 06/26/00 ------------- Total Additional Loans: $4,752,100.00 ------------- Total of all Loans as of July 1, 2000: $7,752,100.00 EXHIBIT B EXHIBIT B - LOANS MADE BY LENDER ICC INDUSTRIES INC. UNDER TERM LOAN AND SECURITY AGREEMENT DATED AS OF SEPTEMBER 30, 2000 Date Date Amount of Loan of Loan Amount of Loan of Loan -------------- ------- -------------- ------- $75,000.00 07/06/00 $50,000.00 09/21/00 $75,000.00 07/10/00 $100,000.00 09/22/00 $175,000.00 07/13/00 $135,000.00 09/22/00 (Austin Chemical) $135,000.00 07/14/00 $100,000.00 09/25/00 $250,000.00 07/17/00 $100,000.00 09/26/00 $50,000.00 07/18/00 $50,000.00 09/28/00 $100,000.00 07/19/00 $25,000.00 09/29/00 $125,000.00 07/20/00 $50,000.00 09/29/00 $100,000.00 07/21/00 ------------- $25,000.00 07/26/00 $4,085,000.00 Total Loans for July 1 $55,000.00 07/28/00 through September 30, 2000 $100,000.00 07/31/00 $30,000.00 08/01/00 $200,000.00 08/02/00 $11,837,100 Total Loans under this $25,000.00 08/04/00 Agreement $50,000.00 08/08/00 $50,000.00 08/10/00 $300,000.00 08/11/00 $140,000.00 08/16/00 $90,000.00 08/17/00 $100,000.00 08/18/00 $40,000.00 08/21/00 $15,000.00 08/23/00 $50,000.00 08/24/00 $50,000.00 08/25/00 $270,000.00 08/25/00 (Austin Chemical) $45,000.00 08/28/00 $40,000.00 08/29/00 $50,000.00 08/30/00 $50,000.00 08/31/00 $55,000.00 09/01/00 $50,000.00 09/05/00 $50,000.00 09/07/00 $200,000.00 09/08/00 $25,000.00 09/12/00 $50,000.00 09/14/00 $135,000.00 09/15/00 (Austin Chemical) $50,000.00 09/20/00 EXHIBIT C EXHIBIT C - LOANS MADE BY LENDER ICC INDUSTRIES INC. UNDER TERM LOAN AND SECURITY AGREEMENT DATED AS OF DECEMBER 31, 2000 DATE DATE AMOUNT OF LOAN OF LOAN AMOUNT OF LOAN OF LOAN $200,000.00 10/02/00 $250,000.00 11/02/00 $135,000.00 10/02/00 $125,000.00 11/06/00 (Austin Chemical) $500,000.00 11/08/00 $50,000.00 10/04/00 $150,000.00 11/09/00 $50,000.00 10/05/00 $270,000.00 11/10/00 $25,000.00 10/06/00 (Austin Chemical) $100,000.00 10/10/00 $250,000.00 11/13/00 $55,000.00 10/11/00 $100,000.00 11/15/00 $180,000.00 10/12/00 $216,000.00 11/17/00 $40,000.00 10/13/00 (Austin Chemical) $50,000.00 10/16/00 $135,000.00 11/20/00 $25,000.00 10/18/00 (Austin Chemical) $50,000.00 10/19/00 $50,000.00 11/22/00 $50,000.00 10/20/00 $150,000.00 11/27/00 $50,000.00 10/23/00 $100,000.00 12/06/00 $50,000.00 10/24/00 $120,000.00 12/05/00 $25,000.00 10/25/00 $150,000.00 12/08/00 $50,000.00 10/26/00 $100,000.00 12/14/00 $50,000.00 10/30/00 $400,000.00 12/21/00 $50,000.00 10/31/00 $216,000.00 12/22/00 $4,567,000 Total Loans for October 1, through December 31, 2000 $16,404,1000 Total Loans under this Agreement EXHIBIT D PROMISSORY NOTE $11,837,100 (Eleven Million Eight Hundred Thirty Seven Thousand One Hundred Dollars and no Cents) New York, New York September 30, 2000            FOR VALUE RECEIVED, the undersigned, PHARMACEUTICAL FORMULATIONS INC., 460 Plainfield Avenue, Edison, New Jersey 08818, a Delaware corporation (the "Borrower") HEREBY PROMISES TO PAY to the order of ICC INDUSTRIES INC., 460 Park Avenue, New York, New York 10022, a New York corporation (the "Lender") the principal sum of eleven million eight hundred thirty seven thousand one hundred dollars ($11,837,100) on the following dates in the following amounts: DATE AMOUNT TO BE REPAID ---- ------------------- From present date until November 1, 2001 Interest-only payments on the 1st of each month 02/01/02 $ 100,000 plus interest 03/01/02 $ 100,000 plus interest 04/01/02 $ 100,000 plus interest 05/01/02 $ 100,000 plus interest 06/01/02 $ 100,000 plus interest 07/01/02 $ 100,000 plus interest 08/01/02 $ 100,000 plus interest 09/01/02 $ 100,000 plus interest 10/01/02 $ 100,000 plus interest 11/01/02 $ 100,000 plus interest 12/01/02 $ 100,000 plus interest 01/01/03 $ 100,000 plus interest 02/01/03 $15,204,100 plus interest The interest shall be on any and all principal amounts remaining unpaid hereunder from time to time outstanding from the date hereof until said principal amounts are paid in full, payable monthly in arrears commencing November 1, 2000, and thereafter during the term hereof and on the final day when said principal amounts are paid and, with respect to interest on any overdue principal amount, payable on demand, at a fluctuating interest rate per annum equal to one percent (1%) per annum above the rate of interest announced publicly by Standard Chartered Bank in New York, New York, USA, from time to time as said bank’s prime or base rate (the “Base Rate”). The Borrower acknowledges that the Base Rate does not necessarily reflect the lowest rate of interest charged by said bank to any class of customer or in respect of any class of loan. Each change in the fluctuating interest rate hereunder shall take effect simultaneously with the corresponding change in the Base Rate and all computations of interest shall be made on the basis of a year of 360 days, for the actual number of days elapsed.           Both principal and interest are payable in lawful money of the United States of America to the Lender at 460 Park Avenue, New York, New York 10022, not later than 12:00 noon (New York City time) on the day when due in same day funds, or at such other address as the holder hereof may direct. Whenever any payment shall be stated to be due on a Saturday, Sunday or a public or bank holiday or the equivalent for banks generally under the laws of the State of New York (any other day being a “Business Day”), such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest.           In the event of any default in connection with any payment under the aforementioned payment schedule, all remaining unpaid amounts shall immediately become due and payable on demand.           This Note is the Note referred to in, and is entitled to the benefits of, the Term Loan and Security Agreement dated as of September 30, 2000 (the “Term Loan Agreement”). The Term Loan Agreement, among other things, contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified.           This Note amends and restates the Promissory Notes executed by Borrower dated April 1, 1999, July 1, 2000 and September 30, 2000. This note is secured by a Security Interest granted by Borrower to Lender covering all of Lender’s assets, and reflected by a UCC 1 which has been filed with the state of New Jersey and county of Middlesex.           This Note shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed therein (without giving effect to any principles of conflicts of law).           The Borrower unconditionally and irrevocably agrees that any legal action, suit or proceeding against it with respect to its obligations or liabilities hereunder or arising out of or in connection with this Note or the transactions contemplated hereby for recognition or enforcement of any judgment rendered in any such action, suit or proceeding may be brought in the United States Federal Court for the Southern District of New York or in the courts of the State of New York, as the holder hereof may elect.   PHARMACEUTICAL FORMULATIONS, INC. By:                                                                             Name: Title:

EXHIBIT 10.48A SECOND AMENDMENT TO LICENSE AND SALE AGREEMENT              THIS SECOND AMENDMENT TO LICENSE AND SALE AGREEMENT (the “Amendment”) is made and entered into as of March 16, 2001 (the “Amendment Effective Date”), by and between METABOLEX, INC., a Delaware corporation (“Metabolex”), and SHAMAN PHARMACEUTICALS, INC., a Delaware corporation (“Shaman”).  Metabolex and Shaman may be referred to herein as a “Party,” or, collectively, as “Parties.” RECITALS              A.         Metabolex and Shaman are parties to the License and Sale Agreement dated as of August 10, 1999, as amended effective December 4, 2000 (as amended, the “Agreement”), regarding the grant of licenses to Metabolex by Shaman in the diabetes area under intellectual property relating to certain compounds and extracts and the purchase of certain related materials by Metabolex.              B.         The Parties have entered into that certain Asset Sale Agreement, dated as of February 13, 2001, under which Metabolex has agreed to purchase, and Shaman has agreed to sell to Metabolex, certain additional assets of Shaman relating to its diabetes program, and in conjunction with, and as a condition to the closing of such asset sale, the Parties are obligated to enter into this Amendment to amend the terms of the Agreement as provided herein.   NOW, THEREFORE, the Parties agree as follows: 1.          AMENDMENT OF THE AGREEMENT The Parties hereby agree to amend the terms of the Agreement as provided below.  To the extent that the Agreement is explicitly amended by this Amendment, the terms of the Amendment will control where the terms of the Agreement are contrary to or conflict with the following provisions.  Where the Agreement is not explicitly amended, the terms of the Agreement will remain in force.  Capitalized terms used in this Amendment shall have the meanings as ascribed below or elsewhere in this Amendment, or if not so defined herein shall have the same meanings as such terms are defined in the Agreement.              1.1        Amendment Of License Rights Under Sections 2.1, 2.2 And 2.3(a).  Effective immediately and automatically as of the Amendment Effective Date, all of Metabolex’s license rights under Sections 2.1, 2.2 and 2.3(a) of the Agreement are and shall be perpetual and irrevocable, and to the extent that such license rights under the Technology as to particular fields or uses were non-exclusive (as of just prior to the Amendment Effective Date), such license rights are and shall be exclusive, even as to Shaman and any of its successors in interest to the applicable Intellectual Property Rights.              1.2        Amendment Of Section 2.2(c).  Effective immediately and automatically as of the Amendment Effective Date, Metabolex’s license rights under Section 2.2(c) of the Agreement include the rights, with full rights to sublicense, to discover, develop, make, have made, use, import, offer for sale, sell and otherwise commercialize Metabolex Extracts for all uses in all fields, except commercialization rights for Dietary Supplements.                1.3        Amendment Of Rights Under Sections 2.3(b) And (c).  Effective immediately and automatically as of the Amendment Effective Date, (a) Metabolex’s license rights under Sections 2.3(b) and (c) of the Agreement shall include the entire Nutritional Area (including areas outside the Metabolic Disease Field) except for commercialization rights for Dietary Supplements, and (b) each Party’s rights to grant further licenses (or sublicenses, as applicable) under their rights under Section 2.3(b) of the Agreement will not be limited to granting licenses on a product by product basis, but instead each Party may assign such licenses or grant sublicenses thereunder for all or part of its corresponding co-exclusive and exclusive license rights (as applicable).              1.4        Amendment of Section 11.1(c).  Effective immediately and automatically as of the Amendment Effective Date, the license previously granted to Metabolex under Section 11.1(c) of the Agreement shall include the full rights to commercialize Dietary Supplements in all countries, including without limitation the United States, Mexico, Central America, South America and Africa, and all such license rights shall be irrevocable.              1.5        Termination of Certain Sections.  Effective immediately and automatically as of the Amendment Effective Date, Sections 3.6(c), 3.7, 4.1, 4.2, 5.2, 5.3, 5.4, 5.5, 5.6, 5.7, 5.8, 5.9, 11.1(d), 11.2 and 11.3 of the Agreement are terminated and of no further force or effect.              1.6        Amendment Effective Date.  The Parties understand and agree that this Amendment is and will be effective only upon the issuance of a proper, final, non-appealable order approving the proposed sale of certain of Shaman’s assets to Metabolex pursuant to the Asset Sale Agreement and this Amendment by the Bankruptcy Court, including, without limitation, entry of an order by the Bankruptcy Court approving the Asset Sale Agreement with a finding that Metabolex is buying property in good faith in accordance with 11 U.S.C. § 363(m), which order is not stayed within ten (10) days of entry thereof, in a form satisfactory to Metabolex (“Approval Order”). 2.          MISCELLANEOUS              2.1        Full Force and Effect.  This Amendment amends the terms of the Agreement and is deemed incorporated into, and governed by all other terms of, the Agreement.  The provisions of the Agreement, as amended by this Amendment, remain in full force and effect pursuant to the Agreement.              2.2        Counterparts.  This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.              IN WITNESS WHEREOF,the Parties have executed this Amendment in duplicate originals by their authorized officers as of the date and year first written below.     SHAMAN PHARMACEUTICALS, INC.           By:  /s/ Steven R. King --------------------------------------------------------------------------------           Name:  Steven R. King --------------------------------------------------------------------------------           Title:   Chief Operating Officer --------------------------------------------------------------------------------           METABOLEX, INC.           By:   /s/ Thomas A. Glaze --------------------------------------------------------------------------------           Name:  Thomas A. Glaze --------------------------------------------------------------------------------           Title:   President and CEO --------------------------------------------------------------------------------    

Exhibit 10.3 NOTE PURCHASE AGREEMENT THIS NOTE PURCHASE AGREEMENT (the "Agreement") is dated as of May 22, 2001 (the "Effective Date") by and between Exelixis, Inc., a Delaware corporation having its principal place of business at 170 Harbor Way, P.O. Box 511, South San Francisco, California 94083-0511 (the "Company") and Protein Design Labs, Inc., a Delaware corporation having its principal place of business at 34801 Campus Drive, Fremont, California 94555-3606 (the "Holder"). Recitals A. Pursuant to the terms of the Convertible Note (the "Note"), dated as of even date herewith between the Company and the Holder, the Holder has loaned to the Company the principal sum of Thirty Million Dollars ($30,000,000) (the "Principal Amount"). B. The Company has agreed to issue the Note pursuant to the terms set forth in this Agreement. Now, Therefore, in consideration of the premises and promises herein contained and in order to induce the Holder to loan to the Company the Principal Amount, the Company agrees with the Holder as follows: 1. AUTHORIZATION AND SALE OF NOTES 1.1 Authorization of Notes . On or before the date hereof the Company shall authorize the issuance of the Note in the form attached to this Agreement as Exhibit A in the Principal Amount. 1.2 Sale of Note . Subject to the terms and conditions hereof, the Company will issue and sell to the Holder, and the Holder will purchase from the Company for the Principal Amount, the Note. The Note and the shares of common stock of the Company (the "Shares") issued upon conversion of the Note are sometimes collectively referred to herein as the "Securities." 2. CLOSING DATE; DELIVERY 2.2 Closing Date . Subject to the terms and conditions of this Agreement, the purchase and sale of the Note hereunder shall take place at 3:00 p.m. local time at the offices of the Company, on the date hereof or at such other time and place as the Company and the Holder may agree (the "Closing"). The date of the Closing is hereinafter referred to as the "Closing Date." 2.3 Delivery . At the Closing, the Company will deliver to the Holder the Note against payment of the Principal Amount therefor by wire transfer in immediately available funds: Bank: Silicon Valley Bank, Santa Clara, CA ABA Routing: 121-140-399 Acct Number: 33001-60643 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to the Holder as follows: 3.1 Organization and Standing . The Company: (a) is a corporation duly organized, validly existing, authorized to exercise all its corporate powers, rights, and privileges, and in good standing under the laws of the State of Delaware; and (b) has the corporate power and corporate authority to own and operate its properties and to carry on its business as now conducted and as proposed to be conducted. 3.2 Authorization and Validity . All corporate action on the part of the Company, its officers, directors, and stockholders necessary for the authorization, execution, delivery, and performance of all of the Company's obligations under this Agreement, the Note and all documents, instruments and agreements executed in connection therewith (the "Loan Documents") and for the authorization, issuance, and delivery of the Note has been taken and the Loan Documents constitute legally valid and binding obligations of the Company, enforceable against the Company in accordance with their terms. 3.3 Corporate Power . The Company has all requisite legal and corporate power and authority to execute and deliver the Loan Documents, to sell and issue the Note hereunder, and to carry out and perform its obligations under the Loan Documents. 3.4 Validity of Securities . The Securities, when issued, sold, and delivered in compliance with the terms and for the consideration expressed in this Agreement, will be duly authorized and validly issued (including without limitation, but subject to the accuracy of the representations of Holder herein, issued in compliance with all applicable federal and state securities laws), fully paid and nonassessable. The Securities will be free and clear of all liens and encumbrances other than any liens or encumbrances created by or imposed thereon by the Holder; provided, however, that the Securities shall be subject to restrictions on transfer under state and/or federal securities laws. The Securities are not subject to any preemptive rights or rights of first refusal. The Shares have been duly authorized and reserved for issuance upon conversion of the Note. The certificate evidencing the Shares will be in due and proper form. 3.5 Securities Law Compliance . Subject to the accuracy of the representations and warranties of the Holder set forth in Section 4, the offer, issue, and sale of the Securities are exempt from the registration requirements of Section 5 of the Securities Act of 1933, as amended, (the "Securities Act") and the qualification requirements, if any, of applicable state securities laws. 3.6 No Conflict . The execution, delivery, and performance of the Loan Documents, the sale and issuance of the Note and the consummation of the transactions contemplated hereby and thereby will not (a) result in any violation of, be in conflict with, or constitute a default under, with or without the passage of time or the giving of notice: (i) any provision of the Company's Certificate of Incorporation or Bylaws; (ii) any provision of any judgment, decree, or order to which the Company is a party or by which it is bound; (iii) any material contract, obligation, or commitment to which the Company is a party or by which it is bound; or (iv) any material statute, rule, or governmental regulation applicable to the Company, (b) (i) require any consent, approval, authorization or other order of, or qualification with, any court or governmental body or agency (except such as may be required under applicable securities laws), or (ii) result in the imposition or creation of (or the obligation to create or impose) a lien under, any agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or their respective property is bound. 3.7 Properties . The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them that is material to the business of the Company and its subsidiaries, in each case free and clear of all liens and defects, except as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; and any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries. 3.8 SEC Filings, Financial Statements . The Company has filed with the Securities and Exchange Commission (the "SEC") all required quarterly reports on Form 10-Q and annual reports on Form 10-K, registration statements, documents, and reports required to be filed by it with the SEC or, if not required to be filed, such other reports and documents as have otherwise been filed by the Company (collectively, the "SEC Reports"). To the knowledge of the Company, all of the SEC Reports complied as to form, when filed, in all material respects with the applicable provisions of the Securities Act, and the Securities Exchange Act of 1934, as amended. As of their respective dates, the SEC Reports did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Each of the consolidated financial statements (including notes thereto) contained in the SEC Reports (a) was prepared in accordance with generally accepted accounting principals applied on a consistent basis throughout the periods involved (except as indicated in the notes thereto) and (b) fairly presented the financial position of the Company as at the respective dates thereof. 3.9 No Material Adverse Changes . Since the filing of the Company's Registration Statement on Form S-4, other than as set forth in the Company's SEC Reports, (a) there has not occurred any material adverse change: (i) in the financial condition or operations of the Company and its subsidiaries, taken as a whole, or (ii) in the capital stock or long-term debt of the Company or any of its subsidiaries, taken as a whole, except as contemplated under this Agreement or development, that would reasonably be expected to involve a material adverse change in the financial condition or operations of the Company and its subsidiaries, taken as a whole; (b) the Company and its subsidiaries, taken as a whole, have not sustained any material loss or interference with its assets, businesses or properties (whether owned or leased) from fire, explosion, earthquake, flood or other calamity, whether or not covered by insurance, or from any labor dispute or any court or legislative or other governmental action, order or decree; and (c) since the date of the latest consolidated balance sheet included in the SEC Reports, except as reflected therein, the Company has not (A) issued any securities other than the issuance of securities pursuant to the grant of or the exercise of options granted under stock option plans or agreements existing prior to the date of the latest consolidated balance sheet included in the SEC Reports, or (B) declared or paid any dividend or made any distribution on any shares of its capital stock or redeemed, purchased or otherwise acquired or agreed to redeem, purchase or otherwise acquire any shares of capital stock, except to the extent provided under any stock option plans or agreements existing prior to the latest date of the consolidated balance sheet included in the SEC Reports. 4 . REPRESENTATIONS AND WARRANTIES OF THE HOLDER Holder hereby represents and warrants to the Company as follows: 4.1 Authorization . When executed and delivered by the Holder, and assuming execution and delivery by the Company, the Agreement will constitute a valid obligation of such Holder, enforceable in accordance with its terms. 4.2 Brokers and Finders . Holder has not retained any investment banker, broker, or finder in connection with the transactions contemplated by this Agreement. 4.3 Investment . This Agreement is made with the Holder in reliance upon its representations to the Company, which by the Holder's execution of this Agreement Holder hereby confirms, that the Securities to be received by the Holder will be acquired for investment for the Holder's own account, not as a nominee or agent, and not with a view to the sale or distribution of any part thereof, and that the Holder has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, the Holder further represents that it has no contract, undertaking, agreement, or arrangement with any person to sell, transfer, or grant participation to such person or to any third person, with respect to any of the Securities. 4.4 No Registration . Holder understands and acknowledges that the offering of the Securities pursuant to this Agreement will not be registered under the Securities Act on the grounds that the offering and sale of securities contemplated by this Agreement are exempt from registration pursuant to Section 4(2) of the Securities Act, and that the Company's reliance upon such exemption is predicated upon Holder's representations set forth in this Agreement 4.5 Limitations on Transferability . Holder covenants that in no event will it dispose of any of the Securities (other than pursuant to Rule 144 promulgated by the SEC under the Securities Act ("Rule 144") or any similar or analogous rule) unless and until (i) Holder shall have notified the Company of the proposed disposition, and (ii) if requested by the Company, Holder shall have furnished the Company with an opinion of counsel satisfactory in form and substance to the Company and the Company's counsel, in the reasonable exercise of their judgment, to the effect that (x) such disposition will not require registration under the Securities Act and (y) appropriate action necessary for compliance with the Securities Act and any applicable state, local, or foreign law has been taken. Notwithstanding the limitations set forth in the foregoing sentence, if Holder is a limited liability company or a partnership it may transfer Securities to its members or constituent partners or a retired partner of such partnership who retires after the date hereof, or to the estate of any such member or partner or retired partner or transfer by gift, will, or intestate succession to any such member's or partner's spouse or lineal descendants or ancestors without the necessity of registration or opinion of counsel if the transferee agrees in writing to be subject to the terms of this Agreement to the same extent if such transferee were a Holder; provided, however, that Holder hereby covenants not to effect such transfer if such transfer either would invalidate the securities laws exemptions pursuant to which the Securities were originally offered and sold or would itself require registration under the Securities Act or applicable state securities laws. Each certificate evidencing the Securities transferred as above provided shall bear the appropriate restrictive legends set forth in Sections 7.6 and 7.7(a) below, except that such certificate shall not bear such legend if the transfer was made in compliance with Rule 144 or if the opinion of counsel referred to above is to the further effect that such legend is not required in order to establish compliance with any provisions of the Securities Act. 4.6 Experience . Holder represents that: (i) it has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its prospective investment in the Securities; (ii) it has received all the information it has requested from the Company and considers necessary or appropriate for deciding whether to purchase the Securities; (iii) it has had the opportunity to discuss the Company's business management, and financial affairs with its management, (iv) it has the ability to bear the economic risks of its prospective investment; and (v) it is able, without materially impairing its financial condition, to hold the Securities for an indefinite period of time and to suffer a complete loss on its investment. 4.7 Accredited Holder . Holder presently qualifies, and will as of the Closing Date qualify, as an "accredited investor" within the meaning of Regulation D of the rules and regulations promulgated under the Securities Act. 5. CONDITIONS OF THE HOLDER'S OBLIGATIONS AT CLOSING The obligations of the Holder under Section 1 of this Agreement are subject to the fulfillment at or before the Closing of the following conditions, any of which may be waived by the Holder: 5.1 Representations and Warranties . The representations and warranties of the Company contained in Section 3 shall be true on and as of the Closing with the same effect as if made on and as of the Closing. 5.2 Performance . The Company shall have performed or fulfilled all agreements, obligations, and conditions contained in the Loan Documents and required to be performed or fulfilled by the Company before the Closing. 6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING The obligations of the Company under Section 1 of this Agreement are subject to the fulfillment at or before the Closing of the following condition, which may be waived in writing by the Company: 6.1 Representations and Warranties . The representations and warranties of the Holder contained in Section 4 shall be true on and as of the Closing with the same effect as if made on and as of the Closing. 7 . MISCELLANEOUS 7.1 Governing Law. This Agreement shall be governed by, and be construed in accordance with, the laws of the State of California, excluding those laws that direct the application of the laws of another jurisdiction. 7.2 Survival; Termination . The warranties and representations of the parties contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement and the Closing for until the earlier of: (a) the payment in full of all outstanding principal and interest under the Note, or (b) the conversion of the Note into Shares, provided, however, that such representations and warranties need only be accurate as of the date of such execution and delivery and as of the Closing. This Agreement shall be terminated and of no further force and effect upon earlier of: (a) the payment in full of all outstanding principal and interest under the Note, or (b) the conversion of the Note into Shares. 7.3 Successors and Assigns . Except as otherwise provided herein, the provisions hereof shall inure to the benefit of and be binding upon the successors, assigns, heirs, executors and administrators of the parties hereto. 7.4 Entire Agreement; Indemnity; Waiver. (a) Entire Agreement . This Agreement and the exhibits hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof, and supersede any and all prior and contemporaneous agreements, understandings, discussions and correspondence. (b) Waiver . Holder's failure, at any time or times hereafter, to require strict performance by the Company of any provision of this Agreement shall not waive, affect or diminish any right of the Holder thereafter to demand strict compliance and performance therewith. Any suspension or waiver by the Holder of a default under the Agreement or a default under any of the other Loan Documents shall not suspend, waive or affect any other default under this Agreement or any other default under any of the other Loan Documents, whether the same is prior or subsequent thereto and whether of the same or of a different kind or character. None of the undertakings, agreements, warranties, covenants and representations of the Company contained in this Agreement or any of the other Loan Documents and no default under this Agreement or default under any of the other Loan Documents shall be deemed to have been suspended or waived by the Holder unless such suspension or waiver is in writing signed by an officer of the Company, and directed to the Holder. 7.5 Notices . All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, sent by Federal Express or other national overnight delivery service or otherwise delivered by hand or by messenger, addressed (a) if to the Holder, at Holder's address set forth below or at such other address as the Holder shall have furnished to the Company in writing or (b) if to any other holder of any Note, at such address as such holder shall have furnished the Company in writing or, until any such holder so furnishes an address to the Company, then to and at the address of the last holder of such Note who has so furnished an address to the Company, or (c) if to the Company, at its address set forth below, or at such other address as the Company shall have furnished to the Holder. Holder: Company: Protein Design Labs, Inc. Exelixis, Inc. 34801 Campus Drive 170 Harbor Way Fremont, CA 94555-3606 P. O. Box 511 Attn: General Counsel South San Francisco, CA 94083-0511   Attn: General Counsel     7.6 California Corporate Securities Law . THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. 7.7 Legends. (a) All certificates for the Securities shall bear a legend substantially similar to the following: "The securities represented hereby have not been registered under the Securities Act of 1933, as amended ("Securities Act"). Such securities may not be transferred unless a Registration Statement under the Act is in effect as to such transfer or, in the opinion of counsel for the Company, registration under the Act is unnecessary in order for such transfer to comply with the Act or unless sold pursuant to Rule 144 of the Act." (b) The certificates evidencing the Securities shall also bear any legend required pursuant to any state, local, or foreign law governing such securities. 7.8 Counterparts . This Agreement may be executed in two counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.   COMPANY: EXELIXIS, INC., a Delaware corporation   _________________________________   George A. Scangos   Chief Executive Officer       HOLDER:   PROTEIN DESIGN LABS, INC., a Delaware corporation   ___________________________   Laurence Jay Korn   Chairperson and Chief Executive Officer --------------------------------------------------------------------------------

QuickLinks -- Click here to rapidly navigate through this document EXHIBIT 10.1 INDEMNIFICATION AGREEMENT     THIS AGREEMENT (the "Agreement") is made and entered into as of            , 2001 between Liberate Technologies, a Delaware corporation ("the Company"), and            ("Indemnitee").     WITNESSETH THAT:     WHEREAS, Indemnitee performs a valuable service for the Company; and     WHEREAS, the Board of Directors of the Company has adopted Bylaws (the "Bylaws") providing for the indemnification of the officers and directors of the Company to the maximum extent authorized by Section 145 of the Delaware General Corporation Law, as amended ("Law"); and     WHEREAS, the Bylaws and the Law, by their nonexclusive nature, permit contracts between the Company and the officers or directors of the Company with respect to indemnification of such officers or directors; and     WHEREAS, in accordance with the authorization as provided by the Law, the Company may purchase and maintain a policy or policies of directors' and officers' liability insurance ("D & O Insurance"), covering certain liabilities which may be incurred by its officers or directors in the performance of their obligations to the Company; and     WHEREAS, in recognition of past services and in order to induce Indemnitee to continue to serve as an officer or director of the Company, the Company has determined and agreed to enter into this contract with Indemnitee;     NOW, THEREFORE, in consideration of Indemnitee's service as an officer or director after the date hereof, the parties hereto agree as follows:     1.  Indemnity of Indemnitee.  The Company hereby agrees to hold harmless and indemnify Indemnitee to the full extent authorized or permitted by the provisions of the Law, as such may be amended from time to time, and Article VII, Section 6 of the Bylaws, as such may be amended. In furtherance of the foregoing indemnification, and without limiting the generality thereof:     (a)  Proceedings Other Than Proceedings by or in the Right of the Company.  Indemnitee shall be entitled to the rights of indemnification provided in this Section l(a) if, by reason of his Corporate Status (as hereinafter defined), he is, or is threatened to be made, a party to or participant in any Proceeding (as hereinafter defined) other than a Proceeding by or in the right of the Company. Pursuant to this Section 1(a), Indemnitee shall be indemnified against all Expenses (as hereinafter defined), judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such Proceeding or any claim, issue or matter therein, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal Proceeding, had no reasonable cause to believe his conduct was unlawful.     (b)  Proceedings by or in the Right of the Company.  Indemnitee shall be entitled to the rights of indemnification provided in this Section 1(b) if, by reason of his Corporate Status, he is, or is threatened to be made, a party to or participant in any Proceeding brought by or in the right of the Company. Pursuant to this Section 1(b), Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection with such Proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company; provided, however, that, if applicable law so provides, no indemnification against such Expenses shall be made in respect of any claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged to be liable to the Company unless and to the extent that the Court of Chancery of the State of Delaware shall determine that such indemnification may be made. 1 --------------------------------------------------------------------------------     (c)  Indemnification for Expenses of a Party Who is Wholly or Partly Successful.  Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, he shall be indemnified to the maximum extent permitted by law against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.     2.  Additional Indemnity.  In addition to, and without regard to any limitations on, the indemnification provided for in Section 1, the Company shall and hereby does indemnify and hold harmless Indemnitee against all Expenses, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf if, by reason of his Corporate Status, he is, or is threatened to be made, a party to or participant in any Proceeding (including a Proceeding by or in the right of the Company), including, without limitation, all liability arising out of the negligence or active or passive wrongdoing of Indemnitee. The only limitation that shall exist upon the Company's obligations pursuant to this Agreement shall be that the Company shall not be obligated to make any payment to Indemnitee that is finally determined (under the procedures, and subject to the presumptions, set forth in Sections 6 and 7 hereof) to be unlawful under Delaware law.     3.  Contribution in the Event of Joint Liability.       (a) Whether or not the indemnification provided in Sections 1 and 2 hereof is available, in respect of any threatened, pending or completed action, suit or proceeding in which Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), Company shall pay, in the first instance, the entire amount of any judgment or settlement of such action, suit or proceeding without requiring Indemnitee to contribute to such payment and Company hereby waives and relinquishes any right of contribution it may have against Indemnitee. Company shall not enter into any settlement of any action, suit or proceeding in which Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding) unless such settlement provides for a full and final release of all claims asserted against Indemnitee.     (b) Without diminishing or impairing the obligations of the Company set forth in the preceding subparagraph, if, for any reason, Indemnitee shall elect or be required to pay all or any portion of any judgment or settlement in any threatened, pending or completed action, suit or proceeding in which Company is jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), Company shall contribute to the amount of expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred and paid or payable by Indemnitee in proportion to the relative benefits received by the Company and all officers, directors or employees of the Company other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, from the transaction from which such action, suit or proceeding arose; provided, however, that the proportion determined on the basis of relative benefit may, to the extent necessary to conform to law, be further adjusted by reference to the relative fault of Company and all officers, directors or employees of the Company other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one hand, and Indemnitee, on the other hand, in connection with the events that resulted in such expenses, judgments, fines or settlement amounts, as well as any other equitable considerations which the law may require to be considered. The relative fault of Company and all officers, directors or employees of the Company other than Indemnitee who are jointly liable with Indemnitee (or would be if joined in such action, suit or proceeding), on the one 2 -------------------------------------------------------------------------------- hand, and Indemnitee, on the other hand, shall be determined by reference to, among other things, the degree to which their actions were motivated by intent to gain personal profit or advantage, the degree to which their liability is primary or secondary, and the degree to which their conduct is active or passive.     (c) Company hereby agrees to fully indemnify and hold Indemnitee harmless from any claims of contribution which may be brought by officers, directors or employees of the Company other than Indemnitee who may be jointly liable with Indemnitee.     4.  Indemnification for Expenses of a Witness.  Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith.     5.  Advancement of Expenses.  Notwithstanding any other provision of this Agreement, the Company shall advance all Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding by reason of Indemnitee's Corporate Status within ten (10) days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses. Any advances and undertakings to repay pursuant to this Section 5 shall be unsecured and interest free. Notwithstanding the foregoing, the obligation of the Company to advance Expenses pursuant to this Section 5 shall be subject to the condition that, if, when and to the extent that the Company determines that Indemnitee would not be permitted to be indemnified under applicable law, the Company shall be entitled to be reimbursed, within thirty (30) days of such determination, by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid; provided, however, that if Indemnitee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by the Company that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any advance of Expenses until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed).     6.  Procedures and Presumptions for Determination of Entitlement to Indemnification.  It is the intent of this Agreement to secure for Indemnitee rights of indemnity that are as favorable as may be permitted under the law and public policy of the State of Delaware. Accordingly, the parties agree that the following procedures and presumptions shall apply in the event of any question as to whether Indemnitee is entitled to indemnification under this Agreement:     (a) To obtain indemnification (including, but not limited to, the advancement of Expenses and contribution by the Company) under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board of Directors in writing that Indemnitee has requested indemnification.     (b) Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 6(a) hereof, a determination, if required by applicable law, with respect to Indemnitee's entitlement thereto shall be made in the specific case by one of the following three methods, which shall be at the election of Indemnitee: (1) by a majority vote of the disinterested directors, even though less than a quorum, or (2) by independent legal counsel in a written opinion, or (3) by the stockholders. 3 --------------------------------------------------------------------------------     (c) If the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 6(b) hereof, the Independent Counsel shall be selected as provided in this Section 6(c). The Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board of Directors). Indemnitee or the Company, as the case may be, may, within 10 days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of "Independent Counsel" as defined in Section 13 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If a written objection is made and substantiated, the Independent Counsel selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within 20 days after submission by Indemnitee of a written request for indemnification pursuant to Section 6(a) hereof, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware or other court of competent jurisdiction for resolution of any objection which shall have been made by the Company or Indemnitee to the other's selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 6(b) hereof. The Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 6(b) hereof, and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section 6(c), regardless of the manner in which such Independent Counsel was selected or appointed.     (d) In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 6(a) of this Agreement. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion, by clear and convincing evidence.     (e) Indemnitee shall be deemed to have acted in good faith if Indemnitee's action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Enterprise. In addition, the knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement. Whether or not the foregoing provisions of this Section 6(e) are satisfied, it shall in any event be presumed that Indemnitee has at all times acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion, by clear and convincing evidence.     (f)  If the person, persons or entity empowered or selected under Section 6 to determine whether Indemnitee is entitled to indemnification shall not have made a determination within thirty (30) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee's statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under 4 -------------------------------------------------------------------------------- applicable law; provided, however, that such 30 day period may be extended for a reasonable time, not to exceed an additional fifteen (15) days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating documentation and/or information relating thereto; and provided, further, that the foregoing provisions of this Section 6(g) shall not apply if the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 6(b) of this Agreement and if (A) within fifteen (15) days after receipt by the Company of the request for such determination the Board of Directors or the Disinterested Directors, if appropriate, resolve to submit such determination to the stockholders for their consideration at an annual meeting thereof to be held within seventy five (75) days after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within fifteen (15) days after such receipt for the purpose of making such determination, such meeting is held for such purpose within sixty (60) days after having been so called and such determination is made thereat.     (g) Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee's entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any Independent Counsel, member of the Board of Directors, or stockholder of the Company shall act reasonably and in good faith in making a determination under the Agreement of the Indemnitee's entitlement to indemnification. Any costs or expenses (including attorneys' fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee's entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.     (h) The Company acknowledges that a settlement or other disposition short of final judgment may be successful if it permits a party to avoid expense, delay, distraction, disruption and uncertainty. In the event that any action, claim or proceeding to which Indemnitee is a party is resolved in any manner other than by adverse judgment against Indemnitee (including, without limitation, settlement of such action, claim or proceeding with or without payment of money or other consideration) it shall be presumed that Indemnitee has been successful on the merits or otherwise in such action, suit or proceeding. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion, by clear and convincing evidence.     7.  Remedies of Indemnitee.       (a) In the event that (i) a determination is made pursuant to Section 6 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 5 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 6(b) of this Agreement within 90 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to this Agreement within ten (10) days after receipt by the Company of a written request therefor, or (v) payment of indemnification is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification or such determination is deemed to have been made pursuant to Section 6 of this Agreement, Indemnitee shall be entitled to an adjudication in an appropriate court of the State of Delaware, or in any other court of competent jurisdiction, of his entitlement to such indemnification. Indemnitee shall commence such proceeding seeking an adjudication within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 7(a). The Company shall not oppose Indemnitee's right to seek any such adjudication. 5 --------------------------------------------------------------------------------     (b) In the event that a determination shall have been made pursuant to Section 6(b) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this Section 7 shall be conducted in all respects as a de novo trial, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination under Section 6(b).     (c) If a determination shall have been made pursuant to Section 6(b) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding commenced pursuant to this Section 7, absent a prohibition of such indemnification under applicable law.     (d) In the event that Indemnitee, pursuant to this Section 7, seeks a judicial adjudication of his rights under, or to recover damages for breach of, this Agreement, or to recover under any directors' and officers' liability insurance policies maintained by the Company the Company shall pay on his behalf, in advance, any and all expenses (of the types described in the definition of Expenses in Section 13 of this Agreement) actually and reasonably incurred by him in such judicial adjudication, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of expenses or insurance recovery.     (e) The Company shall be precluded from asserting in any judicial proceeding commenced pursuant to this Section 7 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court that the Company is bound by all the provisions of this Agreement.     8.  Non-Exclusivity; Survival of Rights; Insurance; Subrogation.       (a) The rights of indemnification as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the certificate of incorporation of the Company, the Bylaws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in the Law, whether by statute or judicial decision, permits greater indemnification than would be afforded currently under the Bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.     (b) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents or fiduciaries of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee or agent under such policy or policies.     (c) In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights. 6 --------------------------------------------------------------------------------     (d) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.     9.  Exception to Right of Indemnification.  Notwithstanding any other provision of this Agreement, Indemnitee shall not be entitled to indemnification under this Agreement with respect to any Proceeding brought by Indemnitee, or any claim therein, unless (a) the bringing of such Proceeding or making of such claim shall have been approved by the Board of Directors of the Company or (b) such Proceeding is being brought by the Indemnitee to assert, interpret or enforce his rights under this Agreement.     10.  Duration of Agreement.  All agreements and obligations of the Company contained herein shall continue during the period Indemnitee is an officer or director of the Company (or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise) and shall continue thereafter so long as Indemnitee shall be subject to any Proceeding (or any proceeding commenced under Section 7 hereof) by reason of his Corporate Status, whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), assigns, spouses, heirs, executors and personal and legal representatives. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as an officer or director of the Company or any other Enterprise at the Company's request.     11.  Security.  To the extent requested by the Indemnitee and approved by the Board of Directors of the Company, the Company may at any time and from time to time provide security to the Indemnitee for the Company's obligations hereunder through an irrevocable bank line of credit, funded trust or other collateral. Any such security, once provided to the Indemnitee, may not be revoked or released without the prior written consent of the Indemnitee.     12.  Enforcement.       (a) The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as an officer or director of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as an officer or director of the Company.     (b) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof.     13.  Definitions.  For purposes of this Agreement:     (a) "Corporate Status" describes the status of a person who is or was a director, officer, employee or agent or fiduciary of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the express written request of the Company.     (b) "Disinterested Director" means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.     (c) "Enterprise" shall mean the Company and any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the express written request of the Company as a director, officer, employee, agent or fiduciary. 7 --------------------------------------------------------------------------------     (d) "Expenses" shall include all reasonable attorneys' fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, participating, or being or preparing to be a witness in a Proceeding.     (e) "Independent Counsel" means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee's rights under this Agreement. The Company agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.     (f)  "Proceeding" includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought by or in the right of the Company or otherwise and whether civil, criminal, administrative or investigative, in which Indemnitee was, is or will be involved as a party or otherwise, by reason of the fact that Indemnitee is or was a director of the Company, by reason of any action taken by him or of any inaction on his part while acting as an officer or director of the Company, or by reason of the fact that he is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other Enterprise; in each case whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification can be provided under this Agreement; including one pending on or before the date of this Agreement; and excluding one initiated by an Indemnitee pursuant to Section 7 of this Agreement to enforce his rights under this Agreement.     14.  Severability.  If any provision or provisions of this Agreement shall be held by a court of competent jurisdiction to be invalid, void, illegal or otherwise unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.     15.  Modification and Waiver.  No supplement, modification, termination or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.     16.  Notice By Indemnitee.  Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification covered hereunder. The failure to so notify the Company shall not relieve the Company of any obligation which 8 -------------------------------------------------------------------------------- it may have to the Indemnitee under this Agreement or otherwise unless and only to the extent that such failure or delay materially prejudices the Company.     17.  Notices.  All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed:     (a) If to Indemnitee, to the address set forth below Indemnitee signature hereto.     (b) If to the Company, to: Two Circle Star Way San Carlos, CA 94070 Attention: Chief Financial Officer or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.     18.  Identical Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.     19.  Headings.  The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.     20.  Governing Law.  The parties agree that this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware without application of the conflict of laws principles thereof.     21.  Gender.  Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. 9 --------------------------------------------------------------------------------     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the day and year first above written.     LIBERATE TECHNOLOGIES     By:                 --------------------------------------------------------------------------------     By:                 --------------------------------------------------------------------------------         Name:             Address:     -------------------------------------------------------------------------------- QuickLinks EXHIBIT 10.1 INDEMNIFICATION AGREEMENT